For a moment, at least, markets were treated to another taste of reality: rates at an acceptable level, the US dollar reacting accordingly, the USDJPY tumbling normally, VIX not being hammered into submission, and oil prices reflecting fundamentals.  Algos, which have grown accustomed to generous support from all the above, simply reacted as they should have.

SPX, ES and COMP all saw their sharply rising channels from Feb lows broken.  And, we were left with very few silver linings at the end of the day.  As “luck” would have it, DXY and USDJPY have bounced and durable goods beat estimates (thanks to increased military spending.) So, ES has bounced 34 points off its overnight lows and is showing an 8-pt gain at the moment.

FB, an important bell cow the past few days, reversed off its SMA200 but bounced yet again at the white channel line we discussed a few days ago [see: Facebook Flops.]

If you’re wondering whether this channel line is important, consider the chart below.  The only time in recent history that FB fell below its SMA200 and the channel line without precipitating a big drop in stocks was when FB announced a $6 billion stock buyback plan.  How’s that for an efficient market?

Unfortunately for bulls, currency and interest rate issues have not gone away.  In fact, a strong durable goods number merely exacerbates the problems faced by the Fed: how to maintain dollar purchasing power while keeping interest rates low enough to keep the country from going completely broke.

A reminder: our yield curve model is still flashing red.  Hence, our downside targets are still in effect.continued for members…

Note that VIX is still above a mere backtest of the broken channel bottom.  In fact, it has backtested it from above, meaning it is suggesting further upside.SPX still looks poised to reach its SMA200.  Though, I’d watch for any signs of a bounce at the .618 at 2635.53 — also a yellow channel (.236) line.  Note that ES already breached its, so there’s no justification for it really.  However, if TPTB get nervous or are simply looking for a good place from which to mount a backtest of the yellow midline, this would do nicely.

CL, which reversed at its .886 on Wednesday, is rebounding slightly this morning.  Still has downside potential, IMO, given the huge gap YoY.  But, TPTB need more upside from it at this time.

And, USDJPY and DXY are bouncing just enough to keep stocks in the green… for the moment.  Note that USDJPY has TL and Fib (.707) support.  A bounce back above the larger red TL would be very helpful for SPX, which is approaching a very important line in the sand.  I’d play the bounce if it holds 105. I have to run out for several hours.  I hope to be back before the close.

We had some website issues this morning which are the result of some larger issues that will probably require a new server, etc.  I’ll try to pick a day next week when we can do some maintenance, and will advise everyone ahead of time.  Hopefully, we’ll get faster page loads, etc. out of the deal.  It’s been quite sluggish lately.

GLTA.

UPDATE:  6:20 PM

At the close…things are looking up.  SPX held the channel bottom, RB and CL are pushing higher in rescue mode, USDJPY has almost certainly found its feet, and VIX should reverse lower now that it’s reached the resistance at the yellow channel midline.  I think we get at least a strong bounce on Monday.

Note that GC is approaching horizontal resistance at 1362 yet again.  Maybe it’ll push through this time, but I wouldn’t bet on it after so many failures. I’d revert to short with tight stops if it gets anywhere close to 1362.