SPX dithered and dallied yesterday, but in the end tagged our downside target before the supportive forces of rising oil and falling VIX came to the rescue.

Today, we’ll be watching for signs of policy changes from the brain trust gathered at Jackson Hole.  Currencies, which have been active all week, are already responding.  And, S&P futures have regained the SMA10.  Will they hold?

USDJPY, which has been limping along for the past week – is back above its own SMA10 and is clearly in supportive mode.  We would expect no less.But, oil, which came to within .06 of yesterday’s downside target before bouncing back above its SMA10 (sense a trend, here?) is already dragging — strange behavior considering all the anxiety tied to Hurricane Harvey.

continued for members…

On to equities…  I’d keep a very close eye on ES and its SMA10 at 2446.  This seems to me to be an important indicator.As to SPX…the 6-pt ramp should leave it at the top of a falling channel — in other words, an opportunity to either break out or to reverse.As always, VIX will likely play an important role in propping up stocks – especially since central bankers are pontificating.Today could be the day we finally get capitulation in DXY.  The purple channel line is currently around 91.3 and the midline is at 88.682.UPDATE:  11:02 AM

SPX just tagged the white midline.  I’d look for a reversal here, if only to the white channel top and SMA5 200.  But, it’s going to come down to VIX vs USDJPY.

AS USDJPY breaks down……VIX is diving for the yellow channel bottom.UPDATE:  10:23 AM

VIX is making new lows, and almost certainly diving for the gray channel bottom (at least) while DXY and USDJPY continue selling off.  It’s do or die time for SPX.

UPDATE:  11:02 AM

Here’s the SMA5 200 and channel backtest. We could very well get a bounce here; but, the falling USD should continue to drag stocks lower.UPDATE:  11:11 AM

SPX dropped through the SMA5 200 and got a bounce on the SMA5 100 only because ES has channel support here.  We’ll see if it holds.

UPDATE: 11:16 AM

I’d cover here and re-short only if it drops back through.We’ll want to watch DXY for signs of slowing.  Ideally, for shorts, it would remain below the SMA5 10.UPDATE:  11:45 AM

It should go without saying that a failure to retake the SMA5 200 would open SPX up to much more downside.  DXY reversed at the SMA5 20 and even VIX is bouncing.

UPDATE:  12:08 PM

DXY is slipping again — doesn’t bode well for SPX unless VIX starts tanking.  SPX has another reason to reverse here at the SMA5 20.  If it can break past 2446, on the other hand, it should be able to test 2455.

My gut tells me DXY is going to plunge either later this afternoon or Monday morning.  Absent any help from VIX, that should see SPX down to 2431.65, 2421.62 and possibly 2415.41. 

Bottom line, I’d want to be short anywhere south of the SMA10 at 2445.93.  I’m going to run some errands, will be back in an hour or so.

UPDATE:  2:33 PM

Markets are in maintenance/melt-up mode right now, propped up primarily by VIX (threatening to break below the yellow channel bottom), CL (recovering) and DXY (slowly turning the corner, as if everything is okay.)

SPX might turn down here to test the SMA5 200 and white channel bottom (2444.90 ish) one more time.  Whether or not it’d hold there through the end of the day and into Monday is anyone’s guess.  If it drops through, obviously we’d want to be short.

If, instead, VIX drops through 11.32 and sends ES/SPX higher into the close, look for ES to reach 2456 and SPX to top its SMA20 at 2458.64.

It is (almost) amusing that Janet Yellen was on record, today, pointing out the dangers of the growing influence of algorithms — considering algorithms are exactly what’s propping up stocks at the moment (like most every day.)

This sort of meltup is exhausting, so I’m going to set some alerts – just in case things turn south – and call it quits for the day.  I have many charts to get caught up on and members can certainly watch it drip higher without any commentary from me.

I’ll be back later if anything dramatic happens.

UPDATE: EOD

At the close…  SPX broke below support in the last few minutes, but that’s happened the past two sessions before this.   So, I’d not read too much into it.  However, it technically bolsters the case for the .618 at 2431 and points south.

I still see CL heading lower, though it’ll be interesting to see if TPTB can force it in the face of Hurricane Harvey.  DX and USDJPY have more to go.

Monday and Tuesday, I’ll be posting only in the early morning as I’ll be traveling.   In fact, I’ll be in Boston and New York for much of the next 2-4 weeks.  If anyone wants to connect, please drop me a line.

Have a great weekend, everyone!

 

 

 

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