Surprised? Not Really.

SPX completed the H&S Pattern yesterday, and dipped to within 4 points of the white .886 retracement for good measure. As we wrote yesterday, several things needed to happen in order for the H&S to play out:

For a breakdown, we’d want to see VIX break out and not retreat from the red TL. We’d also want to see USDJPY reverse course and the dashed red TL break down. Ideally, we’d also see CL break down.

VIX did not break out, but got hammered at the same exact same trendline which has cut short the last four rallies.USDJPY bounced at the red TL and, for good measure, broke out above the latest TL of resistance. And, CL didn’t break down. And, while SPX’s subsequent bounce ran out of juice at a point of overhead resistance at the close, the algo drivers have been at it again this morning. Futures are up another 30 points.

The pols have thrown fuel on the fire by suggesting (yes, again) that the trade situation has improved. But, this morning’s PPI report hints at lingering inflation and interest rate problems. As expected, energy went a long way toward turning down the heat. But, PPI still came in hot.As such, all the talk about fewer rate hikes in 2019 must be questioned. Alternatively, oil needs to drop even further. Neither option will get the bulls where they want to go.