Charts I’m Watching: Apr 22, 2015

CL closed yesterday atop the purple midline for support, then slipped down overnight to tag the .786 Fib and is backtesting the midline as resistance this morning.2015-04-22 CL v DX 60 0615This would be a good opportunity for CL to flesh out the rising purple channel with a dip to the .618, but that would likely put a ding in the “every day is better than the last” meme of this “market.”

USDJPY is masking CL’s weakness in order to maintain green shoots in the futures overnight.  As expected, it didn’t make it through the SMA50 yeaterday.  But, it remains inside the rising white channel and within striking distance of 120.11 — which is enough.

2015-04-22 USDJPY v ES 0615Perhaps the most telling chart of the whole farce is VIX.  Channel tops and bottoms are made for bouncing.  Yet, VIX has been clinging to the bottom of the rising purple channel for a full two weeks.

2015-04-22 VIX v SPX daily 0640In an unrigged market, one might say it represented “coiling” — gathering momentum for a strong surge higher.  In this “market” it represents keeping the index at a level from which it can easily be monkey-hammered lower in order to prop up stock prices.

And, it is on this note that I must diverge.  No doubt many have seen the news regarding one Navinder Sarao, alleged flash-crasher extraordinaire.  Zerohedge has done a good job summarizing the ins and outs of his arrest in Britain and the ongoing US extradition effort.

In short, Sarao is being charged with masterminding the May 2010 flash crash via spoofing, a means of manipulating securities prices by submitting hundreds or even thousands of market-moving orders and quickly (within nanoseconds) withdrawing them before there is a chance of them being executed.

Spoofing has been practiced by countless high frequency trading firms within and outside of the US for years. It is the scourge of the industry, and it is easy to see it in action on practically any given trading day.  Furthermore, it is practiced by major central banks themselves both directly and via their proxies — but, always in an effort to increase stock prices.

Now, Sarao might indeed be guilty as sin of contributing to the flash crash.  But, he most certainly was not the only player.  Nor, was he likely the largest.  FINRA and the CME could very easily put a stop to spoofing any time they like. But it’s one of the primary tools for keeping stock prices rising, and it generates enormous trading revenues for CME.

So, don’t look for any meaningful changes as a result of Sarao’s arrest.  He is a scapegoat who will likely divert attention from the very real and very dangerous practices at work in the “markets” every day — practices that will inevitably lead to more flash crashes down the line.

Coming up, a look at SPX and the progress of our analog.

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