This morning looks a lot like the last two, with one notable exception.  VIX has risen sharply over the past 24 hours.  No surprise, then, that CL has spiked in order to offset it.  The net effect: ES and VIX rising in lockstep — as if things couldn’t get any weirder.

continued for members…

VIX’s 60-min chart tells a different story — having reached the top of a falling channel that has spelled reversals since Dec 30.  It looks to be about 12.17.

CL is this morning’s ramper-in-chief — breaking back above the SMAs and a TL off recent highs.

ES, like SPX, reached the top of a rising channel yesterday.  So, we’ll soon find out which chart is lying through its teeth.

We remain short from yesterday.  But, as always, keep an eye on VIX — which might or might not reverse at the channel top.

UPDATE:  10:20 AM

USDJPY just reached channel and SMA50 support, but CL is looking quite weak.  We might get a bounce here.   It’s going to depend on whether VIX can hold 12.30 and CL stops at the SMA50 at 52.72 or drops through.

The argument for a strong bounce here comes from ES, which rarely ignores an opportunity to respect a random, otherwise meaningless TL such as the purple one in the chart below.

UPDATE:  10:25 AM

I’ve been playing with a couple of charts folks might find interesting.  It occurred to me that the gap between SPX and its SMA10 was getting rather large at 42 points, and has been elevated for a while.

This tends to happen at two times: sharp, sustained rallies such as we’ve been having, and tops – interim and otherwise.  The yellow arrow indicate some of the instances over the past few years.

As we’ve pointed out before, SPX is trying to push above the midline of the rising white channel — which is really only half the story.

If we expand it to include the 2009 lows — the yellow channel below — the downside potential looks a little more dramatic.  Note, also, that weekly RSI is now overbought.  I’ve indicated the other times with purple arrows.  There were a few times when the signal came early, but it was rarely wrong all together.  And, many times it presaged a nice drop.

UPDATE:  10:37 AM

CL just fell off a cliff, but found support at the SMA50 – just like USDJPY.  VIX is loitering around its SMA5 10 — above the white channel top but below earlier highs.  So, hard to know if it’s going to step in a support SPX or not.  SPX popped through its SMA5 10/20/50, so it appears as though the meltup has started.  Watch your stops.

UPDATE:  10:53 AM

ES just tagged its SMA15 200 but SPX isn’t quite to its white channel bottom at 2340.  The tie-breakers might be VIX, which just topped its recent high, and USDJPY, which just dropped through its SMA50 and channel bottom.

UPDATE:  10:55 AM

SPX just reached the white channel bottom.  I’d cover here on any sign of a bounce, though it still has potential to the SMA5 200 at 2336.75.

VIX and CL indicate it might go lower.

UPDATE:  11:03 AM

I think SPX is going to tag its SMA5 200, as VIX is heading higher – probably to the white .618 at 12.88, and CL and USDJPY are slipping as well.

Remember, VIX already reversed at its .500, so it needn’t reverse here at 12.88.  The harmonic target (bat pattern) would be the .886 up at 14.14, though the SMA200 is at only 13.89.

I’m feeling a little less silly about putting that target at 2330 a few days ago.  If the SMA5 200 doesn’t hold, 2330-31 is our next target.  For ES, it’s 2326.80 and 2320.20 — which is slightly more bearish than SPX 2330.

UPDATE:  11:19 AM

Looks like VIX is reversing just shy of the .618, so SPX will likely bounce up to at least the SMA5 10 as it catches down.  Again, watch your stops.

UPDATE:  11:29 AM

VIX is breaking below its SMA5 10.  I’d cover here and revert to long on any sustained push above the SMA5 10 (2343.25ish.)  I’m a little cautious as this might just be a pop to coincide with the euro close.  VIX has support at 12.46, and below that at 12.32.

UPDATE:  11:36 PM

VIX is bouncing at 12.46.  Back to short here with tight stops for the SMA 5 200.  SPX didn’t quite reach its SMA5 20 or SMA5 100.  If VIX drops through 12.46, this was probably just a move to get SPX back down to backtest its SMA5 10 for additional support.  If it drops through 12.32, it almost certainly was.  And, if it drops through the white channel top at 12.16, it definitely was.  Note that USDJPY is backtesting its SMA50 and white channel bottom, and CL has yet to push up through its SMA5 10.

