While the media will ascribe this morning’s exuberance to a rebound in the UK’s “remain” polling, it’s actually oil futures-driven algos that are driving the action.  I suppose it doesn’t matter much, as one is designed to reinforce the narrative of the other.

If last week was a return to “normal” for CL, consider today a refutation of all things normal.  After tagging our downside target on Thursday, CL has rebounded by a stunning 8.4%, and:

1. broken out of the falling purple channel — again
2. broken out of the falling white channel — again
3. rejoined the rising white channel — again
4. broken above its 10 and 20-day moving averages — again

The algos are happy, with ES having gapped up to a 24-pt gain at present.continued for members…

As bullish as things seem at the moment, note that CL has also reached the purple .618 and ES has reached not only the SMA10 and 20, but a full backtest of the broken purple channel from 2009.  In other words, the party should be over for CL and, if so, likely for ES too.It should be enough for SPX to backtest the recently broken purple channel at 2094ish.

UPDATE:  9:34 AM

SPX has backtested the purple and white channel bottoms, as well as the top of the falling purple channel from 2134 in May 2015.  It should at least pause here, if not actually reverse.  I’d close any long from the opening, but consider shorting when CL breaks back below its SMA10/20 at 49ish.UPDATE:  9:42 AM

SPX has leaked slightly higher as ES apparently wanted to tag its .618, too.  Traders could try shorting here, but don’t be shocked if they pin it to these price levels (until the SMA5 10 arrives) with NKD, VIX, whatever it takes.  If you do short, use very tight stops. Note that ES has completed a little IH&S Pattern that targets 2109.50 — we’ll call it the red .886 at 2110.52.  A backtest of the neckline would take it all the way back to 2074.  But, SPX would likely run into support at its SMA10 at 2092.73 or SMA20 at 2089.21.

CL has support at its SMA10 and 20, even though the red acceleration channel looks to have broken down. There’s no reason it couldn’t bounce around, going sideways for a few days.  But, I suspect we’ll see a backtest of the falling white channel (47.80) fairly soon, followed by one of the SMA200 (40.90.) I haven’t mentioned USDJPY this morning, only because it’s also playing games.  After going absolutely sideways for 17 hours on Friday, it popped up to a slightly higher high on Sunday, to support the futures’ rally, and is trending lower again.  At this point, I’d not trust much of anything out of this pair.UPDATE: 10:05 AM

SPX is being driven higher again by CL…probably just to tag the 2100 mark (and run some stops, of course.)  The SMA5 10 is approaching the daily SMA10, so ideally it’ll back off in a few minutes. UPDATE:  11:25 AM

Coming up on the euro close in a few minutes.  ES appears ready to dip to the SMA10 at 2083.70, but only if CL backs off its rally back into the broken red channel.  Even then, it probably won’t happen until the SMA5 200 has reached the SMA10.  This would be roughly the equivalent of SPX’s SMA10 at 2092.73. UPDATE:  11:56 AM

ES and SPX just tagged their SMA10s.  I’d cover the short here and revert to long with very tight stops.  A bounce beyond the (now) resistance at the SMA5 10/20 will require new highs for CL and/or a recovery by USDJPY — which has broken trend. UPDATE:  12:04 PM

Even though CL is still bouncing higher, USDJPY is dropping even more.  I’m curious as to whether they’re planning to validate the rising white channel with a gentle drop over to it’s bottom — near the close or on a gap lower in the morning.  Back to cash here.  I’d go back to short, but don’t see any point until CL is done rallying.  I think they’ll probably try to keep it going sideways until the SMA5 50 reaches the yellow neckline at 2091ish — probably around 12:45.

Update on CL…UPDATE:  12:50 PM

To be clear, the chart patterns are extremely bearish at this point.  If TPTB hadn’t proven the CL-driven algos to be so powerful, I’d put every dime I had into out of the money puts.  But, this morning’s ramp job shows just how powerful they can be.  If we have another morning like this tomorrow, then many of the extremely bearish patterns would be broken.Consider that ES is backtesting the broken purple channel bottom from 2009 and the broken white channel bottom from Feb 11, as well as a host of Fib reversal points. But, today’s ramp also puts it back above the top of the falling white channel from 2015’s highs.It got above the channel top in late May when CL broke out, and is back above it again on the same price action.  And no one seems to care one bit that it’s being manipulated.  And, why should they?  If your next fill-up at the gas station costs you an extra $3-4, you’re not going to shake your fist in rage because the extra cost was a result of propping up the stock market.  Only a very tiny number of people even understand the connection.

I dare say the same situation exists with the Brexit.  I don’t believe there’s anything TPTB wouldn’t say or do to avoid upsetting the ECB’s apple cart.   I will place a small, out of the money bet on a downside move after Jun 23.  But, I’ll be surprised if it comes to anything.

UPDATE:  1:17 PM

SPX just tumbled to the yellow neckline on a USDJPY plunge of .25.  I’ll take a short position here, but dump it if SPX pops back above its SMA10 or ES above its white TL. UPDATE:  1:46 PM

There’s a risk of it popping back above the MAs here.  Caution is warranted with our short position….  At this point, I’d say the SMA20 is looking good for a backtest.  But, note that the SMA20 is increasing at the rate of about 2 pts/day.  So, it’ll likely be up over 2091 by tomorrow — not much below current prices.

UPDATE:  2:02 PM

Close to pulling the plug on the short.  Too much action from CL, and USDJPY itself is starting to look wishy-washy.

UPDATE:  2:02 PM

A lot of action from CL, and USDJPY itself is starting to look wishy-washy.  SPX needs to make up its mind… UPDATE:  2:24 PM

CL is starting to panic a bit, as USDJPY and NKD continue to slump lower, dragging ES and SPX with them.   FWIW, ES has completed a little H&S that targets this morning’s IH&S neckline at 2074.  The equivalent for SPX is about 2085.46 — the red .500 and a line of horizontal resistance.  Holding short. UPDATE:  3:34 PM

SPX is testing the bottom of the rising white channel I sketched in this morning.  It already dipped below the SMA5 100, which is mildly bearish.  But, USDJPY is poised to bounce.  So, there’s a decent chance that the white TL is as far as it’ll go today.    Watch your stops.  If you don’t intend to hold short into the close and/or overnight, this is probably the place to cover this morning’s short. If USDJPY can make it down to the .886 at 103.7ish, then we could potentially get more than 2085 on SPX.

UPDATE:  3:55 PM

ES has reached its SMA50, though SPX’s is still lower at 2078.02.  Still, ES has also reached the H&S neckline backtest, so we’re likely to get a bounce here.  I think we’ll get more follow through on this sell-off, so it might be worth holding short overnight if you can hedge or keep a close watch on it overnight.Just know that it’s the perfect setup for a big pop up to the ES 2110 level we discussed this morning.