What About SPX?

ES’ original recovery channel officially bit the dust yesterday. This morning, we have a new, less ambitious one offering to take its place.

However: the SPX problem persists: What to do about SPX 2703.62? ES’ new channel will also need to break down if we’re ever to reach the strongest support possible.

Spoiler alert: nothing I’ve heard out of D.C. thus far suggests otherwise, while the growth of the Fed’s QE_not continues to speak volumes.

continued for members…

The bigger picture for SPX and ES:

SPX 2703.62 should be about 2699-2700 for ES.And, the VIX scenario that could make it happen with a pop up to the .786 or .886. The equity picture still feels like fine tuning to me, though as long as ES maintains an upward-sloping channel of some kind, we just can’t know for sure.

Meanwhile, CL and RB haven’t done much except sit where they recovered after the initial death spiral. Surely they’ll backtest and close some gaps at some point, right? Only if Russia and Saudi kiss and make up. How do you assess those probabilities? Tough call, as both are playing chicken by announcing production increases.

The currency picture is also one of protecting equities, with USDJPY getting a strong bounce off its .886… …and DXY rebounding on euro weakness (thanks Angela!)…

…but, GC not yet ready to give up on 1708-1735 (thank you central banks everywhere.)The bond market is also in a holding pattern, with the 10Y back above 0.70 this morning. Combined with a 2Y that is still broken down (with more Fed cuts coming next week?)……this has allowed the 2s10s to revert back to the .30 level — that much closer to a breakout.We got a fresh read on inflation this morning, though everybody knows it’s meaningless given the crash in oil and gas prices that will drive Mar CPI much lower. There were a couple of interesting data points, however. First, core inflation (excludes energy and food) is still elevated at 2.4% and slightly higher than CPI at 2.3%.

Food, itself, rose 0.4% MoM for Feb. If my sources are correct, this will continue to rise into March – possibly much higher. One member in the egg business recently wrote me that he saw a 7.5% increase in egg prices in a single day, something which he has never seen before.

Lower energy prices will obviously offset increasing food prices to a great extent. But, what are the implications for oil and gas prices? You betcha. TPTB are unlikely to allow a surge in oil/gas as long as inflation elsewhere is a potential issue – especially if they intend to cut rates again next week.

UPDATE: 10:50 AM

EIA’s inventory report came in ugly. RB and CL are doing their best to hang on, but it’s not looking that positive.

ES is testing that new channel bottom again… Stay tuned.UPDATE: 3:46 PM

SPX came within 4 points of our 2703.62 target. We’ll call it close enough and look for a reaction here. Again, a failure to rebound would open the door to much lower prices.Note that RUT is also testing a key Fib level, its .618 retracement from its 2016-2018 rally.VIX is holding its cards close to its vest, with neither a breakdown nor a breakout.None of our other factors offers any clear clues. As is often the case, this is all happening at the close. So, the cost of placing a bet is a potentially large gap up or down through 2703.62. I think we will get a bounce, but I sure wouldn’t bet the dowry on it.