The House That Jay Built

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You know things are getting real when ES closes below its 50-day moving average. It has bounced at that support 9 times in the past year. When the 50-DMA fails, the 100-DMA has provided support 6 times since Jun 2020.

With ES closing below its 50-DMA yesterday and likely to reach its 100-DMA today, is it finally time for a test of the 200-DMA?

The stakes are high, as VIX pulled back after reaching important resistance at our 32.50 target yesterday.

Meanwhile…inflation, the Fed policy choice that pundits are mistakenly calling a “mistake.” Sure, it delivered a body blow to the have-nots, but It provided record high stock and real estate prices to the rest of us.

November CPI is due out next Friday, and we are still looking for it to mark a turning point in this cycle. WTI is off 23% from its highs – technically a bear market. And agricultural commodities have backed off their breakout and are eyeing a potential breakdown.

Our assumption remains that CPI will be back below 3% by the time the taper is complete. Sorry savers, but there probably won’t be any need to raise rates any time soon, if ever.

continued for members…

Futures are currently up about 20 points, but fading as we approach the open. If VIX has anything to say about it, ES will at least bounce here at the channel midline and SMA100. The downside potential, however, shouldn’t be ignored. ES and SPX both have a .618 Fib which looks even better as a downside target.

SPX illustrates the logic of the .618 Fib target as it intersects with the .236 line in the rising white channel.DJIA closed (well) below its SMA200 for the first time since May 2020.

At this time, CL and VIX are the levers being used to drive futures lower. CL is testing its recent lows… …while VIX is holding an internal support line, with the .886 just ahead. It appears likely to reach it. This would complete the backtest on the rising yellow channel. Currencies are on the sidelines for now. USDJPY is still in NKD support mode. Gold and silver are also not doing much.