It’s been a lousy environment for trading the last 5-6 weeks.  Although SPX closed Friday exactly where our Jan 27 (Day 141) target was set, there have been very few dips since early December that provided in much in the way of trading opportunities — unless you enjoy mindless, intraday dip-buying.

Those who trade after-hours have had things a little better.  But, even the eminis chart shows that a long series of CL- and VIX-driven prop jobs dating back to Dec 9 have kept ES bouncing around in a very narrow range [see: VIX – Just Another Tool.]

Friday was more of the same, as the initial gap higher was driven entirely by a nonsensical spike in CL (which quickly faded as soon as the inaugural address began) and was saved from a negative close by VIX being slammed by over 6% in the final hour.

It’s obviously very difficult to get much downside going if all it takes to prevent it is some 23-year old MIT grad, sitting in a windowless room somewhere, mashing on the SHORT VIX button over and over again until prices stabilize.

continuing…

CL is contemplating continuing lower, but is hung on the SMA10 at present.  I suspect it’ll let loose this week.

USDJPY is continuing its slide.

SPX, for its part, seems less and less likely to put in a meaningful dip between now and Friday.  But, it’s very hard to say.  I remain short until we get some sort of real break out.

There’s easily room for 30 points to the downside, say 2239.  It would do little to damage the rally and would help flesh out some of the rising channels.  It really comes down to whether or not TPTB will allow it.  

ES had many opportunities to have dipped back down to flesh out the rising channel from election day.  I’ve sketched in a red channel, but there were at least a dozen others along the way.  Instead, we’ve seen a NKD-style flat line that will, if left alone, allow the channel bottom to get tagged with no real downside at all.

Will we get a meaningful dip?  Now that some of the Trump bloom is coming off the rose, I think there’s perhaps a 50-50 chance.  But, from the looks of VIX this morning, I wouldn’t make any big bets just yet.

The VIX charts reveal a pattern of very consistent interference with stock direction and timing.

UPDATE:  9:40 AM

Even the initial 5-point dip was apparently too scary for TPTB.  VIX is, again, being slammed.  It’s back below the SMA10, but is finding support at the white TL.

SPX has not broken out above the SMA10, which is a good sign for shorts.

UPDATE:  10:39 AM

Could get some support in here, as VIX is at the channel top and ES and CL have reached internal TLs.  SPX’s last tag of this white TL was last Thursday, when VIX had popped out of the falling white channel to tag a .618 that it reversed from.  Obviously, if VIX can break out this time and complete a Gartley to the .786 at 13.89 or Bat at the .886 at 14.26, then SPX’s TL will not hold.  In that case, SPX 2239-2243 is a good bet.  

One other note: 2261 is also a continuation of the purple H&S neckline.  SPX first completed it on Thursday Jan 12, but bounced back sharply on VIX being smashed from 12.60 to 10.94.  It dipped below again on Thursday Jan 19 before VIX saved it again.  The H&S target of 2239.15 remains our interim downside target and is also the red .886 set up by Jan 12’s dip almost to the red .618 (a Bat Pattern.)

UPDATE:  11:04 AM

Surprise, surprise.  VIX getting beat down, and CL spiking just in time for SPX to get pushed above its SMA5 10, which has now caught down to the index — at the purple neckline.

UPDATE:  11:29 AM

CL is poking up above its SMA20 as SPX finally reached its TL.  I assume we’ll see a bounce here, so would cover the short at 2260.02 unless CL reverses right away. At the moment, it looks likely, as VIX is still on the rise.  If you cover here as a precaution, I’d be quick to re-short on any drop through 2260.

UPDATE:  11:40 AM

Euro close is over, CL backed off its SMA20, and VIX still inching higher.  Looks like we’ll get that additional downside after all.  

It’s going to be important for VIX to break out of the little falling white channel at 12.51-12.55 (the SMA50.)

UPDATE:  12:25 PM

The big, red VIX button got pushed.  VIX broke out, only to break back down as SPX tags the .886 of the rise from last Thursday’s lows.  I’d be cautious here, and consider going to cash on any rise back above the purple neckline unless you’re willing to ride it out.  From a harmonic standpoint, a big bounce here at the .886 isn’t exactly legit (Friday’s bounce trashed a legit Bat Pattern.)  But, I’ve seen worse transgressions turn into big bouncebacks.

UPDATE:  1:15 PM

They got SPX back above the purple neckline with the VIX breakdown.  Now, they’re trying to defend it by pushing CL back above its SMA20.  If it holds, the interim target should be a backtest of the yellow midline as the SMA5 200 catches down to it, around 2266.76.

I’m going to take a break, and will be back in 20-30 minutes.  Following along the meltup makes sense, but I expect it to fail at some point.  Bottom line, I’d want to be short below 2261 and long above it — to a point.

 

 

 

UPDATE:  2:10 PM

Testing the neckline yet again…. Want to be short on any drop below here.

The 60-min VIX chart is looking bearish again…

UPDATE:  3:15 PM

ES reversed at this little TL, and VIX is holding support, so maybe we won’t get the usual meltup into the close.  Not betting on it, but will probably have to make that decision in the next 45 minutes.  FWIW, a push up to 2271 would set up a potential IH&S targeting 2287ish.

UPDATE:  3:44 PM

Moment of truth for SPX.  VIX suggests it’ll punch through.  But, watch out for a reversal here just in case.

UPDATE:  3:47 PM

Got through, but VIX isn’t piling on just yet.  I’d revert to short on any drop back through the SMA200 at 2266.33.  The .618 is at 2269.33 — also the red channel top.

UPDATE:  3:51 PM

Reversing, so back to short with tight stops if you’re holding overnight, or to cash if not. A pop up through the purple TL would indicate 2269.34 or 2272.

FWIW, we have a light day for econ news tomorrow – only existing home sales at 10AM.  It gets busy later in the week, with crude, leading indicators, GDP, durable goods and Michigan sentiment all ahead of us.  I suspect traders will focus on whether the rally since election day can be backed up by results.  Otherwise, they’ve pulled prices forward to a huge extent and the road could be rocky from here out.

I’m going to take a break, then work on updating the big picture.

 

.