Fed President Evans is the latest to double down on the “transitory” depiction of the mounting inflation problem facing the economy. CPI comes out Wednesday, and the Fed has three choices.  Either “adjust” the data to the point where it’s not alarming; leave the alarming data alone, but jump in and save the markets; or, leave the data alone, but let the markets do what they may.For the past several weeks, we’ve seen constant support in the markets – with the latest maneuver being yet another “breakdown” in VIX… …sending futures up to a new all-time high. This marks the second H&S Pattern to be busted in the past month and the third in the last two months. When it comes to saving markets, the Fed really can’t seem to help themselves.

continued for members…

The Fed’s involvement is easier to see on the daily VIX chart…The bigger picture in stocks…Don’t be surprised if the Fed blames the whole mess on the pipeline issues affecting oil/gas delivery to the East Coast. But, as we know, the problem is really the rapid runup in oil/gas prices which manifested last month. April gas prices rose 61% YoY, which should put CPI above 3%, perhaps closer to 4%.

We could still see a collapse in time to help May’s CPI, but it would need to be very swift and very severe.

The other thing working to amp up inflation is the current weakness in the US dollar. Thanks to the latest “breakout” in EURUSD, DXY is having a hard time holding the rising white channel. A breakdown would make inflation that much worse.

Typically, in a market meltdown the Fed would rely on a breakout in USDJPY to prop up stocks. It’s still in a position to help as long as traders don’t overwhelm the pair.Gold and silver continue to make tenuous headway, with GC coming up on an important test of the SMA200. If allowed to, both could enjoy a nice pop on Wednesday.

If GC pops through the SMA200, it faces resistance at 1923, followed by 2089 and 2162.60. If SI can break out above the channel midline at 27.82, the upside targets move to 32.32 and 35.23.The bond market continues to be tightly controlled, with futures edging consistently higher… …even though yields have yet to break in either direction.