PPI tumbled to -0.5% in October (1.3% YoY), the biggest drop since pandemic era April 2020. Core PPI was unchanged MoM and rose 2.4% YoY.

Commodity price weakness was the main culprit, with gasoline’s 15.3% plunge leading the way. The print isn’t all rainbows and unicorns. A slump in PPI could also be interpreted as a sign of economic slowdown and the loss of pricing power. Stay tuned…

Futures have given up much of their overnight ramp, but are still up as we approach the open. As contrary as it might sound, the market is due for a pullback in order to backtest some of its recent gains.

continued for members…

A pullback doesn’t mean the year-end rally is in danger, merely that some backfillilng is necessary in order to shore up the foundation of the rally.Note that ES, in particular, is bumping up against the purple fan line from the October 2022 lows.

The same can be said for SPX.

The flipside of the pullback argument is VIX. Although it was actually slightly higher an hour ago, it has resumed its slide and is off nearly 1% – though not yet to new lows.EURUSD’s rally (US dollar weakness) has been mostly attributed to the idea that the Fed is done tightening and thus lower interest rates will reduce the attractiveness of the dollar. It might, in fact, continue to drop. But, consider that the EURUSD has reached what has previously been a very important line of resistance.

The horizontal yellow line is actually the .236 line of the yellow channel……which dates back to 1992. It’s not necessarily the most legit channel, as the purple channel actually encompasses all that has transpired since 1980. If we look closely, we can see that EURUSD is also reasonably close to the purple channel’s midline.The Fed and ECB have done a very good job of protecting the equity markets by managing the relationship between the USD and euro. I believe they will continue to do so, most likely by allowing another gentle decline by early next year.

continuing…