SPX came within 2 points of our upside target yesterday in a VIX-inspired meltup that was focused on getting and keeping the index above the 2500 mark.  While VIX has already staged obvious breakdowns of its rising yellow TL and rising purple channel, it has managed to keep stocks on the rise by simply drifting… Lower. Every. Day.

With ES up only 1.75 at present, it appears we’re not going to be presented with a reason to reverse just yet.

continued for members…It’s not much to go on, but I’ve sketched in a rising purple channel that, if it plays out, suggests an overshoot of the 1.272 Fib if/when the FOMC “good news” is unleashed.

Here’s your rally, courtesy of VIX’s daily drip to new lows.CL and RB, meanwhile, have broken out but not really gone anywhere — probably until after the FOMC announcement tomorrow.  CL’s SMA200 is now support and a reasonable level for stops. USDJPY continues its reluctant ascent……as does DXY.Markets rarely move much in the lead up to a FOMC meeting.  Most traders have placed their bets and are simply waiting to find out whether they’re right.  This week appears to be no different.

As far as my expectations…  I believe inflation continues to be a concern, especially in the face of low/no growth – exacerbated by Harvey and Irma.  In the old days, we would look at the combination of stagnant growth and inflation and pronounce the economy to be in “stagflation.”

These days, we seasonally adjust the growth numbers so there is no stagnation and manage gas prices back down to avert the inflation.  Abracadabra…no stagflation.

All that we’re waiting on is for gas prices to drop back down.  But, that can’t really happen just yet because the Fed doesn’t want stocks to sell off around the time they’re trying to convince everyone how smart they are and how stable the economy is (but, not stable enough that policy should be normalized.)

At the present price of 2.62 per gallon, gas is still 21% above Sep 2016 prices — enough to put CPI solidly above 2% and necessitate higher interest rates.  At present, CL is not as elevated.  I show it at a 7.2% increase over the comparable 2016 levels — not as problematic and probably close enough for a “measurement error” to make it go away.