Snow Day!

I wanted to title today’s post “Snow Job” in honor of yesterday’s FOMC minutes.  But, it felt a little snarky, even for me.  If you haven’t read the minutes, here’s a quick synopsis:

We don’t understand why inflation’s not at 2% yet, but we’re going to continue to raise rates anyway. We will continue to raise rates until we decide not to. The economy might get a bump from the tax legislation. But, odds are the corporate tax savings will go toward M&A and more stock buybacks [bigger bubbles!]

Stocks might have been buoyed by the comments, but the real story was the latest collapse in VIX (-19.4% since Tuesday night) — a collapse which has come in handy as DXY’s FOMC minutes rally lasted all of 30 seconds. It’s now continuing its slump toward our next downside target.

As we’ve discussed, the big question is whether it can catch support here at a key channel line and Fib level. The answer lies with the S&P 500 futures.While SPX reached and shot through its 2.24 extension (of the drop from 1576 to 666 between 2007 and 2009), ES is till 7 points away (2728.79.) If TPTB pull out all the algo igniting stops today like they did yesterday, we’ll see it leapfrog through 2728 and usher in another few months of melt-up.

If, on the other hand, ES reverses off the overhead resistance, it’ll be because USDJPY, CL and RB stop ramping and VIX is allowed to bounce up to where it belongs at 16.12.  Which will it be?

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