After pushing above its 200-DMA and key 2.24 Fib levels, SPX seemingly had it made in the shade.  This morning’s huge retail sales miss (-1.2% versus +0.1% expected) might complicate things.  Perhaps Bloomberg put it best in the title of the following chart.

The control group came in at an even more dismal -1.7%, the worst since the 9/11 terrorist attacks. The latest data is clearly at odds with the growth narrative being pushed by the White House, and adds to the headwinds posed by numerous high-profile earnings misses and falling inflation.

January CPI came in at 1.55%, the smallest increase since Sep 2016.

continued for members…

ES has already dropped through its SMA200.  Look  for it to test the 2.24 shortly after the open.  If that doesn’t hold, the SMA10 just below it at 2723.63 is the next most plausible target.

SPX has similar support at the SMA200 at 2743.78, the SMA5 200 at 2739, and the channel bottom and SMA10 at 2722.63. The USDJPY was already off slightly before the news. With the SMA200 within reach, this is a notable setback for the bulls.

The impact was also notable in the bond complex, with the 10Y back down to its recent lows… …and the 2s10s back down below the white horizontal resistance and the yellow TL.And, VIX is quite likely to push up past its SMA200, with the red midline and SMA20 the next line of defense. CL and RB are holding on to their overnight gains, though they continue to look vulnerable.

UPDATE: 9:25 AM

VIX nearing important resistance…UPDATE:  10:20 AM

Pretty decent recovery so far, though another leg down to 2722 looks like a good possibility as long as ES remains below its SMA200. UPDATE:  1:20 PM

Good old Larry Kudlow…he has pronounced the retail sales figures as flawed, mistakenly low due to a glitch.  And, he has reiterated that the FOMC will step aside — meaning no further rate hikes or QT.  SPX is back to green, though just barely.

Result: a 25-pt bounce off this morning’s lows.

UPDATE:  3:50 PM

Markets are off slightly going into the close.   They’ve managed to contain the damage, but the question remains whether we’ve seen the top or not.  Remember, the last couple of pushes above the SMA200 ended after the third day.

Bulls should be heartened by the fact that VIX is back below its SMA200…

…and, USDJPY hasn’t broken down. …and SPX closed above its SMA200.  ES looks likely to test its SMA200 all over again.  But, will it make it on down to the 2.24?  Its SMA10 will probably be up to 2728 by tomorrow morning, adding additional support.Likewise, SPX’s SMA10 is now up near 2727, not far below the purple channel bottom should they wish to allow an early morning test.Given the latest inflation figures, no one will get too freaked out if CL and RB continue to rally.  They recovered very sharply on no news after the retail sales data this morning, confirming they are part of the plan to prop up equities. The most tantalizing aspect of SPX’s recent highs is that it sets up a potential IH&S Pattern. A drop to, say, 2630 would establish a well-formed pattern while also backtesting the H&S neckline and the megaphone pattern top.Also, DJI reached 25625.95 yesterday – extremely close to the 25638 level which would put a C=1.272 x A target at DJI’s 1.618 of 18974. As appealing as that scenario is for bears, the fact that COMP still hasn’t reached its SMA200 is cause for caution.  Note, however, that it did the same on Dec 3, coming up 0.4% shy of the mark before tumbling 17%.  It has yet to surpass those highs.Last, note that AAPL has not pushed through to its most obvious upside target.  If it tumbles back through the white channel midline, it might just embolden the bears.While I’ve been adding these last charts for the day, ES has continued slipping.  So far, so good for us bears.Oops, one more chart for the bears: Our yield curve model says stocks are going to drop further, and it hasn’t been wrong yet.

Bottom line, there are ample reasons for the market to crater over the next six weeks: retail sales, slowing housing, low inflation, our yield curve model, falling GDP estimates, too much debt, disappointing earnings, political gridlock, trade war(s), the war on share repurchases, etc.  March 30 is a FOMC announcement date as well as an ideal downside target on many of our charts.

If TPTB weren’t as proficient at propping this thing up, I’d be making big bets on the downside.  But, they are proficient.  Between Kudlow, Fed presidents, Trump and the army of apologists and cheerleaders saying and doing whatever it takes to keep stocks on the rise, there’s still a substantial risk that we’re at 3047 as soon as Mar 5.

That’s the point at which SPX’s purple channel tags the 2.618 Fib extension.  The IH&S Pattern actually targets 3205.The situation calls for caution.  For bears nervous about shorting, by all means wait to see whether SPX drops back through its SMA200 and even its 2.24 at 2703.  For bulls nervous about staying long, by all means use stops. Traders of both stripes should keep a close eye on SPX’s purple channel.  It hasn’t stumbled yet.  And, long or short, consider hedging as we approach the 3-day holiday weekend.  Remember Dec 24?

Speaking of weekends…I will post a quick summary in the morning before getting an early start on the weekend.

GLTA.