You can fake a lot of things in the stock market.  The bond market, not so much. Eventually, reality catches up with the narrative. If the two are as divergent as they’ve been over the past three months, the reconciliation can be ugly.The euphoric breakout we saw following the sharp reversal on Nov 1 was driven by algos, and now it’s failing thanks to algos. The appearance now, however, is that it’s a backtest of instead of a continuation of the falling channel from Sep 2018.Business investment fell more than expected in December, dropping 0.9% and ending 2019 with a meager 0.8% unadjusted gain. It’s not the sort of numbers you would expect if this were “the best economy ever.”

Futures are doing what they do best after a horrid day yesterday, putting in a algo-driven bounce.If the charts are correct, though, this is merely a pause with additional downside to come.

continued members…ES is most of the way to good support, the backtest of the purple channel and SMA50 at 3200ish.SPX supports this outlook. VIX has come off yesterday’s highs, but has not done any serious backtesting. There’s a gap at 15.98 and the SMA200 at 14.98. Meanwhile, USDJPY put in a nice bounce which has probably run its course.The bond market is still bearish on stocks. The biggest shock at this point would be for the 2Y to drop through horizontal support at 1.40%. Keep a close eye on it.Oil and gas have turned an overnight loss into a slight gain as we approach the open. Our next downside targets are still a legit scenario, though as mentioned yesterday the CL wkly chart shows why TPTB might not be willing to allow any further significant downside — at least not yet.

Still looking for 1.4262 on RB… …and 51.62 on CL. Bottom line, there’s nothing new in the markets which would justify a substantial bounce. But, CL remains a bounce risk and the algos could easily work stocks higher for a while. Stay frosty. I have several meetings this morning but will check back in after 12 or 1pm. Consumer confidence is coming up at 10am.

UPDATE:  2:37 PM

Gaps closed on SPX, ES, CL, RB and VIX… …but, not TNX.More later.

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BTW, I want to provide a little advance warning regarding next week.  I am going in for knee surgery (lucky #6!) on Tuesday and will likely be out of commission for a couple of days. I should get a chance to post Tuesday morning, but anything I charted/wrote on Wednesday and Thursday probably wouldn’t be worth a damn. I’ll keep you posted.