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?

continued for members…

In short, the oil deal could well disappoint, if not downright fall apart.  Consider that CL is back to top of the falling white channel and the neckline of the huge IH&S Pattern that was completed, but rejected, in October.  If it can’t push through, a strong move by SPX through 2138 would be be harder to come by.

Here’s a better big-picture view.

But, if it can, then an actual backtest of any sort will probably have to wait until after new highs are achieved.  We’re supposed to have an interim high on day 100, which would be next Tuesday.  Gaining 12 points between now and then seems like a gimme.  And, rarely have TPTB wasted an opportunity to push through resistance over a holiday.

Note that VIX broke down on Friday, and the futures — up 6 points — suggest it wasn’t a head fake.

All signs suggest a long position today.  Even though DX is digesting recent gains, it doesn’t appear to have run into any resistance after a spectacular run.  More likely, it’s going for a backtest — or at least the appearance of one.

In summary, the algos are in “whatever it takes” mode.  Even though CL is probably going to reverse here, USDJPY, DX, and VIX should be able to take over when it does.  I don’t think SPX will be denied.

And, remember, DJIA is creeping up on its 1.618 extension at 18974 — less than 60 points away.

UPDATE:  9:55 AM

Almost there…  CL has run out of steam, but USDJPY is probably about to break out again (as needed.)

UPDATE:  10:06 AM

Not going for it, not yet at least.  For some reason, they’re going to stretch it out.  Notice the VIX and USDJPY reversals at precisely the right time to prevent SPX pushing through the last fraction of a point (0.9 points short.)  Going to the sidelines here, though I’d be fine jumping back in if SPX can hold the SMA5 10 as it arrives.  For now, it seems unlikely.

BTW, I have a conference call coming up at 10:30, will need to duck out for 15 minutes or so.

UPDATE:  11:13 AM

After backtesting the broken rising white channel, SPX is moving higher again on the suggestion of higher USDJPY and CL and a lower VIX.  This push should make it through.  Back to long if/when it does.  Just know, however, that it might be extremely short-lived.  They can ram it through with gusto, with USDJPY breaking out and hammering VIX.  But, the slightly more common action is a small push above 2193.81 to establish a new high and then oscillating back and forth before dropping back through in order to trap weak bulls.

UPDATE:  11:51 AM

SPX just poked above 2193.81, but USDJPY and VIX immediately reversed.  So, there’s no confirmation yet.  I’d watch for a dip below the SMA5 10 as it arrives in a few minutes.  Though we should get new highs by Day 100, it’s possible they’ll execute a pullback over the next few days in order to fake out those taking a few days off Thursday and Friday.  Note that ES has not yet topped 2191.50 — its Aug 23 highs.

Note that CL has a .618 up at 48.39 which might act as an intraday magnet.

UPDATE:  12:03 PM

ES just topped 2191.50 and is falling back.  I’ll play a hunch and short SPX here at 2194.15 with a target of 2184.89 — the gap left from Friday.  Tight stops are recommended for obvious reasons.

Keep an eye on USDJPY.  If the breakout doesn’t hold…

UPDATE:  12:37 PM

VIX keeps pushing lower, driving SPX higher.  Back to long with tight stops.

UPDATE:  1:10 PM

Just staring at the charts, trying to figure out the likely targets for the day.  It occurs to me CL will probably run up to 48.39 if/when needed to keep SPX edging toward 2200.  USDJPY seems to know no bounds.  DJI is still a little shy of 18,974.There’s potential support for VIX at current levels, so the bulls might not get much more help, there.

NKD is at the highs for the day, easily able to break higher.

SPX seems to have run out of room.  But, its rising white channel can get to 2000, or very close to it, by the close.  I’d be prepared for a downturn here; though, if they’re smart they’ll limit it to the SMA5 10 and let it inch higher for the rest of the day.

UPDATE:  2:01 PM

SPX is probably going to backtest 2193.86 here.    There’s no way to know how far it will go, but I believe it’ll stop there.  Back to short unless you don’t mind the risk of a drop to 2190 or even 2181.

UPDATE:  2:34 PM

CL is backing off the red .618 at 48.39……which has left USDJPY and VIX with the task of propping up SPX.  Note that VIX has support at the red .886 of 12.39.

SPX continues to slip very mildly — meaning that the 2193.81 backtest is probably all we can look forward to for now.

UPDATE:  3:44 PM

SPX has gone nowhere for the past three hours.  SPX will definitely break higher…or lower.   DJI is sitting 23 away from 18974, so there’s a very good chance we’ll get a gap higher in the morning to surpass that resistance.  On the other hand, it’s more commonly done on an even slower day.  So, that would argue for a couple of days of mild pull back.  Given how binary the situation is, I’d sit in cash overnight.     They aborted CL’s reversal – for now. While, VIX continues to get clobbered.  

USDJPY refuses to commit one way or the other.  But, we know it’ll rally if needed.

The latest news on oil is still wildly optimistic.  I have to say, though, it seems a little too optimistic.  Methinks they dost enthuse too much.  Note the wording below:

“…the group hadn’t worked out the hardest part yet: how much individual countries would have to slash, and which ones would be exempted from making any sacrifices.”

Call me a cynic, but what the hell else is there to decide besides those two questions?  If those weren’t critical roadblocks, OPEC would have had a deal months ago.

I think I’d rather be short oil than anything right now.  The expectations are so high, and the charts argue for a reversal.  But, the risk is high if I’m wrong.

And, what if I am?  What if oil heads back to 55 or 60+?  We have a real inflation problem on our hands, right?  A 1/4 point discount rate hike next month certainly wouldn’t fix it.  And, consider the macro effects.  Profits and consumer spending are bad enough without throwing a big increase in energy expenses into the mix.

Stay tuned…

 

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