With Fed testimony, the Brexit, key economic data and the fate of the Bachelorette hanging in the balance, this is shaping up as an extremely volatile week.

After a massive 8.1% ramp in oil futures over the last two sessions, CL is finally taking a break.   It’s a horribly perverted-looking chart, but we expect no less from CL.  It has become the primary driver of algorithms which determine where the “market” goes each day. And, when it slumps, USDJPY springs to life, as it did last night — adding 1.12% from the overnight lows.  Note that USDJPY reached our 103.69 target — but, 3 days late.  The delay helped stocks rally quite a bit in the interim.

continued for members…

Note that USDJPY is again positioned to potentially break out of the falling white channel.ES is fleshing out the rising white channel……and, will possibly tag the SMA50 at 2075 before trying for higher.  Note that it has already backtested the H&S neckline.This leaves SPX with a probable pop and drop, though the target is unclear.  The SMA50 at 2078.74 is the most likely candidate.  With ES showing a 5-6 point gain, I’d want to short about 2-3 minutes into the open — as soon as SPX catches up with ES.

But, getting any significant downside would mean ES has to break down from its rising white channel — a tall order these days.UPDATE:  9:45 AM

SPX and ES are struggling for primacy.  ES is open to a dip to 2075, but that 3-4 points won’t get SPX where it needs to be.  Though it has horizontal support at 2085, it’s not a neckline.   Only ES has that going for it.  So, there’s no particular reason for SPX to bounce here.  I’d stay short, and see if we can’t get down to at least 2078.74.

We’ll know it’s time to ditch the short if USDJPY pops out of the falling white channel (it hasn’t yet) or CL reverses higher off its SMA10 at 48.85.  And, needless to say, if SPX drops through the bottom of the rising white channel and the SMA5 200 at 2080ish, we should see yesterday’s gap closed (2072) in short order. One of the most intriguing charts is NKD.  It is pushing up against the red TL we’ve highlighted in the past.  This is a backtest from below, meaning it will either continue lower or break through to the upside — comparable to the situation for the overall “market” given all the key channels discussed yesterday.  Contrasted with the ES, it’s easy to see that a reversal lower would not be good for stocks. UPDATE:  11:04 AM

Looks like they can’t reconcile it.  ES just refuses to drop below its SMA50 and channel bottom, so SPX is apparently giving up.  CL is spiking, which should take SPX up to the SMA50 or falling white channel top or higher.  Remember, the SMA10 and 20 are at 2090.11 and 2090.75.  Back to cash for now.  I’d take another shot at the white channel top if it presents itself. UPDATE:  11:10 AM

With the SMA10 and 20 just above, this should be a safe place to try another short.  Note that the SMA5 200 is up to the gray .382, a nice 7-8 drop from here.UPDATE:  11:16 AM

CL is spiking like there’s no tomorrow.  SPX should reverse here around 2090-2091, but watch your stops. UPDATE:  12: 24 PM

Here we go again. CL is bouncing back above the SMA20, so SPX is breaking out of its falling white channel.  Back to cash for the duration.UPDATE:  12:36 PM

It’s a bit of a long shot, but ES suggests we could get another leg down here.  SPX is in no man’s land, but the SMA5 200 is now above this morning’s low.  So , a pullback would possibly be warranted if ES reverses below its SMA5 10/20 at 2079.40ish.    ES would target 2075, which would equate to SPX 2083ish — possibly when the SMA5 200 reaches that level around 1:30-2:00? UPDATE:  1:06 PM

I’m giving up on anticipating a breakdown.  It seems they’re just not going to permit a breech of the rising white channel at this time.  Maybe later in the day….  I’ll go to cash, set an alert and work on some other stuff for now.

By continuing to push SPX sideways, they have enabled a tag of the rising white channel without all the fuss and muss of an actual decline.  It’s lame, I know; but, it happens all the time, especially when SPX and ES disagree about where support should be.

UPDATE:  1:23 PM

SPX just dropped through our alert, so back to short here.  There’s only a slight chance of this gathering steam to the downside, so feel free to ignore.  This is one of the uglier attempts to break out of a channel I’ve seen in a long, long time.Note that USDJPY has tagged the underside of its broken purple channel once again.  The previous times it did so, ES managed a nice little dip.  We’ll see… UPDATE:  2:10 PM

CL and USDJPY are spiking now.  SPX might dip down to tag the SMA5 200, and it might not.  Too hard to say, with all the “help” it’s getting from the algos.  I don’t have the patience for this stuff.  I’m going to hang it up for the day. UPDATE:  3:43 PM

Another couple of hours of chop.  Anyone who can hedge or watch their position overnight, I’d short into the close.  Even though the rising white channel is still intact, we have yet to get a proper retracement after reaching yesterday’s Fib levels.