Yesterday, futures broke out of a very well-formed falling channel for the second time this week. Will it stick this time or is this just typical OPEX nonsense?continued for members…

The big picture…

VIX shows no sign of breaking down as of this morning.

And, the Dow reversed at its SMA10 yesterday, failing to break out when it would have been quite easy. Note that it’s also on the brink of a bearish 10/20 cross.

The last two times it has posted a bearish 10/20 cross (1/29 and 3/4) however, have marked bottoms and reversals higher. The last time this bearish signal produced a downturn that lasted more than a few hours was on October 27, 2020. The subsequent downturn lasted three more sessions for a total retracement of 9.7% off recent highs. It was halted by the SMA200. The drop followed a similar (9.1%) decline in Aug/Sep 2020 which didn’t quite reach the SMA200.

Bottom line, the possibility of another headfake is quite high. A push above the 3.618 at 34430 should be bullish, but I would be cautious, especially over the weekend.

The setup for ES/SPX:

SPX broke out of its falling red channel as well.Across the board, there are a number of charts that are holding on to an “artificial” bullish stance.  We’ve mentioned USDJPY quite often – on the brink of breaking down but close enough to breaking out to sew doubt.

The offsetting EURUSD is doing the same – with relative dollar weakness correlating with equity strength. It might be easy to imagine it breaking to new highs, but remember it already tagged its red .886. So, where is it to go? In the midst of an inflation scare, would the Fed really allow it to shoot up to new 7-year highs?  It broke out of the falling red channel, buying an additional 5-600 points in the SPX. But, that was before inflation became apparent/alarming. That ship has sailed.

Would they really give up on the USD?  I don’t think so, not if they can help it.Likewise for CL/RB – the benefit to the stock market has played out.

GC and SI continue edging higher… …and the bond market continues to slumber – way too quiet.

Last, BTC is having a very tough time holding its SMA200. I continue to expect it to move lower from here. But, as always with something so heavily manipulated, watch your stops.

I have a number of meetings this morning and then plan to take off early for the weekend.  Wishing everybody a great weekend!