Judging from the breathless press releases and the 8% spike in oil futures, OPEC is moments away from announcing a deal that will send crude up over $60 and stocks to new, all-time highs.

But, we’ve been here before.  So, pardon me if I take the latest “news” with a grain of salt.  Should the deal get done, what impact will it really have on prices?  Here are the two critical charts to watch today.

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We’ve had a constant barrage of optimistic OPEC press releases over the past two weeks.  This week, the actual news is anything but optimistic.  And, CL is showing it.

It’s not over till it’s over.  But, equities are looking more than a little nervous.  We remain short from yesterday.

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One great thing about analogs is how they provide a backdrop of reasonableness for the strange goings-on in the “markets.”  Consider oil’s dump on Friday, and follow through yesterday, on — surprise! — news that the Vienna OPEC deal might be in trouble.

Recall that this was the same deal countless players were touting as almost certain to come together (and, I’ve been touting as dead in the water) for the past two weeks.

While futures responded by shedding some of their gains, the more important factor — especially now that CL is rebounding again — is where they fell to.

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Back on Oct 4 [see: The Most Important Chart], I noted that TPTB had an important decision to make regarding oil (CL.)  Recall that we anticipated an impending top, which I officially declared on Oct 10 [see: Welcome to Peak Oil.]  The choices, as I saw them then:

(1) let CL’s IH&S Patterns play out and drag stocks along to new highs, inflation be damned.

(2) let the patterns play out until mid-October or early November, long enough to keep stocks on the rise into the election.

(3) slam CL back down from current prices as occurred in mid-August, and let USDJPY take up the reins.  It’s been itching to break out ever since Brexit, testing the falling red channel top eleventy billion times.

As we noted later that day, USDJPY did break out.  Its spectacular 11.8% spike in the ensuing 7 weeks has been largely responsible for stocks pushing through to new, all-time highs — even as oil plummeted 18.2% following our top call.Will the rally continue, or is it time for a reversal?  We’ll take a look.

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In our last update on EURUSD, I forecast a continuation of the drop originally forecast in September.  From the Oct 24, 2016 Update on EURUSD:

June’s .618 tag suggests a further drop to at least the .786 at 1.0756 and possibly the .886 at 1.0647. [The correlation with SPX] suggests EURUSD will blow through those Fib levels…and head straight for the rising white channel bottom at 1.0602.

For the past week, EURUSD has been testing the white channel bottom, slightly overshooting our 1.0602 target to test the Dec 3, 2015 lows.  At yesterday’s low of 1.0517, the pair had shed 5.9% since our September top call.

The move seems to have caught most analysts off guard.  Yet, the catalyst for the decline was clear, well in advance, if one was willing to look at the big picture — which, oddly enough, revolves around the price of oil.

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I hope everyone had a great Thanksgiving.  It should be a quiet day, today, with things continuing as discussed on Wednesday.  I’ll post a few big picture charts, and follow up with updates on EURUSD, DX and USDJPY.

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Here’s wishing all of our readers a safe and enjoyable Thanksgiving holiday.

Chalk today up as capitulation, holiday style.  Having gotten DJI up over 19,000 and SPX up over 2,000, CL has backed off its rumor-driven, equity driving rally.  It faces another inventory report this morning, this one from EIA.

USDJPY is rallying to compensate — with the US dollar putting in one of those ridiculous rallies that only a central planner could love.

But, today is all about the backtest we’ve been discussing.  DB is even contributing to the cause, tagging our downside target from Nov 15 [see: Deutsche Bank: All Better?] 

Re SPX, we remain short from 2204.01 with our downside targets unchanged.

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Wasn’t that amazing news regarding oil?  All that excess supply, sloshing around reservoirs, weighing down queued-up tankers clogging ports around the world — not a problem any more.  Our Peak Oil forecast?  Fuggedaboudit.

What?  You missed it?  Surely, you noticed equity prices melting up to new all-time highs on the back of spiking crude prices?  Anyone can see that.

The Nikkei 225 is up 13% in the 13 days since the US election (of a man who has pledged to dismantle the TPP) — even though the value of the yen has plunged 10% since election night lows and oil has spiked 16% in the past week or so.

You might be forgiven for wondering how all these machinations are so great for Japan, Japanese companies, and the Japanese people that they justify a 13% spike in equity prices.

When we talk about algos driving equity prices, that’s the rub.  Whether or not the OPEC deal comes together (I’m thinking not), the constant jawboning has driven equities higher anyway.  Long after oil plunges into the 30s, we’re looking at new all-time highs.

Like Uncle Seymour’s ill-advised political rant over Thanksgiving dinner, all-time highs can’t be taken back — no matter how unjustified they might be.

From a charting standpoint, new highs dramatically change things.  Though, it’s worth noting that they dramatically changed things in October 2007, too.

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It has taken a ramp job for the ages in both USDJPY and CL, but SPX came within 4 points of new highs on Friday.  With a low-volume holiday weekend coming up, and breathless, moment-to-moment updates on the amazing, colossal, stupendous impending OPEC deal, what could go wrong?

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The past few years have entailed many instances of markets “not making sense.”  The latest iteration I hear about a lot is stocks’ continued rise in the face of a Fed hike, a bond meltdown, political uncertainty and an EM currency crisis.

It’s important to understand that it has been years since stocks traded mostly on fundamentals.  At least, if not more important, are the yen carry trade, the oil-driven algos and other central bank interventions.

And, all this has occurred against a backdrop of aggressive corporate leveraging in a historically low interest rate environment in order to buy back stock and, thus, leverage what little growth in sales/cash flow most corporations have been able to muster.

With six weeks to go until year end, the market has a good strong whiff of the barn.  With TPTB giving it the whip, we shouldn’t be surprised that it’s seemingly picking up momentum.  The big question is whether we can get there without stumbling.

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