Any other time, it might seem odd that e-minis are in the green even as VIX has rallied 4.5% overnight. But, such is the nature of today’s “markets,” when the motive, the opportunity and the tools are all in the hands of central bankers who are determined that stocks hold their breakout levels.
They can pull stunts like sudden spikes in USDJPY or CL when stocks threaten to break below key support levels — as they have multiple times this past two weeks. Friday, it was USDJPY which broke out — driving stocks higher just like it did on Wednesday.
Maybe today, it’ll be another VIX slam back below the trend line of support it established for just such a purpose.
Regardless of how it’s done, you can bet they’ll pull out all the stops — convincing investors to ignore any relevant fundamentals or the mounting geopolitical risks. How long can this go on?
continued for members…
Again today, it’s all about holding the yellow channel top and getting SPX to the red neckline at 2375ish.
Look for VIX to break down and USDJPY and CL to hold whatever gains are necessary.
UPDATE: 10:42 AM
SPX is coming up on its red .618 at 2367.11. The rising little white channel will pass through it around 11:10 ET. I don’t have a firm timetable for the IH&S to complete, and obviously the neckline is falling. If it’s at today’s close, it would coincide with the red .886 at 2375.
VIX has powered most of the move so far, with the TL break and drop below the SMA200 doing the most. Though CL continues to slip higher and USDJPY has yet to undo the breakout.
UPDATE: 11:32 AM
SPX just dropped down through the SMA20, which is problematic for the bulls. I’d ditch the long position and revert to short here. Beware of the SMA5 200 (2359.11), though, as it might offer support. Below that, we have the SMA10 at 2357.71 and the white channel bottom at 2356.93. The red neckline of the H&S is at about 2352.40. 
Note that VIX not only shot up through the SMA200, but the TL as well.
Still working towards a backtest, USDJPY has pushed below its SMA10.
UPDATE: 11:53 AM
Other than USDJPY, not sure what that was all about. But, I’d cover the short position on any sustained move back through the white channel bottom and SMA10 at 2357.71.
Now seeing that the Korean news agency Chosun reported that “the Chinese army has deployed 150,000 troops to the North Korea border to prepare for unforeseen circumstances.” Also, Russian Interfax reports more sanctions are coming Russia’s way.
UPDATE: 12:11 PM
Basic conflict between SPX, which is headed for the neckline, and ES — which is trying to hold this purple TL.
UPDATE: 12:15 PM
SPX dropped through the neckline, but is now thinking twice about it. I’d cover here and re-short if the backtest holds. I expect TPTB will see this as problematic, and will start propping things up here. If not, then the H&S points to 2316.
UPDATE: 12:50 PM
So far, so good. Just pushed back though the SMA5 200. I’d make that the stop, and see how far this can go. If VIX pushes back down below the TL and SMA200, we could easily make up the decline from this morning’s highs.
UPDATE: 1:33 PM
Hanging right at/above the SMA20 as VIX remains at a critical decision point.
UPDATE: 1:53 PM
I’d raise stops to the SMA20 (2360.84), as VIX is bouncing rather than falling through support.
UPDATE: 2:03 PM
Just stopped out at 2360.84. Back to short with stops back at the SMA20.
UPDATE: 2:16 PM
Testing the SMA20 again, but no confirmation from VIX. I’d wait until VIX drops through support. Taking a quick break, back in 5.
UPDATE: 2:44 PM
SPX held the white channel bottom and is headed back towards the SMA20 — this time with help from VIX and USDJPY. I’d cover here.
UPDATE: 3:19 PM
VIX just popped back above the purple TL. I’d take another chance on shorting here. As a reminder, support is at the SMA5 200 at 2359, the SMA10 at 2357.71, the yellow channel top at the purple TL intersection at 2354.40.
UPDATE: 3:55 PM
The backtest at 2354.25ish looks good. But, at this point, the safe bet is obviously to take profits and sit in cash overnight. It goes without saying that the news cycle scored some points over the algos today. But, overnight is another matter all together. Even though there’s plenty more potential downside…only hold if you can hedge or deal with the considerable gap risk.
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