Throwing the Game?

Watching this administration operate the markets, I sometimes get the feeling they’re trying to throw the game. Witness Mnuchin’s bizarre announcement that everything is fine, there are no liquidity issues, I’m going to convene the PPT just for the heck of it.

It’s akin to bursting into a crowded theater and screaming “don’t worry, there’s no fire!” Sure, some might reach for another handful of popcorn. Wouldn’t you at least look around and sniff the air more carefully? Maybe a few of us would even make our way toward the exits — just to be on the safe side.

Futures are currently off 14 points on what might otherwise have been a typical maintenance-mode Christmas Eve.But, that’s not the problem. After reaching our latest downside target on Friday, SPX closed below support. And, this morning, USDJPY and TNX have broken down. VIX, which already broke out last week, is threatening another breakout. This is no way to run a rescue operation.

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Thus, equities are likely to continue to our next lower targets. ES’ falling white channel has broken down and the smaller red one might well follow suit.

SPX’s falling white channel has been expanded so many times, it no longer makes any sense. As I wrote a couple of weeks ago, this is looking more and more like a 2011-style breakdown.

VIX has potential resistance here at the red channel top, but the white channel top and the .618 and .786 Fibs present an easy alternative since last week’s breakout.

It’s also worth keeping an eye on COMP, which has very nearly reached our next downside target… …and AAPL, which is only 4 points away from our 144.48 target in pre-market trading.

A bounce by either, or both, could do wonders for the broader market — especially if the PPT takes concrete action (e.g. whacks VIX.)

The currency picture. USDJPY is heading toward its .886 at 110.31. If it doesn’t bounce there, we’re likely headed for 108.46, the 1.272 and a backtest of the broken gray channel.