A very Happy New Year to our members this morning!  I wish all of you a prosperous 2017!

The New Year is off to a bang with oil and USDJPY spiking higher and VIX backing off after tagging our SMA200 target.

In other words, more of the same…so far.

continued for members…

CL is up over 2.5%……and USDJPY has rallied sharply off the bottom of the rising white channel.

This has left the futures up over 15 points, targeting SPX 2253, just below the SMA10 at 2258.82.  We’ll set that as our initial target.

As we discussed last week, SPX has a habit of head-faking at the end of the year.  Last week’s close was ugly, with the SMA10 clearly rolling over and the SPX dropping through the SMA20 as well.

Convention would have SPX backtest the broken purple channel.  Though, our analog leaves open the possibility of more than that.

UPDATE:  9:37 AM

Almost there, and it seems to be waning.  I’d take profits here at 2257.86, but hold off on shorting.  This is likely just a pause to let the short-term moving averages catch up and provide some algo-support, potentially involving a backtest of the SMA20 at 2249.41.   

ES is likely to backtest its SMA20 as the SMA5 200 comes along at 2246.90.  So, this is likely a pause.  And, CL is backing off the red TL — looking iffy in here.

VIX, which started to break down in the opening few minutes, is back above TL support and even the SMA100.  We’ll know they’re ready to support SPX when it drops through the TL.

UPDATE:  10:00 AM

VIX’s TL has broken down.  The question is whether they’ll be satisfied with the SMA10 or will try to leapfrog it.  Note that USDJPY is also spiking for no particular reason.

UPDATE:  10:07 AM

SPX just pushed up through the SMA10 to backtest the purple channel.  Back to long with tight stops, as VIX has plenty more room to drop.  It doesn’t run into support until 13.03 — a backtest of the white channel.  Odds are SPX will now protect its position atop the SMA10 until the SMA5 10/20 come along, then build upon its gains.  A backtest of 2258.82 is likely at some point.

UPDATE:  10:39 AM

SPX is testing its SMA10 from above.  VIX’s SMA5 10 has almost caught down to it, so I’d strongly expect SPX to bounce here on further VIX drops.  If it doesn’t, then the SMA20 is the next support at 2249.41 and, following that, the gap close at 2240.35.

I have to step away for 30 minutes, will be back ASAP.

UPDATE:  11:23 AM

The SMA10 obviously didn’t hold, as CL and USDJPY are both plunging.  CL seems to be in free fall, perhaps in a replay of the early January breakout/breakdown.  Watch to see if the falling red channel bottom holds at 53.05.USDJPY has established an intraday channel that might just hold.  

If you shorted on the drop through the SMA10, congrats.  But, watch out for VIX, which is still in a dangerous spot as far as bears are concerned.  It bounced at 13 on a backtest of the broken, falling white channel.  But, the overhead resistance is just as strong, if not stronger.

SPX’s SMA20 held so far.  But, we’ll need a rebound by CL and/or USDJPY and a drop from VIX to get it going higher again.   Until they do, the risk remains to the downside, with the SMA5 200 at 2247 and the gap close at 2240.35.

UPDATE:  11:54 AM

SPX got a bounce on USDJPY and VIX.  It’s back above the SMA5 200, which it might try to preserve as support.  Note that VIX has decent potential to backtest the purple TL and SMA5 200 at 13.82 — meaning SPX might not be done.  CL continues to look vulnerable, at least to the SMA20 at 52.47 and more likely the purple channel bottom at 52.  I’d hold short a little longer, but keep a very close eye on VIX.

My biggest concern holding short is ES — which appears to be trying to hold the rising purple channel bottom and the white channel backtest. at 2240ish.  It’s also the .618 of the rise from 2228 to 2259.50.

UPDATE:  12:09 PM

SPX just tested its SMA5 200 again, as CL got a nice bounce at its SMA20.  I think they’ll try to hold these levels, so would go ahead and cover shorts here at 2247.59.  If SPX can’t push back up above the SMA20, then we might get another shot at shorting for 2240.  The SMA5 20 is approaching, meaning SPX will get another chance at riding algos higher once it’s within reach and we can get a SMA5 10/20 cross.

VIX remains vulnerable to another downdraft — having established a new TL that it can noticeably (by the algos) “break.”

UPDATE:  12:43 PM

USDJPY is reversing, and VIX is on the rise.  Looks like we’ll get more downside here, as SPX is balking at retaking the SMA20, so I’d short here at 2247.19 with very tight stops.

I’d continue to keep a close eye on ES.

UPDATE:  1:20 PM

SPX is popping up above the SMA5 10/20 here, so I’d revert to long and take a wait and see approach to the upside.  As before, the trick will be to get above the SAM20 at 2249.41.  The SMA5 200 at 2246.92 should serve as a reasonable stop level.

ES bounce looking okay from here.  Since the initial drop was to the .618, the door is open to a deeper retracement after whatever bounce we get.  Though, it should be noted that we’ve had plenty of pushes to higher highs after only a .618 retracement.  

It will depend a great deal on CL, which remains in the dumps.  A bounce back above the SMA20 would do the trick — even if it were temporary, i.e. until the close.

I have to jump on a conference call, will be back in an hour or so.

UPDATE:  2:32 PM

We’ve now had three hours in a 4-pt range.  What fun…  SPX hasn’t broken out past the SMA20, but hasn’t dipped back below the SMA5 200.  CL fell back below its SMA20, probably intending to hit that channel bottom — now around 51.72.  VIX is about to breakout from it’s breakdown — so as clear as mud right now.  I’d dump the long position and short on any drop through the SMA5 200, as it really does seem they intend to close that gap.  

Alternatively, this would be a excellent place to go to cash and wander into the kitchen to see if there are any Christmas cookies left!

UPDATE:  3:22 PM

Testing the SMA 20 again.  I’d revert to cash here and call it a day.  Way too much mush.  All the signals are shaping up for another leg down, but we saw another example this morning of how a good-sized bounce in CL and a smackdown on VIX can drive prices much higher.    Our analog suggests 2298, but I’d be leery of holding long overnight unless you can handle the gap risk or, alternatively, hedge your position.  

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