With this morning’s ADP employment report bolstering the odds of a rate increase next week, one would expect the USD to get a little bump (is there anyone left out there who doesn’t expect an increase?)

It would be a shame, though, if investors saw rising rates as a negative — which explains why USDJPY stepped up to the plate.  The peculiar thing is that the now-familiar spike occurred over 5 hours before the ADP news hit.  

In fact, it was about the same time that oil broke down from its week-old rising channel, dragging stocks below an important channel line.

Futures are up 9.5 points from their overnight lows, and everything is peachy again in the “markets.”

continued for members…

ES is back above the yellow channel top — though still below the rising white channel bottom.  Either this needs to be “corrected” asap, or the lower, purple channel (yellow arrow) is going to be paid a visit sometime soon.

The daily chart shows what a prize it would be for bulls if they can hold the yellow channel breakout.

The same goes for SPX.

While ES rebounded overnight, it rebounded to the TL that has proven difficult to break through.  I’d stay on the sidelines this morning until we get either a breakout or a reversal involving a VIX breakout.

SPX has been locked in a falling channel for a week, now.

VIX is currently straddling the white channel top…

…which, closer up, is a triangle formed after a breakout from the small red channel.And, CL has fallen to support at the red channel bottom.

UPDATE:  11:33 AM

SPX is breaking down a bit, potentially heading lower, but we won’t know for sure until VIX breaks out — which, who knows?  A short position here at 2369.64 should be relatively safe, but I’m a bit concerned re a backtest of the SMA5 200 as it crosses the white TL up around 2372.

Even though ES hasn’t broken out, it is gaining at an exponential rate.  Bottom line, I’m happy on the sidelines unless VIX confirms a short position by breaking out past the white TL.  But, for those willing to take a shot at shorting, keep your stops tight — at least until VIX breaks out and/or CL drops through channel support at 51.96.

UPDATE:  1:30 PM

SPX finally tagged its SMA5 200 in spite of CL’s 4% plunge.  VIX and USDJPY have nicely offset CL, with threats of a breakdown (VIX) and another leg up (USDJPY.)

Interestingly, VIX has made no effort to break down, or even tag the lower bound of the triangle — which would easily send SPX higher.  It’s content to do just enough to keep SPX pegged at overhead resistance while CL melts down.

For its part, CL appears headed for the 1.272/.382 at 50.26 and, if that fails, the .618/.500/1.618 at 48.63.  It’s additional fuel for the shorting argument, especially if it drops through the SMA100

This implies that there’s another leg down coming, which would in turn suggest shorting here.  SPX is still below its SMA10, so the stops are pretty clear cut.  But, with ES having already broken out past both TLs, the risk of being on the wrong side of the trade can’t be ignored.

I’d try a short position with tight stops with a target of 2347-2351.

UPDATE:  3:34 PM

CL has dropped over 5%, reaching our next downside target of 50.26.  I believe there will be additional downside, especially after the margin calls go out.  VIX is on the rise, and has no immediate overhead resistance once it clears the SMA50 at 11.69.  I’d hold short on SPX with the SMA20 (2351.13) and the 1.272 (2347.53) as the next downside targets.  The yellow channel top is just below at 2344.50ish — depending on when it happens.