The rescue operation we detailed on Monday [see: Rescue Operation Underway] is taking another stab at the 200-DMA this morning after the Fed’s ill-advised emergency rate cut nearly unraveled the progress the algos had already made.

Again, it’s a battle between the algos and fundamentals with numerous factors lining up to nudge stocks past important overhead resistance as though there’s really nothing to worry about.

continued for members…SPX’s rising channel is a little less elegant, but is in essentially the same position — it should push past the SMA200 on the open.

VIX is obeying its falling white channel after the timely TL breakdown on Monday.The 2Y bounce where it needed to… …as did the 10Y – though it is still below 1%.  USDJPY has arrested its breakdown…

…with EURUSD’s backtest completed just in time… …to provide support to a flagging DXY.CL and RB are maintaining their bounces as expected.

And, the 2s10s is still threatening to break out.Remember, there are two reasons for a carefully constructed bounce like we’re seeing in ES: (1) the fundamentals and prospects are strong and stocks reflect this; and (2) the central bank financial engineers know how to artificially elevate the indices and, by God, they’re going to do it every time.

What we don’t know is whether the cost/pain of “fixing” the markets is too much for it to last. RB and CL have room to zoom, given that the YoY comps available in March will not result in CPI rising too high.  VIX can be pounded into the sand for all anyone cares.  Currencies  are really going sideways if you take a step back and squint.

Interest rates are a different matter. It has always been much tougher to manipulate the much larger fixed income market and there are plenty of old fogies like me around who recognize that a 10Y and 30Y at all-time lows is a signal of really bad things to come.  When the 2s10s blows out, we’ll find out if bonds have also been completely co-opted.

Bottom line, stay frosty. If ES can’t remain above the SMA200 at 3050.20, our ES 2728 and SPX 2703 targets are still very much alive.

I have a meeting out of the office today, so will leave it here for now and post some additional updates on bonds and currencies.  More later this afternoon.

GLTA.

UPDATE:  6:30 PM

As Reeodd pointed out, both ES and SPX completed little IH&S patterns today. They’re not pretty, especially SPX. But, they’re technically legit and point to new highs if they manage to play out. Needless to say, the silliness we’ve seen over the past two days could well continue despite the fundamental arguments to the contrary.  VIX has plenty of downside potential as long as TPTB can stay on top of it.

For those who are wondering, if the 2728/2703 support is tested and breaks down, the next lower targets are ES 2548 and 2439. Given the potential for interest rates to crater into Election 2020 (see today’s post on bonds) I still consider this a possibility.