With Deutsche Bank soon to be the beneficiary of both a fire sale and a government bailout, and the Saudi’s reportedly having become besties with Iran, last night’s 10-pt swoon in the futures has been erased.

DB is up 7.7% off its lows, and 4.7% since our bottom call, so everything must be okay.  If CL and USDJPY cooperate by breaking out of their triangles, it will be.

continued for members…

Lots of economic news and Fed speak on tap today, so we could have some pretty substantial swings.

Around the horn:

Our upside target for SPX is 2177.83, with initial overhead resistance at 2165.31.   VIX has plenty of room for further declines.While, CL is nearing a breakout of its triangle. The USD is still contemplating one, not due until Oct 11th. And, USDJPY has broken out past the falling TL and should soon test its own triangle top.

This leaves stocks in position for a nice rally today.

UPDATE:  9:45 AM

Just closed Friday’s gap, heading for the .618 at 2165.31.  That, and the SMA50 at 2169.01, might also provide overhead resistance.

While CL has broken out of its triangle, it hasn’t taken off yet — not with the EIA inventory report coming up.  And, USDJPY looks like it’ll backtest its purple TL at the red triangle bottom before doing anything else.  Don’t be surprised if SPX closes this morning’s gap before taking off.

UPDATE:  10:15 AM

SPX has reached the white channel bottom and closed yesterday’s gap. I’d go long here at 2159.45 with fairly tight stops, as it could dip further to the SMA5 200.  

Note that ES has backtested its SMA20, its SMA5 200 and a TL off yesterday’s lows.

UPDATE:  10:32 AM

EIA reports inventories decreased by 1.9 MM barrels from the previous week.  This is an even bigger drop than API’s surprise 752K drop yesterday (vs expected build of 3MM.) CL got an initial pop, but seems to be having a hard time holding it.  Consequently, SPX is threatening to dip below the white channel bottom.  

I’d step aside here, as SPX isn’t taking CL’s indecision well.  It appears we’re going to have to test the SMA5 200 at 2155.69 and perhaps flatten the channel out a bit.

UPDATE:  10:51 AM

There’s the SMA5 200 tag.  CL has reached its SMA10, but could try to climb back above the red TL here. If not, the white channel bottom and the SMA50 are just below at 44.60. And, DB has backtested an important TL.  I’d go long on any bounce here, and short on any further drop.

UPDATE:  10:55 AM

Looks like SPX wants to bounce here.  However, CL is still slipping.  I’d stay in cash for the moment — even though USDJPY is spiking higher.

UPDATE:  11:13 AM

Back to long here at 2152.93.  This is a better looking channel which, BTW, gets SPX up to 2178 tomorrow — which is better timing anyway.  CL has tagged a .886 retrace of yesterday’s rise.

Tight stops are advised, as the revised white channel is really the only argument for a reversal here — at least until CL makes some headway on a reversal.  Note that VIX has backtested its SMA5 200, which could help support stocks.

If this new channel holds, then today’s revised upside target is more like 2172.  The biggest challenge, of course, will be to get back above the SMA5 200 and SMA5 10 at 2155.  I’d bail on this position on any sustained drop through the red channel .236 at 2150.25ish.

UPDATE: 1:07 PM

CL made a nice recovery, but it had little impact on stocks, even with the higher high.  I’d step aside here at 2156.06 and see whether we can get another rebound, or the white channel breaks down.

UPDATE:  1:28 PM

Looks like we’ll probably get another little breakout here.  Back to long here at 2157.73.  VIX is plumbing new lows, while USDJPY is perking up and CL is testing the previous highs.  If VIX can dip below 12.81 or CL above 46.23, SPX should pick up steam.

UPDATE:  1:49 PM

I was hoping we’d get a strong push through the SMA20, but the algos seems to be chickening out.  VIX is bouncing and CL is reversing off its .886.  Tighten up stops, and watch for a reversal as the SMA 5 10 approaches.

UPDATE:  2:34 PM

Apparently, OPEC had a deal.  SPX has reached the SMA50.  I’d be comfortable taking profits here, as CL has reached a 1.618, VIX has reached support, and USDJPY has reached TL resistance. We can always go long again if it pushes through.  I suspect it’ll hang around here until the SMA5 10 arrives at 2165.31, then 50:50 that it pushes through to 2171.76 or even 2175.60.

UPDATE:  3:10 PM

WSJ is reporting that “OPEC reached an understanding that a production cut is needed to lift petroleum prices…but, the Cartel will wait until November to finalize a plan to tackle a supply glut that has lasted longer than expected.”

Yeah… and my wife and I have reached an understanding that I need to lose 10 pounds.  Come November, I’m going to get right on that.

Some of the bloom has come off CL’s rose.

UPDATE:

Good chance that we’ll get one more leg up here. And, we often get a reversal at 3:34 PM.   I’d try a long position here at 2165.98, targeting 2172 into the close.  The only problem is we’re seeing DB sell off into the close. 

UPDATE:  3:56 PM

So far, so good.  Though I expect to see carryover tomorrow, we can’t ignore the risks posed by Deutsche Bank, not to mention a slew of economic data due out tomorrow.  For that reason, I’d only hold long if you can hedge or stomach a potential gap down in the morning — a 50:50 chance.  The oil deal is flaky, to say the least.  But, they’ve run it up a lot further on flimsier rumors than this.  If you’re not holding overnight, I’d take profits here at 2171.46.