Stocks did all they could, yesterday, to project renewed strength.  But, despite gaining 23 points, SPX didn’t break out of the falling channel it’s been in for a month.  Neither it nor ES were able to clear the neckline of their IH&S Patterns.  And, though DJIA finally closed above its 200-day moving average, it was by 3 points, literally in the final 10 seconds of trading.

Toss in the fact that RB, CL, USDJPY and DXY are all sliding, and VIX remains above horizontal support, and you get the feeling stocks aren’t ready to commit to higher prices.

It’s the same sense I get when I read the Fed minutes.  Things are going so great that they need to raise interest rates twice more.  But, they can’t shake the feeling that a recession is just around the corner.  So, they’ll probably stop hiking soon — coincidentally, right about the time the yield curve (as a result of their hikes) would otherwise invert.

continued for members…

Going around the horn…

Finally seeing some movement from CL, which is testing its SMA10.  A drop through it would be an important sign for bears.

RB again failed to push through its SMA50 and channel midline.  Should clear the decks for our downside targets.Rates continue to slump. And, the dollar with them. EURUSD continues to bounce. And, USDJPY is heading for another SMA200 tag. Despite the push from this morning’s Goldilocks employment numbers, ES has yet to break out beyond its neckline. Ditto for SPX. The Dow’s silliness.VIX dipped below horizontal support but — for now, at least — is back above it.  Note the SMA20, 50 and 200 just below in a right range of 14.14 – 14.32.  UPDATE:  12:45 PM

VIX broke down, and RB and CL both bounced at their SMA10s.  As a result, ES has broken above the neckline, only to backtest the rising white channel which broke down on Jun 25 as well as a TL off the Jun 12 and Jun 20 highs.If ES backs off from here, it will be a clean backtest which suggests our lower targets are intact.  We get a similar suggestion from SPX, which has backtested the midline of the rising purple channel.It has been my feeling that SPX’s rising white channel would ultimately break down and the larger purple one (which is parallel to the huge yellow channel) take over.

If so, a reversal here would support that theory.  It would also support my overarching belief that the index is simply treading water, using the 2.24 and eventually the SMA200 to support it while RB/CL complete their decline.

If SPX were to fall to the bottom of the yellow channel as it did in early 2016, there would be no major Fib to “catch” it — as there was with the 1.272 in early 2016.As we discussed back in April, the more likely scenario was that TPTB would try to keep SPX close to its 2.24 until the SMA200 arrived, at which point they’d have much stronger support.

Note that the yellow channel midline, which provided bottoms on Feb 9, Apr 2 and May 3, is approaching the purple .618 at 2644.59, which isn’t far below the SMA200 at 2673.64, which isn’t far below the 2.24 at 2703.62.

The longer they can hold out, the closer the yellow midline and SMA200 will get to 2703.

If I’m wrong, and SPX pushes above 2760, then the IH&S is the likely target — probably a slightly higher high as the target is around 2793.  While it rises, thanks primarily to VIX and maybe a bounce by USDJPY, RB and CL can continue their slow drop to more CPI friendly levels.

But, my gut tells me it will reverse from SPX 2763/ES 2764, even if it’s only to SPX 2703 — if only because of the pressure applied from falling RB/CL and falling 10Y.