Stagflation is a major threat

US equities closed broadly flat, sp +1pt @ 2160 (intra low 2150). The two leaders - Trans/R2K, settled u/c and -0.2% respectively. VIX settled -1.1% @ 12.84. Near term outlook threatens a Friday swing day, with a low of sp'2145/40 in the morning, but still settling the week in the 2170s.


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Summary

It was not the most exciting of days. A little morning weakness, then a moderate swing higher on some chatter that the ECB won't be tapering QE 'early' after all.

VIX remains broadly subdued, as the US capital markets are very comfortable, which is especially impressive considering the looming earnings, and of course, the election.
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Market chatter from Armstrong



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This morning, Greenspan appeared on clown finance TV.

Greenspan seemed genuinely concerned that stagflation looms for the US. Growth is clearly not great, the post 2009 recovery has mostly been a case of 'ticking along', whilst inflation has been very subdued. Yet things do change.. and since the equity/commodity lows of Jan/Feb', I've been increasingly wondering if some significant price inflation is coming.

In the weeks and months ahead, I'll be sure to regularly highlight commodity prices, especially via the CRB index.
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Global QE is currently running around $200bn a month, which amounts to a monstrous $2.4 trillion each year. There is no question that some of this 'hot money' is starting to leak into commodity markets.

Just reflect on this..... we haven't even reached the stage of helicopter money - whether via a 'basic living income', or just giving money out with the intent to stimulate demand.

The times we live in are crazy, but if inflation does pick up... even to just 3-4%, things will get even more insane, as the central banks are going to be faced with needing to raise rates as a natural 'cyclical recession' occurs.  Happy dreams

Goodnight from London

WTIC pushing for $50

US equities closed moderately higher, sp +9pts @ 2159. The two leaders – Trans/R2K, both settled higher by 0.7%. VIX settled -4.7% @ 12.99. Near term outlook offers some Thursday weakness, with the threat of Friday ‘good jobs news is good news’.. with a weekly close above resistance in the 2180s.

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Summary

A day of moderate gains, as the market seems content for moderate swings ahead of the Friday jobs data.

VIX is naturally subdued, usually unable to hold the low teens. If the market can break above resistance of the sp'2170s this Friday, then VIX will see the 11s.. perhaps even 10s. From there, the sp'2210/20s might equate to single digit VIX (not seen since Feb'2007), which would be truly bizarre, considering an election is near.

Best guess remains... market holds together... with renewed upside on 'good news jobs data'.

Things don't turn remotely bearish unless the recent low of 2119 is broken, which would also violate the rising trend that stretches back to the Feb' low.

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WTIC oil, weekly

A net daily gain of $1.13 (2.4%) to $49.83.. with an intra high $49.97. A weekly close >$50 looks due, whether this week.. or later in the month. It should make little difference to those with eyes on the bigger picture.

Goodnight from London

Big bear flag?

US equities closed moderately weak, sp -10pts @ 2150. The two leaders - Trans/R2K, settled lower by -0.3% and -0.5% respectively. VIX settled +0.4% @ 13.63. Near term outlook is bearish, with a viable (and provisionally confirmed) bear flag, offering the 2080/60s by early Nov.


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Summary

So... another day where we saw a lot of price chop... but leaning weak.

The real question is... that IS a big bear flag... right? For the sp'500 it clearly is... but less so for other indexes.

Core rising support (seen better on the bigger weekly charts) is around 2125 this week. Any break of the multi-spike low of 2119 would be decisive, and open up another 2-3% of downside to test the monthly 10MA.. and the 200dma.

Things only turn bearish with a monthly close in the sp'2060s...   or rather, the 2050s to be decisive.

My best guess is that 2119 will hold.. with renewed upside as earnings start to appear. 
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Meanwhile, in the land of her Majesty...

UK, monthly

With the GBP weak, UK equities continue to battle upward. Today's high of 7121.93, was within a single point of the April 2015 historic high. Now its a case of whether we see an Oct' close above... or below the giant 7k  threshold. Its not absolutely critical that the bulls achieve it in Oct'... but certainly before year end, otherwise repeated failures will end just like summer 2015. Badly.

Goodnight from London