With oil having reached our upside target and DXY our downside, we can expect today to represent an inflection point.  Will it spill over into equities?

continued for members…

Not if they’re careful.  USDJPY has backtested the channel it broke out of.While, CL has reached the channel top a full week ahead of schedule. Futures are up a few points, which still represents a breakdown of the latest little channel.SPX is still in need of a backtest.  So, we’ll leave our 2451-2453 downside target in place for now.VIX, however, reversed at the yellow channel bottom on Thursday and continues to slide lower.  As long as that trend continues, SPX won’t be slipping lower — at least until July is officially in the record books.As we’ve been discussing for many months, now, the algos are firmly in control of the daily fluctuations (aka, the meltup.)  While any number of events could derail it, this meltup should continue as long as USDJPY or CL can continue to rise and/or VIX can continue to decline.

In my opinion, this leaves CL and USDJPY (and, possibly EURUSD) as the better trading vehicles than ES and SPX.  If CL reverses here, which I believe it will, look for DXY and USDJPY to head higher to compensate — with VIX contributing heavily when/as needed.

One caveat: the last time CL reached a major upside target like this, it continued sideways for weeks before breaking down.  So, while I’d be comfortable shorting oil here, I’d want to see technical support break down before putting all my eggs in that basket.  The SMA10 and SMA100 are about to cross at 48.50ish, but the better target is the SMA50 currently around 46.60.

I’m still on the road this week, so I’m cutting this post short.  I wasn’t able to complete last week’s central banker-centric post over the weekend, but will do my best to complete it in the next day or so.

GLTA.