Another ramp job is underway, this time led by a resilient USDJPY.  Though CL is in a position to be the spoiler as it might finally recouple with the incredibly bearish fundamental picture.

A reminder: this is a big week for economic data — with PPI, CPI, retail sales, housing starts and permits, Philadelphia Fed and leading indicators all on deck.  The most important, IMHO, is CPI.

Though the Fed supposedly doesn’t use it, and though it woefully understates the true state of affairs, a significant headline beat of the 0.2% expected could be the tipping point for the Fed’s March meeting.  We’ll look for some hints in Yellen’s testimony on Tuesday.

continued for members…

Oil is currently off 1.5%, wiith plenty of room to go before it gets back to where it was when last week’s disastrous inventory reports were released.  As is typical, it has been putting in most of its drops overnight, when ES is more easily propped up, then recovering during the day so it can help boost stocks.

It’s being largely offset by DX, which has clearly broken out of the falling white channel it was in since Dec 21.

Needless to say, this has been a big boost for USDJPY.

Which has elevated ES in the after-hours — as has been the case for weeks (the lightly shaded areas are the AH.)  At present, it has a 6 point head start on the session.  The immediate upside target is the 1.618 at 2322.52.

VIX is up overnight — which is getting to be old hat: ramp it higher overnight so it can plunge during market hours.

It is bumping up against its SMA10.  So, we could see a breakout or breakdown, depending on which TL it obeys.

SPX has two potential upside targets ahead of it: the red 1.618 at 2321.88 and the white 2.24 at 2330.23.

We got another in a long series of breakouts from what I’d call headfake falling channels.  Not one of them has been backtested, dating back to at least Brexit last June.  And, regardless of which rising channel one picks, the “breakdowns” have been ridiculously mild — with SPX flatlining or falling very gently in order to tag the bottom of the channel.

The chart below is quite messy, but note the number of times a decline was cut short in order to make higher highs.

UPDATE:  9:33 AM

SPX has reached our first upside target, so I’d take a stab at shorting it here at 2322.79 — the red 1.618.  VIX has potential channel support here.

We should know pretty quickly whether or not it will work out.  Just keep an eye on VIX and whether it can hold 11.27 or so.

UPDATE:  9:41 AM

It took all of 2 minutes for VIX to break down.  I’d switch back to long, but ES is bumping up against that 1.618.  I’d hold on for now and see what happens at ES 2322.50.  Note that VIX stopped right on the yellow channel bottom that dates back to 2014.

As it usually does, CL is bouncing now that the “market” is open.  It now has plenty of overhead resistance where there was once support.

A quick FYI:  I have to take off early today for a quick business trip.  I’ll post until about 12PM EST, then sporadically throughout the day.

UPDATE:  10:06 AM

VIX bounced, but merely backtested the channel.  And, USDJPY is still ratcheting higher — approaching 114. The net result is that ES just poked above the 1.618.  Both it and SPX’s SMA5 10 are about to arrive on the scene for additional support.  50:50 whether SPX will continue on up to our upper target at 2330.23.  Keep an eye on VIX, which is straddling the fence.  If it spikes through the SMA10 at 11.38, our short position should be in the clear.

UPDATE:  11:02 AM

Another test of VIX’s SMA10 and another rejection.  CL is off nearly 2% now – testing the bottom of the rising white channel it “broke out” of on Friday – and USDJPY is back below 114, but VIX is pinning SPX at its highs of the day.  You get the feeling that VIX is going to pop through its SMA10, but so far it’s no go.  And, now, SPX’s SMA5 20 is catching up with the index.  Moment of truth for SPX…

In a few minutes, the SMA5 10 will roll over and intersect the SMA5 20.  If VIX doesn’t do a nosedive at that point, we’ll get our downturn.  But, quite often, TPTB have chosen that very moment to deflate VIX and push SPX up through both SMAs and on to new highs.  Tighten up those stops, and stay tuned.

UPDATE:  11:22 AM

There goes VIX.  I’d dump the short position and revert to long with tight stops, though we can always revert to short if this is another head fake.

UPDATE:  11:30 AM

Euro close, and ES is pausing at the white channel midline as VIX bounces at the purple midline and CL is headed south again.  I’d revert to short here at 2326.74 with tight stops.

UPDATE:  11:46 AM

It doesn’t appear they’re going to give it a chance to drop.  VIX keeps edging lower, and now has the SMA 5 10 to guide it.  CL bumped up to test or break the SMA20 at 52.99.  At the very least, we need a drop through the SMA5 20 to get things going.  But, as before, the real treat will come if VIX can pop through 11.38.

UPDATE:  12:00 PM

Note that USDJPY has reached trend line support……as has ES.

VIX, has bumped back above the SMA5 10, but certainly no break outs……and CL was rejected at the SMA20, but has established a series of higher lows in the process.  It is probably constructing an intraday to support stocks in case USDJPY drops down to the red .500 at 113.48 — which it probably will at some point.

At this point, SPX could fall “all the way” down to the purple channel bottom at 2321.88 around 12:50 and still maintain upward momentum to tag 2330 by the close.  Of course, there are plenty of gaps below 2321, starting with this morning’s at 2319.23.

As I mentioned earlier, I have to take off for a quick business trip, but will check back in in a couple of hours.

If ES doesn’t bounce off the purple TL, I’d be inclined to stay short.  If it does, then count on VIX dipping just often enough to keep ES/SPX on the rise for the remainder of the day.  If SPX drops through 2321.88 and VIX pops above 11.38, I’d be a lot more confident about staying short.  Clearly, the folks managing VIX today care a lot about that level, too.

One last thought…  The trend over the past 6-8 months has been to ramp SPX as high as possible before any news that’s potentially bad enough to dent the rally.  With Yellen’s testimony coming up tomorrow, I assume that’s what’s going on here.  The only question is how stocks would react if she presents a very hawkish view.

A higher US dollar is good for the USDJPY and, hence, the yen carry trade.  It might be enough to offset falling oil prices.  And, of course, if the FOMC should embrace higher inflation, then they might convince investors that inflation and higher interest rates are, somehow, good for stocks.

Just saw the German Wholesale Price Index — up 4% over the past year due to, of course, fuel prices.  DAX futures are actually slightly higher.

Lots to think about while I’m sitting in Bay Area traffic.  GLTA.

UPDATE:  3:32 PM

Crazy day, with charts that are so warped, it’d be laughable if it wasn’t so frustrating.  After dropping every time it was needed, VIX is still straddling the fence.  No clear indications.  It could easily give stocks one more boost by dropping through the SMA5 200.CL has done the same, and is hugging the bottom of the rising channel.  It’s one of the few things that has a clear direction.  I expect it to continue dropping. USDJPY made it to the red channel bottom, and is holding on to that for now.  ES bounced off the TL we were watching.  At this point, it might make it down to the white channel bottom, where the SMA5 200 is lurking, but could wait until after the close — which would screw cash day traders out of 7 points.   And, SPX is slipping, but… who knows whether it’ll hold the purple channel or not — let alone backtest the 1.618.  We shorted at 2326.74, which makes this a 3-pt loss versus taking a chance on holding overnight.  

I believe PPI will probably be bearish in the morning, but how big a ramp will we get before 8:30?  Only hold short if you can bear another gap higher on an overnight ramp job.

I’ll post more later this afternoon, and will also post the RUT charts I worked on over the weekend.  GLTA.