Few things were as terrifying to the Star Ship Enterprise’s crew as being caught in an enemy’s tractor beam.  That unrelenting pull towards certain doom was a frequent plot device that tested, but never bested, the ingenuity of Kirk, Spock and Scott.

So it is with the “market’s” behavior when it comes to central bank announcements.  The bankers have discovered that it’s better to repair the damage before it’s done by fostering a sizable ramp prior to an unfavorable announcement.  It happened before Brexit, the election, and lately with the Italian referendum.  Why should the upcoming ECB and FOMC meetings be any different?

We remain long from 2208.79 yesterday afternoon.

continued for members…

Yesterday saw SPX melt up and out of the falling white channel courtesy of an intraday ramp in CL (which, naturally, fell apart after the close)……and, an ongoing smack down in VIX.  Our analog calls for another week of this, no doubt with plenty of head fakes along the way.  Our current target is 2223.74 by the 14th, but there’s wiggle room in the price.

We got a small backtest yesterday, and appear to be getting another this morning as VIX and USDJPY momentarily take their feet off the gas pedal.

UPDATE:  10:31 AM

CL broke down with the latest EIA crude inventory report, but it was one minute after helping SPX to a new high.  This, of course, eliminates the downside harmonic patterns.  Funny how that timing worked out…

It was no less unusual than the ramp in CL which, like yesterday, began precisely as the “market” was opening.

UPDATE:  12:50 PM

I think there’s a very good chance of an interim reversal at 2221.35.  Note we had a significant reversal at the .786, hence the possibility of one at the 1.272 extension to complete a Butterfly Pattern.

I’d watch for CL to break down again and/or VIX to continue its break out once SPX gets close.

UPDATE:  1:05 PM

I think that’s probably close enough.  I’d close our long position here at 2223.98 and short with tight stops.

CL and VIX haven’t reversed yet (hence, the tight stops) but are clearly in a position to do so.  Our downside target is 2214, and if we get stopped out the next upside target is 2230.58.

Note that ES hasn’t quite reached its equivalent Fib level (2224.17), so that could act as a driver for a couple more points.  CL continues to accelerate, but VIX is also bouncing…

UPDATE:  1:14 PM

I misspoke a moment ago.  ES 2224.17 is equivalent to SPX 2223.02 — the 1.272 extension of the drop from 2134 in May 2015 to 1810.10 in Feb 2016.  Neither ES nor SPX put in much of a reversal at their .786s, so 1.272 doesn’t really stand out.  But, under normal circumstances we’d at least see a reaction there.  With CL accelerating here, we might be ditching the short any second.

UPDATE:  1:22 PM

CL is breaking out, so SPX is likely to shoot up to 2230ish and then backtest 2223.  We could close the short here at a small loss, or wait for the backtest and get out closer to even.  I’ll be watching for a reaction as the SMA5 10 and then the SMA5 20 catch up.

UPDATE:  1:47 PM

VIX is definitely making for the white channel top, now.  For anyone who was stopped out earlier, this is likely a good spot from which to play the backtest.  Note that CL is also breaking down.

UPDATE:  2:15 PM

They’re trying to keep SPX in breakout status by — what else — smacking VIX back to the purple TL and white midline which is more than offsetting CL’s slide.  Next step should be for VIX to dip below both. I’d close the short here and move to the sidelines.  

Only if it drops through the approaching SMA5 10 and white channel top would I re-short for 2223.  The next resistance is ES 2235.84, about 2236ish in SPX.

UPDATE:  2:31 PM

Interesting that CL finally judged it safe enough to complete its reaction to a rather suckish EIA report. If it drops through the purple channel midline, it would open up the downside for SPX.  However, there’s an excellent chance it would wait until after the close when ES is easily propped up.

UPDATE:  2:37 PM

I’m going to short here at 2233.42 with the understanding that there’s the potential for another couple of points up to resistance for ES.  SPX has reached the red channel top and a purple channel .236 line — which should provide a turning point.  In addition, it has completed a backtest of the broken gray channel bottom.  I intend to hold short overnight.

Given that we’ve already reached out Day 111 target, and the Day 127 target is only 26 points away, I have to consider the possibility that my targets are all too conservative.  Remember, the analog tells us the direction and the dates.  It doesn’t necessarily tell us the prices.

At current prices (which increase the odds of a FOMC hike, of course) we’re 100 points above the 2015 highs.  I should be plenty big enough a margin to accommodate whatever the reaction should be after a rate hike.