Friday offered further confirmation of the distortion in markets driven by manipulated algorithm inputs.
SPX was rolling over as the early 10AM close approached. The only problem was that the SMA5 200 hadn’t even reached the 1.618 extension at 2599.41. VIX suddenly dropped from 9.69 to 8.56 — an 11.7% plunge in mere seconds. There would be no backtest of the 1.618 extension (at least on Friday), let alone the many other important support levels further south.
So, we have a new all-time low for VIX… and the bubble expands just a little further. Just another day in the “markets.”
continued for members…
Friday’s rally was also helped significantly by CL shooting up past the 1.272 Fib. It has since been erased as some are starting to question the certainty of the OPEC extension. It’s still a good 20% higher than the top of the Nov 2016 range. 
RB has given up far less of its gains — about .25% at present. But, with several sessions left in the month, I haven’t given up on it just yet. We’re sitting at 1.78, about where it was when I first suggested a short. If you’re playing the bounce from Nov 16, now is your last chance to get short again.
It appears that USDJPY is going to tag our lower target — the yellow channel midline around 110. Remember, once it starts bouncing, RB and CL should be free to drop.
The bigger picture shows how important it’s been in the past. It also shows that the yellow channel line was broken — between Jun and Nov 2016.
CL fell about 20% over that same time frame, displaying outrageous volatility as it went.
To be clear, the headlines are loaded with reasons oil should go higher. And, the price action has been strongly positive — even though it’s on negative divergence and with weak volume.
Long positions are at all-time highs – reflecting incredible optimism that the OPEC deal will get done and it’ll drive prices higher. It’s a very, very crowded trade.
Fundamentally, it’s a load of crap. While the OPEC/Russia oversupply has been whittled down some, there’s still a vast oversupply and an imbalance between supply and demand — all while US production is going full speed ahead thanks to the price levels.
If CL falls, it could be pretty nasty. Though we said this last year, and the (eventual 23%) fall was delayed until after the year-end.
Jan 3, the first trading day of the year, marked the top at 55.24. It bumped along until late-Feb, then fell 15% by mid-March, bounced 14% into mid-April, dropped 18% into early May, bounced 19% into late-May, then finally plunged 19% by Jun 21.
CL is clearly at an inflection point. At the top of this channel, there’s a good chance it’ll reverse lower. On the other hand, stocks need it to continue rising. Stay frosty.