SPX should finally hit our 2063.95 target from Nov 3 [see: Beware the Bat] in the opening few minutes  (click on the great Etta James to the left for musical accompaniment.)

The chart back then showed a relatively quick backtest that would take a few days at the most.  Somehow, that few days got stretched into 9, testing our patience and fleecing traders trained to always buy the dip.

It’s not that TPTB didn’t want to allow a backtest.  They just didn’t want the average Joe to participate.  Hence, our warning for the past several days that it was likely to occur on a gap down in the morning.

First, a quick look at why it’s happening this morning, followed by a review of what’s likely to happen next.

continued for members…The primary driver the past few days has been CL, which shed another 2.7% this morning.Sure, USDJPY has dipped below the midline of its rising white channel, but it remains striking distance from it.  So, a rise back above would require little effort and should have immediate impact.If, on the other hand, it decides to give up more gains, there is plenty of downside available whilst staying in the channel and maintaining the uptrend.Put it all together, and there’s a fairly clear picture of immediate support at 2063.95, followed by stronger support at 2032.48 — the .618 Fib and SMA100.UPDATE:  9:35 AM

USDJPY just started reversing, so I’ll assume this is the bottom — at least for now.  Long here at 2060.08.  Use tight stops, though, as it could be limited to a backtest of the SMA200. VIX suggests there could well be another leg down.

UPDATE:  9:41AM

USDJPY has reversed off it’s sharp spike higher.Switching back to short trade here at 2060.05I suspect we’ll see TNX close its gap from last week before it’s all over.  But, for now, it’s being propped up.A little broader view that brings the SMA100 into perspective.  The bottom of the megaphone pattern reaches it around 2pm this afternoon.UPDATE:  9:49 AM

ES and USDJPY just started spoofing higher.  Watch your stops and the relative position of the ES 5-min SMAs and USDJPY’s purple midline. CL just jumped into the pool and is preparing to tow SPX to safety.Just noticed that DX is in danger of breaking trend from Oct 14.UPDATE:  10:16 AM

I think we’re going to get jerked around for a bit here.  USDJPY and CL are both threatening higher, and TNX is being propped up.  I’d close the short with any sustained push through the SMA200.

UPDATE:  10:56 AM

USDJPY, and hence ES, just popped by a few points.  While it’s unclear whether it’ll go anywhere, the safe play is to close the short and see if it settles back down after the euro close.  There’s a good chance it’ll try to tag the SMA50, currently at 2072.  So, there’s a decent opportunity for a a quick long trade here. Just keep your stops close, as there’s plenty of funny business happening with the algos — particularly CL — which is apparently being used to effect a backtest of the SMA200, if not halt the rise altogether.

If SPX breaks through the blue SMA50, then the 5-min SMA100 and SMA200 are about to cross the bottom of the red Flag Pattern at 2076 in the next hour, and would make an excellent bounce target.

If you missed going long at 2063.95, there should be another shot coming up here in a few minutes.  Though, keep an eye on USDJPY and CL to see whether or not it’s meant to hold.

UPDATE:  11:23 AM

Whilst USDJPY is holding up pretty well, CL is not.  So, it appears that SPX is meant to dip a bit more here.  I’d revert to a short below the SMA20 (white) but be prepared to close it if USDJPY and/or CL reverses after the euro close in a few minutes. UPDATE:  11:42 AM

SPX is taking its sweet time.  Clearly in a holding pattern…  Maybe waiting for the SMA50 to decline to 2063.95?Will TNX break down? Will USDJPY dip back below the purple midline?

UPDATE:  1:01 PM

SPX is acting like it might break out here… …but, USDJPY, CL and TNX are working against that outcome at the moment.  Just beware of the 5-min SMA10 (red) coming along, scooping it up and carrying it higher.  Algos definitely in control at present.

The chart that most concerns me is VIX — which looks like it needs to backtest the MAs and close a gap at 16ish.UPDATE:  1:36 PM

Algos doing their thing, producing a bigger than expected bounce.  I’ll cut loose the short here unless TNX and USDJPY reverse right away.UPDATE:  1:44 PM

USDJPY reversed, but only to the rising MAs. TNX reversed, but only to backtest the falling purple TL it broke out of.  And, CL is coming up on a channel line that it might or might not respect.  Hard to feel confident about holding short here, especially with the SMA 3.5 points above.  I’ll give it a little more leash…

UPDATE:  2:58 PM

I show this as being a potential bounce spot.  SPX is near a backtest of the broken red channel/TL.  But, more importantly, VIX is right near the top of its rising channel.  Unless it breaks out, it should reverse fairly soon.

Though there is more downside potential, I wouldn’t be surprised to see a sizable bounce here.  Watch your stops.

UPDATE:  3:17 PM

Feeling very uncomfortable with USDJPY and VIX.  I’ll go ahead and take profits here at 2051.77, but gladly reopen if it comes back by.

UPDATE:  3:34 PM

Looks like one more bit at the apple, here.  Shorting at 2051.74 with very tight stops.  Would love to see it get down to the white channel midline at 2043.50ish.

I’d want to be watching like a hawk if it happens in the closing minutes.  The SMA100 looks awfully tempting, but it’s not that much lower and I’d be concerned about an overnight ramp job.  I don’t plan on holding any position overnight. UPDATE:  3:56 PM

Planning to close the short at the white midline or as close as I can get at the close.  I would not hold any position overnight.  It looks like the falling purple channel doesn’t reach 2035.95 until 11:30 tomorrow morning.UPDATE:  4:00 PM

Closing the short position here at 2046.30.  Pretty nice day!