Note, also, that VIX’s rising red channel intersects with 12.32 — the next lower Fib — around 12:10.  I often see reversals at 12:09, so this is setting up as an important pivot point.  Either VIX’s channel will break down and SPX will break out of the falling red channel and above its SMA5 100, or VIX bounces and SPX can continue on down to 233y and, potentially, 2330-2331.

FWIW, DB is off 1.25% today, and seems to be aiming for its SMA10 at 19.53, where it can also close a gap from Tuesday (19.57.)

UPDATE:  12:25 PM

Clear as mud here, as VIX is working lower, trying to get stocks up to the SMA5 50 at 2346 as USDJPY pushes above its SMA50 and CL backtests resistance.  VIX just gapped lower, so I’d take it seriously and go long here — while being prepared to short again on any drop through the SMA5 10 — probably after the 2346 tag if it happens.  VIX is slightly below where I have the white channel top, but I could be off by a few cents.  Keep an eye on the SMA5 10, as a drop through it and the SMA5 20 is a warning to short.  And, remember, tomorrow is OPEX — so the bulls have that going for them, too.

UPDATE:  12:43 PM

Breakout or breakdown time.  VIX has slipped below the white channel top and is approaching its SMA5 200 as SPX has reached the white channel top and tagged its SMA5 50.  The bigger driver, though, is CL — which is back above that purple TL it broke out of yesterday and is in full-on plunge protection mode. I’d revert to short, but with very tight stops.  If VIX plunges through 11.93, switch back.

Correction…VIX just reached its SMA5 200.

UPDATE:  12:50 PM

CL keeps going, and VIX is slipping below its SMA5 200.  Sadly, going to revert to long here with tight stops.

UPDATE:  1:00 PM

Probably a head fake, but ES just broke trend and CL is backing off.  I’ll try a short position here with very tight stops.  Same downside targets as before, except now it would have to break down through the white channel bottom again (2343ish) and the SMA5 200 is up around 2338.50.  

In other words, if they can keep this decline gentle enough, the SMA5 200 might be up above this morning’s low (2338.87) by the time they allow the tag.  It’s the same SMA5 200. But, a higher low is bullish, while the lower low wouldn’t have been.  The SMA5 200 should top 2338.87 around 1:20.

UPDATE:  12:03 PM

This is getting ridiculous.  Back to cash here, and I’ll revert to short if/when it can ever reverse back below this level.

UPDATE:  3:15 PM

Apparently the SMA5 200 hasn’t yet reached an acceptable level — even though it’s now above the 2:20 lows too. Maybe waiting for it to emerge from the falling white channel all together.

I have to finish some other work that I think will be helpful to a lot of folks, so I’ll leave you with these thoughts.

I’d short on any drop through the SMA5 50, now at 2343.30.  But, of course, the SMA5 200 is now only a few points below that and should be bought, at least initially.  A drop through the SMA5 200 means we’re heading for the 2330-2331 target — which reaches the bottom of the falling white channel around the close (or tomorrow’s open.)

The fact that they delayed this as long as they have actually increases the odds of a lower low — since there’s room in the channel for it to drop down to intersect those other support lines.

Note that the purple channel line reaches the purple .618 (2333.29) tomorrow.  It would make for a clean Fib target and a nice backtest — whereas the red and yellow are less Fib friendly.  But, at this point, I’d thrilled with anything less than 2336.73.

Again, though I’d go long at the SMA200, I’m ready to switch back to short at a moment’s notice.  Sometimes these days where everyone’s lulled to sleep all day long can finish with a bang.

Note CL’s dance about the TL that started it all this morning… …and, USDJPY’s multiple SMA10 tags.  How many head fakes before it just gets plain rude?

 

UPDATE:  3:38 PM

Backtesting the broken white channel, so there’s a chance for a reversal here.  No suggestion from VIX, CL or USDJPY that it will.  But, if you’re a glutton for punishment, here’s your opportunity.

 

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