October PPI came in at 8% annually and 0.2% monthly versus expectations of 8.3% and 0.4%. Core PPI remained unchanged at 6.7%.
Futures popped up to our 4050 IH&S target on the news, but had already ramped over 40 points prior to the print.
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Seemingly on a rail, VIX’s bump took it only to the top of the falling red channel in place for over a month.
A failure to break out means ES can top its 361.8 Fib extension and reach its IH&S targets. 
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It was more of a red ripple than a red wave. So far, it appears that Republicans will hold a five seat majority in the House and might actually lose ground in the Senate. Futures are moderately lower.
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More of the same…perhaps until CPI comes out on Thursday.
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The market is essentially unchanged from yesterday, with VIX in a position to make or break this rally unless the FOMC delivers a significant surprise.
We’ve seen this movie before: a sharp rally into a Fed meeting or CPI report that wipes out the put buyers and positions the market for a drop from a higher price level once the disappointing news is delivered.
There is widespread expectation of a 75 bps hike, but less agreement about whether the FOMC will be as dovish as the market’s latest rally would suggest.
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Q3 GDP came in at 2.6%, beating the 2.3% consensus and of course Q2’s -0.6%. While good news for the economy, it does little to advance the narrative that the Fed might be ready to pare future rate hikes.
Nevertheless, VIX fell…
…so futures rose slightly on the news.
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ES rallied 7.3% off the Oct 13 lows to tag our target at the white channel midline – also the 20% correction mark.
This is the same target we added on Oct 14 [see: It Wasn’t Oversold] as it’s an important line in the sand.
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Pretty standard fare for an OPEX week…futures have ramped 1.6% higher on a bounce in USDJPY and CL and a trounce in VIX.
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Futures have been all over the map this weekend following the breakdown of the small white flag pattern on Friday. But, the key factor is that VIX is higher and should experience a golden cross as we approach PPI tomorrow and CPI on Thursday.
Our downside targets remain unchanged with SPX now within a few percent of our analog’s target from this past May [see: Analog Watch.]
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The thinking goes like this: a strong jobs report is bearish for stocks because it might delay the Fed’s eventual pivot; while, a weak report would be bullish because it might accelerate the Fed’s pivot.
The futures are on the fence, but not for long.
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