With oil on track to our downside target, it suddenly shot up 4% from its overnight lows on rumors which were immediately proven false while failing to drop even a little on quite bearish API inventory.  What else is new?

While SPX broke out of the tightest falling channel it had going, it still failed to make new highs.  This says a lot about the kind of “market” we’re in now.

Our analog continued on track, with the biggest current question being where the next rise begins from.

continued for members…

CL’s silliness continues: USDJPY’s sideways shuffle continues:

SPX looks likely to at least test the purple TL, and still has a shot at the purple .236 line or bottom before the next high.  The SMA10 is at 2183.63 and the SMA20 at 2177.4.  The channel .236 line is at 2170.63 and the bottom is near the .618 at 2165.24.

ES is currently playing its cards close to the vest, off 1 point in the minutes before the open.  Just a reminder, ES still suggests a potential 40-pt drop in the days ahead. I’d start out short, as we should at least close yesterday’s gap at the SMA10.  

But, we’ll have to keep an eye on CL, which is bumping higher for no particular reason in the lead up to today’s EIA report at 10:30 ET.  It does this, of course, to prevent any serious decline in stocks.

I think it’s also worth keep a close eye on DX, which is in a prolonged backtest of the broken purple channel.  The moving averages are bearishly aligned, and I’m still looking for another leg down to at least the red .786 at 93.153.

In fact, the longer they delay it, the lower it’s likely to go.  It’s the best argument I can see forSPX to drop to the bottom of the purple channel (or lower) on hawkish comments out of Jackson Hole on Friday.

UPDATE:  9:56 AM

Quick update — with CL and USDJPY both putting the brakes on SPX’s decline.

UPDATE:  10:26 AM

Unfortunately, I have to duck out for a few minutes before the EIA figures are released.  I’d hold short unless CL starts levitating.  Remember, the support is at the red TL at 2181 and the purple TL at the SMA20 of 2177.40.  Below that, 2170 and 2165.

If CL breaks out, go long and hold on.

UPDATE:  10:55 AM

It was a 2.501 MM barrel inventory build rather than the drop some had expected.  CL is slumping below its SMA10, and looks likely to reach our 45.3 – 45.6 target from Monday.  This would have SPX past 2177.40 by now, but USDJPY is spiking again to compensate.  Look for it to at least test the SMA10 at 100.592; and, I wouldn’t rule out a move higher just to make a point.

UPDATE:  11:37 AM

I’d be cautious in here.  With the falling white SMA5 20 approaching, this is about where TPTB usually stage a VIX smackdown or a USDJPY or CL intraday spike.  Any sustained move through the SMA5 20 mean one should cover their short and revert to long.

UPDATE:  12:05 PM

I’d cover the short here, as VIX is about to dip below support, and CL is probably going to push above its SMA10.  I’d go long on any sustained move above the SMA10 at 2183.63 — which could just as easily be the target of a backtest.  If it reverses at the SMA10, I’d revert to short.  But, it’s hard to turn VIX around once it breaks support and starts feeding the algos.

More charts in a moment.

The other charts…

UPDATE:  12:50 PM

Breaking out — all VIX.  CL is still stuck beneath SMA10, and USDJPY has more downside to come.  Could be short-lived, as SMA5 200 is just above, and VIX’s movements have been subdued.  But, I see nothing wrong with playing along, as long as you use tight trailing stops.

UPDATE:  1:29 PM

Dropping back through the SMA10 and the SMA5 20, I’d revert to short here.  I can’t rule out a return to the intersection of the white TL and the SMA5 200 at 2185.50ish.  But, VIX and CL are hinting at another wave lower.

VIX has support again… …and, CL reversed off the SMA10.

UPDATE:  3:03 PM

USDJPY is spiking higher, and VIX has already retraced .886 of the drop from last Wednesday.  But, CL is still lurking below its SMA10, so we’re meant to believe there’s more downside.  Keep a close eye on it.

UPDATE:  3:11 PM

Here’s something we don’t see very often – an overshoot on the downside.  There’s a decent chance of a bounce here at the red midline, but CL is still below the SMA10 and VIX is threatening higher highs.

UPDATE:  3:44 PM

SPX just tested the white channel line and the purple .236 line.  This would be an opportune time for a bounce.  I’d cover here and only go short again if it breaks down into the close. 

We’re potentially leaving another 5-6 points on the table, as the .618 at 2165 still makes perfect sense.  But, CL and USDJPY are both sparking to life, and VIX seems to be reversing.  So, we should get a nice bounce here — at least into the close. Here’s the white channel, again.  A bounce should reach at least the SMA20 at 2177.40 or the purple midline at 2179.