Plenty going on this morning, with a huge miss in jobs on top of the Syrian missile attack.  Futures have largely shaken both off, thanks to a relatively strong dollar and a surge in oil prices.

Again, as we’ve been reporting all week, markets sit right at support — meaning the breakout or breakdown question remains unsettled.  That doesn’t mean we don’t have some strong clues.

continued for members…

This was the picture yesterday, before the news.

And, this is what the futures looked like overnight.

Note that by dipping to 2336.75, ES merely fleshed out the rising red channel and performed another tag on the falling white channel midline.  In other words, support was held.

Couple this with the fact that it’s back above the purple TL off Wednesday’s highs and should be able, with VIX’s help, to get back above the SMA10 without too much difficulty.  From there on, it’s a race to the neckline of SPX’s new IH&S Pattern.

USDJPY, which is long overdue for its date with the SMA200, has been masterfully propped up and will probably break out — at least a little — today.

I’m sure I needn’t remind anyone of the headline risk on a day like today. A brand new president with a penchant for knee-jerk reactions and a bunch of shiny new military toys is undergoing his first real military test.  Both Russia and China are playing chicken with him — at least by proxy.  Things could go south in a second.

Though the script might call for an IH&S completing at 2375, reality might interfere.  The algos can only do so much.  As we discussed yesterday, if SPX dips below the yellow channel top, now about 2352.83, the long case loses its mojo real fast.  Use stops.

UPDATE:  9:56 AM

SPX has fallen right to the yellow channel top.  I’d want to short on any dip through 2350.45 or so.

UPDATE:  10:00 AM

Almost…

Here’s a quick look at potential downside targets should the lows not hold.

UPDATE:  11:00 AM

There has been a terrorist attack in Stockholm.  A truck crashed into a crowd of pedestrians and a store front.  Details are still a little sketchy.

SPX weakened on the news, but so far is holding the purple TL shown.  I would expect the selling pressure to pick up in the next 30 minutes into the euro close, as many traders won’t want to remain long going into the weekend with all the headline news risk.

I think there’s a good chance of SPX dipping down to the white .618 or lower by the close.  Keep an eye on ES’ red TL and SMA5 200.  I’d want to short SPX on any drop through support, here.

But, I’m not yet ready to bet on it.  The way this is playing out, ES will probably continue to bounce off the SMA5 200, at least until it reaches the red TL at 2349.50 around 1:25PM ET.  At that point, it’ll have a decision to make: whether to follow the red TL or drop a little and backtest the purple one again.

I find it interesting that ES has made three successively lower lows since Monday, while SPX has made three higher lows. I’m not sure what conclusions to draw just yet other than, as we already know, it is much easier for TPTB to effect a recovery after hours.  This makes it safer and cheaper to prop things up — importantly, before “markets” open.

UPDATE:  3:18 PM

Pretty quiet so far today too quiet!) but SPX is looking at a long weekend with headline risk.  If it drops out of the rising red channel, I’d go ahead and bail out.  Even if it doesn’t, I’d be careful about holding over the weekend unless you can hedge or deal with the gap risk.

Yes, it has held support.  But, that doesn’t mean the risk is gone.

UPDATE:  3:29 PM

2358.02 is about where the SMA10 will end up today, barring any huge moves in the last 30 minutes.  As such, I’d go ahead an ditch the long position here as it slips beneath it.  I’d be happy to ride it higher if it bounces back, but would still be cautious about holding through the weekend.

I’d have no problem shorting, but beware that it might easily hold at the SMA10 at 2356.55.  In other words, very tight stops if you decide to bother.

I’m about 50:50 on it dropping through.  Note that ES also has TL and SMA5 200 support just below current levels.  I think its SMA5 200 would pretty much line up with the yellow channel top in SPX (2353.27.)

UPDATE:  3:59 PM

ES just tagged support at its SMA5 200.  Very precise, very algo.

And, yes, in case you were wondering about the red channel…

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