Futures ramped higher overnight……purportedly on a perceived reduction in risk from Hong Kong, Britain and Italy.  The primary drivers of the algos, however, were a sharp bounce in oil and a gap lower in VIX — neither of which should have much staying power.  Hence, just another head fake that should be faded.

continued for members…

This bump should close DJIA’s gap, and that’s about it.Our analog calls for a lower low — breaking the white channel bottom — in the next couple of sessions followed by a bounce and an even lower low around 9/11-9/13.

ES’ chart indicates the drop could be very dramatic.VIX made a dramatic plunge to nowhere in particular but impressive enough to drive the algos higher.  I don’t expect it to last, or to break below the rising red TL from July. CL is merely backtesting its broken yellow TL again — with SMA200 overhead resistance just above at 56.11.While RB is testing both a small TL from Aug 22 and the midline of the red channel dating back to June 2015 (just like SPX in our analog.)  Stay short as long as it doesn’t break above it. USDJPY continues to go sideways, holding off on its test and potential breakdown of the horizontal support at 104.59.EURUSD is backtesting the channel bottom it just broke below.

More later.

UPDATE:  12:20 PM

CL and VIX have gone as far as they can without breaking trend.

ES is giving the appearance of having broken out, but our analog says this is a head fake and should still be faded.SPX looks a little less enthusiastic, holding below the gray channel top at a lower low.Bottom line, this still has the feel of a delay – the purpose of which is to give insiders a chance to hedge or reposition.  I see nothing arguing against a sharp downturn between now and Sep 13ish.

I just learned I need to be out of the office the rest of the day and most of the day tomorrow.  I’ll post tomorrow morning as usual, but will likely not be able to update things until after the close.

GLTA.