Markets tend to moves higher on Fed minutes days, even if the news isn’t all that positive.  It’s all about convincing investors that the FOMC has their best interests at heart — that all they’re worried about is making sure that stocks continue to rally.

Today’s session is slightly complicated, then, by ADP employment which came in much higher than expected: 263K versus 175K.  Theoretically, this puts pressure on the FOMC to raise rates and/or trim their balance sheet faster than anticipated.  But, central banks have many tools at their disposal to ensure that the complication doesn’t become a problem.

S&P 500 futures are up 6.5 points, but right to Fib resistance.  

Can the Fed spin a hawkish set of minutes into something positive for stocks?

continued for members…

ES’ breakout will require topping 2370.

So far, USDJPY and CL are both on a tear.  USDJPY has clearly broken out of the latest falling channel…

…while CL is potentially running into overhead resistance — with EIA inventory data due out at 10:30.

VIX has punched below support for the 20th time in the past 70 sessions. Which means SPX’s little breakout yesterday has a better chance of holding — if ES can pop above that .886 and VIX can plumb new lows.  The key for SPX is at 2368 — the top of the falling white channel.

UPDATE:  9:37 AM

SPX has reached the top of the falling white channel at 2368.  If it’s going to reverse, this is the spot.  I suppose it’s worth taking a short position with very tight stops, though I’m less than thrilled with the odds.

UPDATE:  9:43 AM

It appears to me that VIX is going to be able to push SPX past 2370.42, but has the purple .618 at 2370.86. UPDATE:  9:47 AM

I’d cover here, but be prepared to go long if it accelerates past the .618 or reshort if it falters.

UPDATE:  9:54 AM

This is about as much leeway as I can give the falling white channel before calling it a breakout.

Note that VIX has reached the purple channel bottom — potential support but also a line through which to plunge if TPTB wish to bust SPX’s white channel.

UPDATE:  9:59 AM

I’d take another shot at shorting here at the white channel top, as USDJPY is almost to its little .618 and VIX is bumping a little here.  Again, this is a low probability bet, as it’s more likely that it’ll sit here until the SMA5 10 arrives, at which point it’ll continue an algo-fed frenzy driven by VIX dropping below the purple channel bottom.

UPDATE:  10:18 AM

I’d probably ditch the short here as the SMA5 10 arrives.  Remember, we have the EIA inventory report coming out at 10:30.  Regardless of the data, CL is likely to push past its .618 and VIX below the purple channel bottom.  It appears to me ES is now locked in on the 1.618/.786 combo at 2383.18.

UPDATE:  10:33 AM

Inventories built a little instead of contracting as API reported.  CL is selling off, initially, at least.  And, USDJPY is at least backtesting the rising purple channel.  This is giving SPX a little push downward, but I wouldn’t short unless it can dip below the rising SMA5 20.  In fact, it’ll probably backtest it as it reaches the white channel top — maybe even as low as the purple .618 at 2370.68.

UPDATE:  11:07 AM

Just got the white channel top backtest with the arriving SMA5 20.  I’d revert to long here with tight stops.

UPDATE: 11:17 AM

CL continues to slip, and VIX isn’t taking up the slack.  I’d revert to short here, but with tight stops in case it’s a head fake.  The .618 is just below at 2370.86 and the SMA5 10 and 20 are about to cross — commonly a spot where TPTB rev up the algos.  If it can drop through 2370.86, targets include the gray channel midline and SMA5 50 at 2366, followed by the SMA20 at 2362.56 and gap close at 2360.53.

UPDATE:  11:23 AM

There’s the .618 tag – moment of truth for bulls.  CL continues to slip, with its next support at a channel midline at 50.75.

UPDATE:  11:41 AM

TPTB decided they’d had enough, and VIX is plunging again now that SPX’s SMA5 10 has caught down.  Back to cash, or long if it can clear the SMA5 20 at 2374.50ish.

UPDATE:  11:59 AM

So, they got SPX back up to the channel top and above the SMA5 10, which it is now backtesting.  The presumption is that it’ll bounce higher from here, but it’s not looking particularly strong, and VIX and CL are still waffling.   It’s probably worth trying a long position, but keep an eye on 2372.

I can’t remember the last time I saw SPX being so shy about breaking out of a falling channel.  It would be quite simple to push VIX down below 11 and get the breakout going.

CL is certainly arguing for a breakout…

UPDATE:  12:18 PM

SPX is finally breaking out, but there’s been no follow through from VIX.  And, CL is edging higher just fast enough to keep SPX from dropping — not the sudden spike we’re accustomed to seeing when TPTB are trying to achieve higher highs.  I can only deduce that they’re trying to hold it in limbo until the minutes come out — after which we’ll get the break out (or down?)  USDJPY is helping, but we need to see more effort from VIX if it’s going anywhere.

UPDATE:  1:11 PM

Proposing a new channel for this breakout…assuming it keeps going.  If not, we’d be looking at a backtest of the falling white channel at the very least.

UPDATE:  1:49 PM

Coming up on the release of the minutes.  What usually happens is we get a lot of volatility as the minutes are released — sometimes very big swings — and, gradually it settles into the same sort of melt up we’ve had so far today.

If SPX sells off at all, it has support at 2372, 2366 and 2362.  Otherwise, the upside targets are 2384 and 2387.

UPDATE:  2:05 PM

Lots of talk about reducing the balance sheet, which is affecting bonds (higher rates) a lot more than equities.  The initial drop served as a (near) backtest of the white channel.  And, from there, it’s rebounding a bit, again.  I suspect it’ll make it all the way to 2372.20.

VIX initially popped up to the SMA5 50, but is threatening to slip lower again.

The troublesome language (for bulls) in the minutes…

UPDATE:  2:26 PM

There’s the backtest.  Should get a rebound here — potentially to our upside target.  I’d keep stops relatively tight just in case they’re not serious about this breakout.

UPDATE:  2:33 PM

USDJPY is slipping, VIX is edging higher, and CL even broke down for a few seconds.  This doesn’t bode well for SPX — leading me to wonder if they intend to prop it up here or will let loose a little tantrum.  I’d tighten up stops and short on any drop through 2373.

UPDATE:  2:40 PM

Dropped through the channel top and approaching the SMA5 100/gray midline as VIX approaches its SMA5 200 and SMA50 at 11.69.  Could see it bounce at 2368ish.

UPDATE:  2:50 PM

Just dropped through the SMA5 100.  Next support is the SMA5 200 at 2361.49 and SMA20 at 2363.56.  This morning’s gap close is just below it at 2360.53.  Be aware that USDJPY just tagged its SMA5 200 at 110.92 and could get a bounce before reaching its purple channel bottom at 110.71.  And, if for some reason SPX doesn’t bounce at 2360-2362.50, the next support isn’t until a backtest of the falling white channel and yellow channel top at 2351.70ish.

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A quick FYI…I’m expecting a conference call around 3:30.  I’ll post it at the time, but there’s a good chance I’ll be out of pocket from then until the close.

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UPDATE:  3:15 PM

There’s the SMA20 and almost the SMA5 200.  VIX just topped 11.69, which suggests we’ll dip at least a little lower.  But, there’s nothing wrong with taking profits here.

UPDATE:  3:22 PM

Gap closed, coming up on the yellow channel top at 2351.70.

 

UPDATE:  3:34 PM

Close enough.  Back to cash at 2351.17.  If you don’t mind being on your own and holding through some bounces, I’d try a long position.  I’m clocking out to do this conference call, and will be tied up until after the close.

UPDATE:  4:00 PM

At the close…

 

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