Housing starts and permits both fell, with starts missing expectations by a mile. Philadelphia Fed index also fell and saw a big miss. Capacity utilization and industrial output both missed and fell. So, naturally, the OPEX-obsessed S&P 500 futures are up 10 points.
If things seem a little upside down at this point, know that this will pass very soon. If only Grandpa Kudlow’s diatribe would…
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ES spent 6 1/2 hours yesterday anguishing over the trend line/neckline we discussed. When the Fed minutes came out, it even broke down a bit from the rising channel it had constructed overnight. The breakdown seemed like it was sticking. 
But, just after the close, WTI spiked and VIX dumped. That’s all it took to put ES back into bullish mode, prompting a 21-pt pop which fell apart overnight but is back in place as we approach the open. 
Meanwhile, VIX has constructed a little TL which could break down any minute and boost the algos if they should need help. But, what if it holds? (For the answer, see yesterday’s: This is a Test.)
Should be a very interesting day.
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We would almost always expect a big bounce off SPX’s 200-day moving average. Despite yesterday’s dip below the 200-DMA, the index dutifully crept back above it in time for the close. And, the futures are currently showing an 8-point gain.
Yet, if an analog I’ve been watching and our yield curve model are correct, this bounce won’t last. Stocks could be sharply lower by Monday.
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Things are playing out as expected, with ES coming within 5 points of our next downside target (the SMA200) overnight.
The chart receiving the most attention is the 10Y, which broke below 22.94 and is on its way to our 21.72 target.
The one which should be receiving the most attention is SPX, which closed below its H&S Pattern neckline — adding credence to our lower targets.
Though it seems like more, 2776 will represent a 5.5% drop since our short signal at 2940 on Apr 30 [see: FOMC – Endgame.] Things will get really exciting if/when SPX fails to bounce.
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It’s now been five days since futures bounced out of the falling white channel. It still seems fairly likely it was just a delaying tactic, as various currency pairs, commodities and indices are sliding toward our next targets.
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We started posting about TSLA a little over a year ago when it dipped below important horizontal support [see: Can Tesla Avoid a Crash?]
We’ve updated the charts multiple times since then, working to stay ahead of Musk’s obvious attempts to manipulate the stock. The harmonic picture has been tricky due to the presence of two Point X’s which produces two different grids – the purple and the white.
TSLA dipped below the white .618 in March (and multiple times afterwards) bolstering the argument for the purple grid. But at times it has appeared that the white grid aligned nicely with channel lines such as this chart from last September which officially triggered a short call at 289 [see: Crypto Carnage] which was reiterated at 291 on April 3 [See: Can TSLA Survive This Crash?] and targeted 202.29.
The Better Late Than Never Department has notified me that TSLA just crashed into 202.29, nearing the completion of this particular leg of its journey.
Given that OPEX is in the rear view mirror and the futures are about to break below support again, we have to wonder whether TSLA is done.
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SPX needed about 22 points downside to reach the support of its SMA50, a rising channel bottom, and a falling channel bottom. ES, which finally reached our 2655 target from last week [see FOMC: Endgame] is currently off 30 points.
At this rate, SPX will breach its support on the open, especially if USDJPY doesn’t bounce here at its new lows.
Is it time for bulls to get nervous?
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The markets weren’t exactly reassured by Powell’s testimony yesterday. Bottom line, no one in their right mind buys the idea that we can have such strong GDP and wage growth but still need such accommodative policy. IMO, Powell was curt and sometimes downright evasive, which didn’t help matters.
Stocks plunged to our initial downside target, closing well below the SMA10 (a rarity, lately) with additional downside potential this morning.
AAPL tested its channel top and retreated. As we discussed yesterday, this failure to break out has weighed on the overall market.
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While January’s retail sales saw a modest rebound (+0.2% MoM), December’s were revised downward from -1.2% to -1.6%.
Futures bumped slightly higher, presumably because a slowing economy protects the market from Fed tightening. In reality, it was driven by continuing VIX algo-signalling.
With key DJIA component Boeing off sharply in the pre-market, today could be a tumultuous day.
Obviously, BA is reacting to the second crash of its key 737 Max 8. But, its chart already argued for a downturn before the latest tragedy.
First order of business will be to close the gap at 369ish. If it can’t hold at 369, look for it to test the SMA200, the .618, or potentially the .786 Fib well ahead of schedule.
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An extremely disappointing payrolls report put February new hires at 20K. I had to look twice, certain that a digit had been left out.
To make matters worse, hourly earnings spiked 3.4% YoY, far in excess of what all the Goldilocks models suggested. 
It should be entertaining to see how Kudlow et al. spin this one.
Meanwhile, our targets are being hit left and right. ES came within 1.21 (so far) of our next downside target.
On the currency front, EURUSD nailed our next downside target…
…USDJPY plunged right through its nearest support and is closing in on our secondary target…
…and DXY is again approaching our upside target.
CL and RBOB’s selloffs are accelerating after tagging our upside targets.
S&P futures are currently off about 20 points. But, our models suggest SPX should tumble a minimum of 35 points before all is said and done. If that support doesn’t hold, there are potentially very large declines ahead.
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