With new all-time highs last Friday and a very modest decline in futures this morning, the market keeps insisting that the government shutdown is a non-event.The USD and the bond market beg to differ.continued for members…

Citi put out this chart showing the divergence between high yield spreads and equities.  Spreads are wider (bearish) even as equity prices continue to rise.One or the other is off its rocker.

SPX closed at the high Friday.  As we discussed earlier in the week, an A=C correction would now exceed Tuesday’s lows — i.e. a higher low to go along with the higher high.CL is still sliding ever so slightly.While RB is still trying to decide about a breakout.

VIX remains within easy striking distance of 13.93.Note how sensitive stocks remain to VIX, especially when it “breaks down” below TLs or horizontal resistance.

UPDATE:  11:55 AM

A couple hours into the session, and we can see the levitating factors at work:  a “breakout” in CL……an abrupt backtest in RB.  It would appear I jumped the gun a little last week.  Probably not a bad idea to step aside and wait for the breakout and rebound play out.  It should be soon.

Naturally, we’re also getting the ubiquitous breakdown in VIX.  A further breakdown below the latest straw man TL and, potentially, the SMA200 would ensure another wave higher (at least.)It’s been enough to send ES 10 points higher, back into the rising white channel.