Backtest Successful…For Now

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ES and SPX safely tagged their backtest targets yesterday, scampering back to safety by the close. Around 2:40AM, however, ES’ channel looked to be in trouble again. ES even dropped through its SMA5 200 – a no-no in any meltup scenario.

As luck (not!) would have it, someone in the administration (not Trump, we know he never watches the markets) was watching the markets at 4AM and slipped a note to Bloomberg that trade talks were going well. The yellow arrow marks the spot. All the stops have been pulled out: VIX is back below its SMA200, CL is back above its SMA200, and USDJPY got a bounce off its SMA50. And, just like that, all is well again. For now.

continued for members…The rest of the charts show that there are still some risks to a continuation of the meltup. Obviously, ES and SPX are still below their SMA10 and, now, their SMA20.

SPX looks likely to backtest its SMA20 and broken red channel at 3108. How things go after that will be very important. ES, likewise, is approaching a backtest of its SMA20. If it doesn’t break above 3109.55, then a second leg down between now and Dec 16 gains a great deal of credence. Incidentally, the SMA50 should reach 3047 around the middle of the month.VIX has pulled back, but that Dec 16 intersection still intrigues me. It’s the day after more tariffs are supposed to hit.USDJPY is going sideways, hinting at more downside… …even though NKD’s channel is holding.Aramco is supposed to close today, so oil and gas are going for a strong finish. None of the previous moves above the SMA200 have held. So, I’d be shocked if this one does.The weekly chart presents a pretty lackluster triangle which has been propped up at 50.57-50.99 over the past six months. And, last, 10Y prices are pausing here, with yields dipping back into the falling purple channel yesterday. The 2s10s is still in breakdown status even though the drop has moderated in support of this bounce.Bottom line, continue playing the bounce. But, keep your stops tight. SPX 3047 is still a very viable option once SPX’s gap (3110.78) is closed.

Quick program note: I’ll be out of the office from 11AM – 2pm today and after 10:30AM on Friday.

We’ll have services ISM at 10AM and EIA inventories at 10:30AM. More later.

UPDATE: 10:34 AM

Decent draw for crude and build for gas. I’m still bearish on both and will be working on an update after the close today.

RB has backtested the TL which marked the failure of the November breakout.SPX is holding at a backtest of the broken red channel – a sliver of hope for bears.I’m taking off now, will post before the close.