Despite approaching OPEX, it’s getting harder and harder for stocks to find a reason to rally. So, last night, they didn’t.

On the other hand, a 20-point drop isn’t enough for bears get excited about, let alone pile onto…at least yet. With so many algo inputs suggesting we’re at or near a turning point, what’s really going on with this market?

Perhaps Linda Perry had it right…

And so I wake in the morning and I step outside
And I take a deep breath and I get real high
And I scream from the top of my lungs
“What’s going on!?”

continued for members…

I spent the last several hours cleaning up the ES charts to offer a clearer view of the big picture. We aren’t quite to the .886 Fib – the deepest retracement stocks can make without risking new highs. Yet, the channel picture is really starting to firm up. I’ve switched colors around to emphasize the white channel, which cues off the recent lows…but still needs another upper tag to confirm.

The confusing part of the chart is that ES broke out above the 2.618 and the rising white channel not once, but a second time – thanks to the Fed and Treasury, of course. No new QE or PPT, and we’d have beat a retreat at 3076. Yet, here we are – not only above the rising white channel top, but the rising yellow channel midline and the 2.618.  All systems go, plenty of upside ahead. Only, the fundamentals are terrible for all but a handful of stocks which just happen to represent a huge chunk of the indices and which are more profitable during a pandemic. The SPX chart close up:

Then we have central banks fixing interest rates well below market… …and the yield curve at a level which will (hopefully) do no harm.And, between central banks, treasuries and their little helpers, we have a VIX which is essentially daring bears to bet on the downside. It’s a few minutes away from a major breakdown and the algos are very, very observant of each little twitch. What’s especially frustrating is that dropping through the yellow TL to the .886 at 19.86 would almost certainly push SPX to new highs. The latest little red TL connecting recent lows intersects 19.86 on July 23-24 – about the same time that the top of the falling yellow channel intersects the .707 at 33.12.  Take your pick.The algos have also taken note of the huge rally in oil and gas – though each has probably rallied all they can without upsetting the economic apple cart (MoM CPI last month of +0.6%.) Of course, they can’t break down with upsetting the algos.

Watching the DXY, you’d conclude that the real issue is deflation (a lower dollar raises the price of imports, increasing price inflation for a net importer like the US.) We know interest rates have to remain low and actually drop even lower. The euro zone is so far ahead of us in terms of COVID-19 that the ECB doesn’t look as desperate right now. Between economic fundamentals and perhaps the plunge in US yields, perhaps the DXY deserves to be this low.

If so, why is gold pulling back from its .886 instead of pushing up through it?

I continue to be bearish, but it’s obviously been very frustrating to see every softness in equities get bought back to new higher highs.

More later…

UPDATE:  2:15 PM

Hard to say for sure, but it looks like VIX is preparing to dive below its SMA200 in order to get ES up to 3258 tomorrow (SPX 3256.)

Nice negative divergence setting up on the daily and 60-min chart… I need to run an errand, will post later if anything interesting happens. Expectations are that we’re at or within 1.5% of a significant turning point.