Will they, or won’t they?  Even under tenacious grilling by the MSM, the Federales haven’t given much guidance as to whether they’ll hold the line in September.  We have our own thoughts on the matter, which informs our analog [see: A New Analog: Aug 3, 2016.]  It’s still (drumroll, please) on track.  But, today marks one of those inflection points that will make it or break it.

SPX came within a few points of our next downside target yesterday, held at bay by USDJPY, which kept threatening to break out beyond this totally meaningless TL — a charting straw man if ever there was one.

And, of course, CL got in on the action — ramping just a little higher every time SPX ticked down a little.  Its former falling red channel is now a distant memory.  And, it’s back to playing cat and mouse with its SMA10.

continued for members…

It’s going to be tough, now, for it to reach a full backtest of the broken white channel without putting a dent in the rising purple channel.  So, I’m raising the downside target just a bit to the SMA100 at 45.76.  If we tag it, SPX 2165 is a gimme.  If it shoots up past the SMA10 and accelerates, SPX should do the same.

SPX remains unchanged, with the .618 at 2165.24 the most likely downside target.

It would maintain the rising purple channel quite well.

With futures flat, it looks like a good possibility.

Will it hold?  Hmm…

UPDATE:  9:34 AM

Wow.  VIX just got hammered on the opening bell, sending SPX and ES spiking higher.  I’d go to cash here and wait to see whether it can break through the SMA20.  If so, I’d go long with the SMA20 as my stop.

UPDATE:  9:39 AM

It’s pretty wild because CL and USDJPY were both set up to assist in a modest downside move.  TL is still beneath the SMA10.  We’re looking for an explosive move higher by early next week, but I thought it’d be better coordinated than this — a solo VIX move.

There’s a lot of resistance right at the SMA10 at 2182.29, so the whole thing could very well unwind right away.  Bottom line, I don’t trust it.  But, we also can’t ignore it.  We’re long for now, but ready to pull the plug if it loses steam.

If they intend to hold it, the next step should be a backtest of the SMA20 as the SMA5 10 rises up to meet it.

UPDATE:  9:59 AM

Dropping back down, would short again here.

USDJPY and CL – huge reactions.  CL, which has real buyers and sellers, is selling off.  USDJPY, driven almost entirely by BoJ, is doing its best to compensate.

UPDATE:  10:04 AM

USDJPY still spiking, erasing the downward move in SPX.  Back to long here on the breakout.  Gotta love the whipsaw…  higher prices on suggestion of a rate increase!  Our upside target, the top of the rising purple channel by Monday at 2200.

Watching closely to see if CL can join in and spike beyond the SMA10.  If it fails, then SPX will have a hard time holding any gains.

It’s very unclear whether they’ll try for a breakout on the bearish news, or will be content to hold these levels until the close.

I don’t like being whipsawed, so would likely step aside if it continues.

UPDATE:  10:11 AM

The dust is settling, and the strategy is shaping up.  CL is spiking beyond the SMA10, which means USDJPY can return to earth.  VIX is also tanking more, which should support the breakout — as ridiculous as it is.

UPDATE:  10:20 AM

SPX just reached the top of the falling red channel — another inflection point.  I’ll be watching CL to see if it can keep going and support a breakout.  It’s currently up 4.4% since yesterday’s lows.  Because…???

Normally, we’d see at least a pause here until the SMA5 10 can catch up.

VIX finds support at the SMA10 and 20.

Lots of moving pieces here, I know, but USDJPY and DX are taking advantage of the CL spike.  DX is about halfway to last week’s downside target…

…as USDJPY’s rising white corrective “channel” breaks down.

UPDATE:  11:46 AM

One thing that bugged me in laying out the road map for today is that the purple channel bottom technically didn’t pass through the .618 until late in the day, or even Monday morning.  With SPX dropping back through the SMA10 and testing the SMA20, that appears to be a real possibility.

The key will be whether CL holds the SMA10 or drops back through to tag our downside target.  USDJPY is certainly doing its best to prop things up.  Bottom line, I’d short here and take a chance on 2165.

UPDATE:  12:13 PM

I’d cover the short here and revert to long with tight stops.  The red channel bottom is at 2162.57, so we could leak a little lower.

UPDATE:  12:18 PM

Note that ES’ .618 is at 2160.60.  It has reached 2160.75 so far, which might be enough.  Watching CL and USDJPY to see if they bounce to support SPX bouncing here.

