Retail sales came in roughly double the Street’s estimates at 0.7% versus consensus of 0.3-0.4%. Ex-auto was just as strong: 1.1% versus 0.5% consensus. Combined with an Empire State Manufacturing index disappointment of -14.3 versus -6.0 expected, futures sold off for all of 30 seconds or so before rebounding to higher highs.

The retail sales print, like much of the recent data, further reduces the odds of substantial rate cuts in 2024. Yet, as is often the case, the algos ignored the data and focused instead on several of their favorite factors: VIX, currencies and SPX’s bounce off its 50-day moving average.

continued for members…

If the overnight ramp holds, the little H&S pattern will have failed and the channel top could be threatened. VIX’s 15% (so far) reversal at the red TL is very important.  The first time in Mar 2023 led to an 800-pt increase in SPX. The second led to a 1,400 point rally off the October lows.

On the currency front, EURUSD is taking a breather but USDJPY is unabashedly forging ahead. This puts DXY pretty close to our upside target.
The fallout from Iran’s counterattack on Israel proved less disastrous than expected (so far) which allowed CL and RB to retreat somewhat, further emboldening the equity algos.

Nevertheless, the retail sales beat leaves the 10Y higher on the day. Will the algos care, or will VIX’s “all-clear” carry the day? Stay tuned…