The big economic news overnight was Japan’s continuing economic meltdown.  Imagine that – the most aggressive QE on the planet and it’s doing nothing for the real economy.  Seems like someone would start to question it, no?

Offsetting it, as usual, CL continued its ascent, reaching a critical price level.

continued for members…

This is a breakout of CL’s falling white channel…… and could be the impetus SPX needs in order to break out of its rising purple channel. First, it has to break out of the falling red channel…

…in spite of the US dollar’s continuing meltdown.

Which means, in addition to CL’s ramp, VIX would need to break down.

I think it will, and I think SPX will take the opportunity to break out.  I’d be long out of the chute this morning.  Only if SPX dropped through the SMA10 (2180.56) would I revert to short.

If it breaks down, our downside targets remain the same: 2166, followed by 2158.52.  They still make perfect sense from a charting standpoint.  But, CL and VIX have proven a formidable influence on SPX, and I suspect TPTB will at least attempt a breakout here.

While we wait to see if that occurs, I’m going to be updating the big picture this morning.  Therefore, I won’t be watching short-term moves or issuing trade alerts.  Let the SMA10 be your guide.

More later.

UPDATE:  3:34 PM

It’s been a rather underwhelming display of ramping.  SPX is hanging on to the rising purple channel……largely on unconvincing moves by USDJPY and VIX.   ES has constructed an IH&S, but hasn’t been able to get past the neckline after two tries.  There’s still time left, but this is not the kind of move that inspires confidence.

I suspect they’ll pull out more stops overnight to keep it alive, but I’d be cautious with any position overnight.  Today’s move looks forced and quite tired.  And, so do VIX and USDJPY.  Despite the bounce back above the purple channel midline, we still haven’t seen a move past its .786 line.

If the rally continues, we’ll likely need to see VIX break below 11.02 and CL above 49.  I’d be a lot more confident if those things were to happen in the next 30 minutes.  But, even then, we had a big head fake on Monday — a breakout that turned into a gap lower, failed breakout and 22-pt loss on Tuesday.

Trade carefully.