Way back in February [see: Feb 13 Update on RUT] we noted that RUT had reached the top of a very long-term channel and was having trouble punching through.

The next few days are very important, as RUT has an opportunity to break above the yellow channel that dates back over 20 years.  If it can…it will leave the rising yellow channel in the rear view and won’t face overhead resistance until the purple 2.24 at 1493 and the 1.618 at 1514.09.

As it happened, RUT couldn’t break out.  It gained a few more points over the next two weeks, then reversed by 5.6%.  It tried again in May.  That attempt failed, too, resulting in a 5.2% drop.  But, it still wasn’t done trying.  In July it pushed through both the 1.272 Fib and the top of the yellow channel — only to tumble 7.1%.

This time was more serious, as the white channel dating back to its Feb 2016 lows broke down and RUT dropped through its 200-day moving average.   But, it wasn’t quite done.

In our September 19 Update, I pointed out that — due largely to a series of strong collapses in VIX — RUT was knocking on the door yet again. Would it be able to punch through this time?

I think it’s going to come down to what the USD does tomorrow. If DXY finds support between here and 88.68, then stocks could get a nice boost and maybe RUT can break out this time.  If not, and if oil/gas tumble further as we’re expecting, then a drop to the SMA200 around 1385-1392 would make a lot of sense, with 1296 next in line.

As it turned out, DXY found strong support the very next day — spiking higher and not looking back.But, oil and gas decided to spike higher, too.  CL suddenly popped above a long-term trend line (on bearish news) and RB aborted the plunge from its dramatic Aug 31 peak.  Oh, and VIX spent the next several sessions making new lows.  In other words, RUT had plenty of algo firepower this time, and popped through the yellow channel top where it just tagged our upside target of 1514.09.

So, it’s a good time to ask what’s next for the index — especially as SPX and ES have also reached overhead resistance.

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The dominoes are all lined up so nicely.  Who’s going to tip the first one over?continued for members… (more…)

Just a quick update to our last update [see: Sep 20 Update on Gold] as GC has reached our initial downside target.

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At the time of our last update [see: Sep 7, 2017 Update], oil had reached our 49.75 upside target, selected because it marked: (a) a trend line dating back to June 2014, (b) the midline of a large, rising channel, and (c) CL’s 200-day moving average.  I called for a reversal, and apparently wasn’t alone in my thinking. CL plunged over 4% the following day — a nice start to the 13% drop I expected.

Needless to say, this was a problem for stocks, which had just flubbed an assault on the psychologically important 2500 (SPX) and faced resistance of its own.  As has happened countless times before, oil futures bottomed out and spiked higher right as the market opened.  SPX gapped open with an 18-pt gain and, thanks largely to CL’s recovery, never looked back.

The only problem with this scenario was inflation.  Gas futures (RB) had closed August on a high note, the top of a channel dating back to Aug 2015.  I had called for a reversal at 1.78, reasoning that inflation would spike higher unless RB fell sharply.

With stocks counting on CL’s continued ascent, and the Fed counting on RB tumbling, was there a scenario that could satisfy TPTB’s needs?  There was, but it involved some last-minute theatrics and required the EIA to falsify its gas price data for the month.

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There was a time when VIX tagging 9.30 was momentous.  VIX’s all-time low of 9.31 was reached on Dec 22, 1993 and it subsequently soared as high as 89.53 (Oct 2008.)  This past December, however, marked a progression of lower and lower marks that culminated in a new all-time low of 8.84 in July.

Want to know whether stocks have topped out?  First, you’d have to ascertain when VIX will stop melting down.  We’ve seen 17 straight sessions below the bottom of our long-term yellow channel.  The only signs of life were the backtest of a rising channel that broke down in order to get SPX up over 2500.With important resistance coming up today for SPX/ES, might VIX be ready for another (easily-contained) pop?

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Years that end in “7” and Octobers are often full of fireworks.  Since we’re in October of 2017, might we finally get a respite from the melt-up?

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There’s not much to be get excited about in these past 24 hours as we ease into the last session of the quarter.  RBOB dropped to our initial target but seems to be hung up there for reasons we discussed yesterday.  Stocks are levitating nicely, but one gets the sense the other shoe might be about to drop.

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It starts out with a bright, buoyant red balloon, but goes downhill awfully fast.  (spoiler alert: a sewer-dwelling, child-devouring clown that somehow isn’t all that funny.)

So it is with this market.  The S&P 500 has been floating along for over two weeks, close enough to 2500 to reach out and snatch it any time it likes.   Yesterday, it finally tagged our 2510.87 upside target and managed to close above 2500, with only two days to go before quarter-end.

Is this the start of the next leg up, or should we be alarmed by those sinister sounds gurgling up from the sewer?  [And, no, it’s not just RBOB, which hit our next downside target overnight.]

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In what were generally viewed as hawkish comments, Janet Yellen reinforced the widely held expectation of a rate hike in December.  USDJPY is rallying strongly in response.

After struggling for the past week at the SMA200 and, more recently, at a TL off its recent highs, it is making a show of breaking out.  Needless to say, equity futures are responding in kind.continued for members… (more…)

Futures are slightly positive this morning even though RB and CL are slumping — primarily on an overnight VIX dump — off 9.9% from yesterday’s highs. Note the SMA10 at 10.08.Traders will remain focused on Fedspeak and North Korea, either of which has the potential to upset the month-end run for the barn.

SPX and ES both reached our initial, minimal backtest targets yesterday.  As I posted last night, the next steps are a bit muddled.

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