Here’s wishing all of our readers a safe and enjoyable Thanksgiving holiday.

Chalk today up as capitulation, holiday style.  Having gotten DJI up over 19,000 and SPX up over 2,000, CL has backed off its rumor-driven, equity driving rally.  It faces another inventory report this morning, this one from EIA.

USDJPY is rallying to compensate — with the US dollar putting in one of those ridiculous rallies that only a central planner could love.

But, today is all about the backtest we’ve been discussing.  DB is even contributing to the cause, tagging our downside target from Nov 15 [see: Deutsche Bank: All Better?] 

Re SPX, we remain short from 2204.01 with our downside targets unchanged.

continued for members…

CL’s wait and see stance:

USDJPY has completed a Crab Pattern to its white 1.618, but will rally further if need be.

SPX looks likely to backtest the SMA5 200 and former high 2193.81 today — either in the initial hour or late in the session.  If it can drop through, the channel bottom awaits at 2191.40ish.  Note that 2193.81 lines up very well with ES’s target of 2191.50.  

Note that VIX has broken out of the little falling wedge it’s been in for the past week and is likely to backtest its broken red channel bottom at 13.07ish.

UPDATE:  10:03 AM

As frustrating as this is, the algos aren’t playing nice.  After tagging yesterday’s low exactly at 2194.51, SPX is bouncing on CL and NKD’s say-so.  Are they really that afraid of putting in a lower low?  Yep.  Look for SPX to bounce up to the SMA5 10 — and hopefully no further.  But, given the craziness of the past few days, I’d cover here.

UPDATE:  10:11 AM

Trying again.  Back to short here at 2198.04 after backtesting the SMA5 100.  Note that it SPX declines only to the SMA5 200 this time, it would be slightly above 2194.51 — so, a higher low.  Very tight stops here. 

UPDATE:  10:18 AM

Don’t know about everyone else, but I have no interest in playing this game for the third day in a row.  Covering here at 2198.22 and will likely call it a day.  At this point, it appears that a drop to the channel bottom, if it happens, would be later in the day when it’s back up to 2193.81 or higher.

CL is rallying for no particular reason except that the EIA report is due out in 10 minutes.  Either someone knows ahead of time that it’ll be positive and is trading on that info, or they know it will be negative and are putting a little buffer in before the decline to the red channel bottom at 46.71.

And, VIX, which had support at its SMA5 10 decided to plunge through it instead.

NKD is now up 145 points (.80%) on the day.

UPDATE:  10:33 AM

Inventories came in lower by 1.3 million barrels but gasoline was up 2.3 million barrels.  If CL will reverse at its red midline, SPX has the potential to decline.  I’ll try a short position here at 2201.03 with tight stops.  Note that CL could back off only to the falling white channel top, which would serve as a floor as SPX approaches its SMA5 100 – now support.  And, VIX, which is reversing, is still in the middle of nowhere – with backtest support still lower at 12.46.  In sum, this could go nowhere even if it does reverse.  I’ll give it 30 minutes and see what happens for the sake of 8 points.  Obviously, if CL doesn’t reverse at the red midline, there’s no point in holding short.

UPDATE:  11:46 AM

If they intend to have SPX tag the white channel bottom, it seems likely to happen at either 2193.81 around 12:40 or at 21194.51ish around 1:30.  The ball buster move would be a gap close up at 2202.83 and subsequent dive at the close.  For the hardcore among you who are willing to wait it out, I’ll leave you with those targets and a suggested stop at 2201.

There’s still a risk of VIX backtesting the white wedge top, especially now that the SMA5 200 is emerging.  But, I’d focus more on the channel bottom backtest up at 13.42ish which would likely signal the end of any SPX decline as described above.

And, VIX is likely to play a role in any additional downside.  Note that it’s back inside the falling white channel and has multiple downside targets available to it, including the white channel midline at 47.21 and the rising red channel bottom, now at 46.74ish.

As I write this, I see ES is taking another shot at breaking out.  It’s as good a guide as any regarding the potential for the current short position working out.

I’m going to update some currency charts, so won’t be watching the squiggles over the next hour or so.

UPDATE:  2:43 PM

Got wrapped up for a little longer than I expected.  Here’s the updated SPX chart.  If it backtests the white channel bottom, that translates to 2196.65 or so at the close, as low as 2195.83 if it were to happen right away.

The white TL has been broken, so it offers a little hope as long as it doesn’t bounce back above.  Regardless of how it closes, I wouldn’t hold short overnight.  The odds strongly favor a long position.  But, as always, hold overnight only if you can live with the gap odds or hedge your position.

I’ll check back in later this afternoon with updates on DX and EURUSD.

GLTA.

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