Escalating carnage in the Middle East points to a protracted and increasingly complex set of circumstances for markets, with oil prices and currencies confused as to how to respond. Futures are off moderately this morning, supporting our notion that a 200-DMA tag is still in the cards.
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Futures are off moderately, backtesting the recently broken channel after much stronger than expected retail sales.
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Futures are up moderately, running into their own channel top following VIX’s recent retreat from resistance, 
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Futures are up modestly following establishment of a new rising channel.
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September PPI came in at 0.5% versus 0.3% expectations, briefly driving down futures prices…until VIX was hammered back down. Its 200-day moving average continues to be the critical threshold for algos.
It remains to be seen whether tomorrow’s CPI print can also be ignored.
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Futures are testing the upper bounds of the channel from Sep 14. Judging from VIX, currencies and the commodities we watch, ES won’t break out just yet – thus allowing SPX to fully backtest its 200-day moving average.
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Futures came within 7 points of our 200-day moving average target overnight, begging the question: was that close enough for a legitimate backtest? SPX itself is still 15 points away, close enough by Aug-Oct 2019 standards but nowhere near the overshoot experienced this past March.
The more important question is whether the factors driving stocks lower haven’t yet finished? As we discussed yesterday, the bearish fundamental case has been building momentum lately. What if investors started to care?
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The currency pairs on which we focus reached our long-time targets on Tuesday. While good for the ego, it’s always a mixed bag for yours truly. It means a broad reassessment of the path forward at a time when the signposts are not terribly clear.
First, a recap. EURUSD indeed reversed after reaching our 1.1273 target last July [see: July 18 Update] and obliged us by dropping to test our downside target at 1.0658. From that post:
And, the price action since:
Note that EURUSD has dropped through that original 200-day moving average and has continued lower.
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Futures have rebounded modestly following yesterday’s drubbing.
The Conference Board’s Consumer Confidence Index’s plunge from 108.7 to 103 did little to convince investors that the consumer is still doing well. Perhaps the more important question: will it outweigh, in the minds of FOMC members, the stellar 0.9% increase in August for core capital goods?
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Futures are sagging once again as they test our latest downside target to be tagged.
One has to wonder how much ground will need to be given up in order for consumer confidence to drop back below 100.
Note that the Dow is testing its 200-day moving average – always an important threshold when it comes to investor confidence.
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