Whistling Past the Graveyard

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Amidst growing speculation (soon to be evidence?) that the coronavirus outbreak is much worse than the Chinese have admitted, the market is having a hard time whistling past this particular graveyard.

Futures have climbed back from an ugly Sunday, but are hardly out of the woods. If this gently falling, carefully managed channel breaks down, watch out.continued for members…

VIX has still not broken down… …and interest rates are about to finally lose their grip, with the 10Y heading straight for 1.491 or 1.45.The 2Y is back below 1.4%. Oil’s rising white channel has officially broken down and CL is likely headed to 47.55 or 45.12. This leaves ES/SPX likely to tag their SMA10s again, with significant air pockets below that. The USDJPY is still hanging in there……but the euro is getting crushed… …meaning DXY’s rally is extending – this time, clearly a fear trade. UPDATE: 3:30 PM

Once again, we’re reminded of the extraordinary power VIX has over the algos. SPX is either going to make new all-time highs or is due to reverse here… …based on VIX cratering at 9:31 this morning. VIX has dipped as far as it can without setting off another equity breakout. ES has recouped almost exactly .786 of its losses. And, the bond market is still whispering bearish things about stocks, with the 2Y still below 1.4% and the 10Y nearing new cycle lows.USDJPY has been generally supportive of stocks – mostly by staying on the sideline as the euro continues to collapse. I supposed you could make a case for euro weakness based on the five newly discovered coronavirus cases in the French Alps. The net effect on DXY has been powerful, and could continue to be so depending on what Powell has to say over the next couple of days.CL has had a pretty awful day… …with RB registering indecision. Recall that we don’t expect a big rebound until March, if then.

Note to bears: ES and SPX are about to see a bullish 10/20 cross unless things fall apart this afternoon or tomorrow.Bottom line, if today’s market action seems like a crock of donkey dung, you’re right. There is no integrity on a day like this, when TPTB are pulling out the stops to prevent potentially catastrophic events from sending stocks lower. It’s frustrating, but becoming increasingly commonplace.