When Push Comes to Shove

The big story yesterday was oil and gas, which have now fallen about 29% since our short call on Oct 23 [see: VIX Takes the Plunge.]  Importantly, the decline has occurred without decimating stocks.  And, the impact on November’s CPI – due out on Dec 12 – will be significant.

Will it matter to the FOMC, which is widely expected to hike rates on Dec 19?  PCE is due out on Dec 22.  I can only imagine the onslaught of tweets from the White House if CPI comes in at 2.1% and the Fed hiked anyway…

In any case, SPX is at a very interesting place right now.  A continuation of the drop would complete a H&S Pattern that targets 2250.  A reversal and new highs from here would complete an IH&S that targets 3035.

So far, oil and gas have been a drag on stocks.  USDJPY and VIX have been conspicuously non-committal.  What say you, BoJ?  Are you ready to sacrifice a few thousand points on the NKD for the sake of market integrity?

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