We had yet another head fake last night, as SPX closed below the latest rising trend line, the channel top and the SMA10. Traditionally, these are all short-term negative indicators from a technical standpoint.
But, of course, short-term indicators can’t compare with the impact of a paradigmatic VIX beat down. It’s now off 30% since tagging our upside target last week.
We should get that changing of the guards we’ve been discussing for the past few days — either today or tomorrow. Keep an eye on USDJPY and CL/RBOB. The algos sure will be.
continued for members…Look for USDJPY to finally tag our downside target today or tomorrow. The SMA100 and SMA200 are at 111.71 and 111.73 respectively. If it does, and we get a nice bounce, then stocks will have all the support they need for the next leg up.
There’s enough of a breakout above ES’ channel top to accommodate whatever backtest that would otherwise result. Note that placing the Fib extension at 2598.09 puts its 1.618 at the white .886 of 2547.50.
My thesis remains that USDJPY’s bounce will permit CL/RBOB’s decline to get underway in the last week of the month.
SPX could rally up to the red 1.618 at 2599.41, where a reversal would be justified — though far from assured. Or it could dally in the space just below. Either way, it should break out of the falling white channel.
If I’m right about USDJPY, then gold will continue to falter. It made it past the SMA50 for a short while, but is clearly under pressure from the monetary establishment.
After breaking down, DXY found SMA support. If USDJPY spikes higher, this would provide additional support.
And, EURUSD still looks to me like it’s due for another tumble — relative dollar strength through the end of the year. The latest political drama from Germany certainly supports our view.
UPDATE: 10:25 AM
ES reached our Fib extension target and SPX nearly the 1.618. Traders might wish to try a short here targeting the channel backtest at SPX2587/ES 2586 and a long position in VIX (9.69) targeting 12 (+23.8%.)
