As Powell prepares for his Monetary Policy Report to Congress (10am, Watch Live), is he paying attention to the bond market?  Prodded by abysmal housing data… …ZN finally broke out.

According to Kudlow, last month’s retail sales miss was a glitch.  What about the 10.5% YoY drop in single family permits or the 15.9% plunge in multifamily permits?  How about wholesale inventories that expanded at twice the expected rate last month?

The bond market isn’t waiting for Powell to proclaim that the data has been anything but rosy lately.  With ZN breaking out, we can expect the next 4-6 weeks to be very interesting.

continued for members…

A reminder re our interest rate targets. Price targets indicate the potential for some impressive moves.Nowm, popping above 123’100 – 123’285 would mean a push through not only the falling white channel midline, but the rising white channel .236 line and the .382 Fib as well — a lot of resistance.  It will take some doing, meaning be on the lookout for a reversal there.For now, equities are taking the data and bond market reaction in stride — though SPX is still threatening a breakdown.And, ES has plenty of room to drop if it wishes to flesh out its rising channel. The more interesting chart is VIX, which is back above its SMA10 in the face of a well-constructed rising wedge in ES. And, just in case anyone has forgotten, our yield curve model is still bearish.The currency picture continues to look benign, with the DXY backtest almost complete.  But, I get the sense that we could see some violent moves in the next 4-6 weeks that correspond with big interest rate and equity moves. I’m going to sign off and watch Powell’s testimony.  Will check back in later…

UPDATE:  3:45 PM

It’s been a pretty frustrating day.  Stocks have sold off multiple times during the day. But, each time, VIX gets hammered and they quickly recover.  With 15 minutes to go, it looks like they’ll get one last chance.  Of course, the SMA10s will be higher tomorrow.  So, there’s a chance that the SMA200 is no longer in play at its current levels.  For ES, today was the last, best shot if the channel is going to take it higher.

DXY finally completed its backtest……which didn’t quite get EURUSD…

…or USDJPY to where they’re going.The insinuation is that DXY has further to fall — not much of a stretch if my expectations for TNX and ZN are on track. I continue to be bearish — at least in the short run for a corrective wave — though it looks like we’ll have to wait another day to know for sure.  Note that COMP is now high enough to make a backtest worthwhile, and its SMA10 is now north of its SMA200 — a bonus in terms of backtesting.I continue to love the idea of a dip to 2138 as early as late March.  But, the bears are going to have to put in much more effort.

GLTA.