Between the Senate passing its version of the tax bill and the CVS/Aetna deal, futures are up almost 20 points this morning.

The DXY and USDJPY are getting a nice bump.  And, VIX is, of course, slipping. So, what could go wrong?

continued for members…

We’d want to see VIX back below the yellow channel bottom.  Otherwise, it has potential up to 16.12.

CL is threatening to slip below the TL……and, RB is not in the clear until it bounces at the neckline.Otherwise, ES has potential to the white channel top at 2700ish after having rejoined the purple channel in classic meltup mode. I have to be out of the office all morning, will be able to catch up with things around 1pm.

UPDATE: 1:40 PM

RB and CL are taking advantage of the cover offered by VIX and USDJPY to reset.  RB has dropped below the neckline at 1.72, confirming our short position.  Remember, there is support at 1.68, 1.65 and 1.63, meaning this could be a short-lived trade.If I were in charge of propping it up, I’d do it at the SMA100 on Thursday or Friday (but, as soon as tonight) when it reached the cloud top at 1.68 – about where the “L” is in the word “cloud.”Likewise, CL has dropped through the TL at 57.86, theoretically triggering a short position.  But, support comes in at the SMA20 (57.04) and the previous top at 55.24.  We’ve seen it rebound sharply on several occasions.  And, the EOY is only 3 weeks away.  So, I suspect it’ll rebound again this time.DXY’s pop stopped at the SMA10, meaning it doesn’t merit a long position yet.  Even with the bounce that began on Nov 27, it hasn’t closed above the SMA10 since Nov 8.USDJPY continues to be a tough read.  The channel I sketched in this morning is holding so far, but I don’t put a lot of faith in it.

The drop in CL and RB are taking some of the juice out of stocks.  ES is testing the gap close level that served as this morning’s low.  A drop through 2650.75 would open the door to the purple channel bottom at 2640 and, potentially, the SMA10 at 2617.25.UPDATE:  2:42 PM

In the ES update above, I neglected to mention that SPX is nearing support at its SMA5 200 at 2646.15.  This would equate to 2647.50ish in ES.  Bottom line, lots of potential support levels.  But, stocks have given up most of their gains on the day, making for a bearish shooting star candle if it doesn’t recover.UPDATE:  3:46 PM

SPX has dipped below the SMA5 200 (2640) and ES just reached the purple channel bottom that it worked so hard to rejoin.  Both are in the red, and a bounce is badly needed here to avoid a very bearish outcome. Note that VIX pushed back above the yellow channel bottom — also a bearish signal.  We have a 16.12 upside target on VIX, but not for another few days.  A close above the yellow channel bottom would be a good sign, but there’s a lot of overnight risk to consider.