USDJPY just tagged our 101.48 target.  It might need to break out in order to give SPX the support it needs.  And, CL had better get back above the SMA10 — at least until the close.

Crazy, risky low cost trade idea of the day: the VIX 12.5 puts that expire next week for .05.  If the rebound is correct, these things will rise 10X at least.  If not, hey, they’re a nickel!

VIX just closed the gap from Jul 7 (yellow arrow) that we discussed a couple of days ago. It could still bump a little higher to tag the SMA100, but I think that’s all the upside exposure there is at this point unless the “market” really breaks down.

Remember the ES 2147 target — still a possibility.  It would equate to about 2150 in SPX, which would mean a breakdown of the rising purple channel.  The alternative, if we get a bounce here at the .618, is a Gartley Pattern to the .786 early next Wednesday morning.  It would mean that ES’ falling white channel 

Hard to believe the “market’s” only been open for 3 hours…

UPDATE:  12:50 PM

Except for this morning’s craziness, the falling white channel looks like a good fit.  I assume we’ll get some resistance here at the red TL marking yesterday’s lows.  Time for CL to sneak back above 47.45.

UPDATE:  1:20 PM

It looks like we could get the rest of the drop to the red channel line mentioned above.  I show it at 2162.27 pretty close to 2pm.  You can ride it out, and take the chance that it drops further per the ES note above, or revert to short for the 8-9 point swing.  

Remember VIX’s SMA100 up there at 14.56.  I wouldn’t be surprised to see a close today on a negative note, leaving traders scratching their heads going into the weekend.  It has been the norm for a long, long time — facing a decision on Friday afternoon that could have serious repercussions come Monday.

SPX’s rising purple channel has been pretty well behaved so far.  And, there’s every likelihood in the world that it’ll continue (every channel continues, forever, until it doesn’t.)  Analogs are always suspect, every step of the way, and this one is no different.

To get a 35 point rebound in the next couple of sessions would surprise no one.  But, at some point, we will get a backtest of 2138, and it could just as easily happen on Monday if TPTB don’t get their ducks in a row.  Lots of selling pressure here after Yellen’s comments, which I take as hawkish.

UPDATE:  2:16 PM

There’s the red channel bottom.  I’d go cautiously long here.  Note that CL is back above the SMA10 and USDJPY has broken out.  VIX tagged the SMA100, and is leaking slightly higher.

UPDATE:  2:21 PM

That didn’t take long.  Back to short here, though there’s a good possibility it’s a head fake.

A reminder: ES’s .886/channel bottom is at 2147.20, so about 2150 for SPX.

UPDATE:  2:39 PM

Getting a bounce here.  Back to long with super tight stops.  It’s late in the day anyway, if it turns back down I’m out.

UPDATE:  2:46 PM

What a mess…

VIX is probably topping, but could be eyeing the red 1.272 at 15.12 or even the 1.618 at 16.23.  But, USDJPY is breaking out.  CL looks confused.  But, I believe it’s still going to test its SMA100 around the close or, at least, on Sunday.

FWIW, I labeled this morning’s CL chart with its SMA10 at 47.45.  It’s now at 47.37.  Not a big difference, but it puts CL currently above its SMA10 instead of below.

Even so, watching CL, it occurs to me we might not get a strong bounce into the close.  It might close quite weak, maybe even with the channel breaking down.  As we’ve seen countless times, though, Sunday could be used to fix all that.

UPDATE:  3:35 PM

SPX seems to be losing momentum, probably because of ES running into resistance.  I’d take profits here on the bounce unless you’re planning on holding on over the weekend.  As always, I only recommend doing so if you can hedge or, at least, handle the gap risk.

I understand there’s plenty of time left in the session.  And, if SPX dips down to the red TL or white channel midline and gets a nice bounce, I’d be right back in.  I’d also jump back in if VIX starts dumping.  Right now, it’s stuck at 13.9.  To me, 2176 would be a more logical spot to close — back in the green.

USDJPY looks very droopy, here.  It’s probably an excellent short over the weekend.  And, CL is sitting just below the SMA10, waiting for the close so it can drop on down to its SMA100.

UPDATE:  3:48 PM

NKD is ramping, and VIX is dumping.  Back to long.  Should close in the green with a nice bullish candle on the day.

UPDATE:  3:55 PM

Losing a little steam here.  Again, only hold long into the weekend if you can hedge of deal with the possibility of a 10-20 point gap lower.  TPTB have a lot of work to do in order to really turn this thing around.  Today was a nice recovery, but they’re not out of the woods — not by a long shot.