Our advice yesterday was to ignore Draghi and focus instead on oil.  It was headed for an important support level which would determine whether or not stocks could bounce.

Oil did, in fact, reach our 50.63 target, at which point it tried, but failed, to rally.Fortunately for bulls (or market makers positioning for OPEX), VIX came to the rescue – repeatedly tumbling just enough to prevent the backtest I had anticipated. It was just Wednesday [see: True Colors] that we discussed how effective it’s been, lately, at propping up stocks.This morning, investors are correct to focus on Kuroda’s comments which are, in a word, absurd.  Saying that the BoJ is open to 3-4% inflation is like me saying I’m open to adding a 360 to my slam dunk.

USDJPY has given up on the ramp it started yesterday.  Along with CL and VIX, it is positioned to allow our next downside target to be hit — probably in the opening hour.  From yesterday’s Ignore Draghi, Watch Oil:

If ES’ channel breaks, SPX should at least get a backtest of the broken white channel at 2130ish.

Of course, by delaying the decline for a day, SPX’s backtest could be even lower.  We remain short from 2143.

UPDATE:  9:42 AM

There are two possible channel drawings here.  If the more bullish one (in white) holds, we could get a nice bounce here at 2130.09.  I’d be prepared to take profits on the short just in case.  If the purple one, which I believe to be more legitimate, proves dominant, then we should reach 2126.  Stay tuned.

UPDATE:  9:48 AM

VIX is tumbling again.  I’d take profits here at 2130.94 and move to the sidelines until things are a little more clear.  

VIX could end up backtesting the broken white megaphone top at 14.1ish, which would provide an opportunity for SPX to drop further.  Let’s keep an eye on it.UPDATE:  10:01 AM

SPX has backtested 2134.72.  This could be the extent of the bounce.  However, the SMA5 10 is still working its way lower, and probably won’t arrive there for another 5-10 minutes.  If it decides to bounce to the SMA5 20, instead, we could be looking at a backtest of the gray TL up at 2136.81.VIX is playing its cards close to the vest.  And, CL and USDJPY look like they’re rallying a bit.  I’d stay in wait and see mode for now.

If USDJPY reverses at the red TL and VIX gets a bounce here, I’d definitely reconsider.UPDATE:  10:25AM

SPX would be up to 2136 already on CL and VIX alone, but USDJPY has reversed and is holding things in check.  It’s almost as though real live traders are in charge…  I know, stupid thought.  The machines are probably just being rebooted.

Speaking of rebooting…my apologies for the late start again this morning.  Today, like yesterday, ToS crashed right before the open — leaving me scrambling to post the charts I’d been working on since 4am.  I don’t know whether the issue is my computer or the platform – because my computer froze up after the platform became unresponsive.  I’ll work on it this weekend.  And, it might be time for a new rig.

UPDATE:  10:32 AM

Shorting here at the gray TL at 2136.94.UPDATE:  11:00 AM

Never mind.  Back to cash at 2135.45, as everything is ramping and VIX is dumping.  If you liked yesterday, you’ll love today.

UPDATE:  12:49 PM

It would appear that this is the channel they’ve got planned for the day.  The question is what happens if/when SPX: (1) closes the gap at 2141.17, (2) reaches the falling red channel top and SMA5 200 at 2141.80.

If the channel breaks down and SPX pushes decisively below the SMA5 20, I’d want to be short.  If, on the other hand, VIX keeps sliding and CL keeps ramping, I’d want to go long as long as SPX stays north of the SMA5 20.

As it is right now, SPX has broken down a bit from the channel, so I’d go short here at 2137.57 with the above in mind (i.e., f it bounces back above the SMA5 20, currently at 2137.70, I’d want to be long.)

Downside targets include the red channel midline around 2135.50, the May 2015 high at 2134.72, and the white channel bottom at 2126.06.  Upside targets besides 2141.17-2141.80 include the SMA100 at 2142.60 and the white channel top at 2147ish.

I’ve been staring at these charts for the past 7 hours and need a break.  I’ll be back in an hour or so.

UPDATE:  2:40 PM

For those riding along with SPX on its last push up through the SMA5 20, this is as good a place to take profits as any.  I’d close it here at 2141.41 and call it a day.UPDATE:  3:55 PM

Not much to say about this close.  SPX is at resistance – no surprise.  This being OPEX, one would expect it to sell off Monday.  But, there’s no guarantee.  Don’t short unless you can deal with the gap risk.