The past few years have entailed many instances of markets “not making sense.”  The latest iteration I hear about a lot is stocks’ continued rise in the face of a Fed hike, a bond meltdown, political uncertainty and an EM currency crisis.

It’s important to understand that it has been years since stocks traded mostly on fundamentals.  At least, if not more important, are the yen carry trade, the oil-driven algos and other central bank interventions.

And, all this has occurred against a backdrop of aggressive corporate leveraging in a historically low interest rate environment in order to buy back stock and, thus, leverage what little growth in sales/cash flow most corporations have been able to muster.

With six weeks to go until year end, the market has a good strong whiff of the barn.  With TPTB giving it the whip, we shouldn’t be surprised that it’s seemingly picking up momentum.  The big question is whether we can get there without stumbling.

continued for members…I never doubted we’d reach new highs.  But, I thought we’d at least get a backtest of some kind first.  USDJPY did most of the heavy lifting post-election in one of the strongest rallies in history.

Even after it should have taken a breath, the promise of higher interest rates has kept the drive alive.

And, oil’s spike on the umpteenth repetition of the same old rumors has been a great help — even if the rallies are undone after hours as occurred last night.

We’re seeing the same thing happen this morning.  Every time SPX tries to settle back, CL spikes higher.

And, VIX is perched right on support, threatening to plunge through at any second as it has countless times before.

SPX appears locked in this small, white rising channel that will reach 2193.81 later today.  The nearest SMA is the 10-day, a full 30 points below current levels.

UPDATE:  10:07 AMAM

CL is breaking down, but VIX is plunging to (over)compensate and DX has decided it wants to move inversely to oil after all.  Watching to see if VIX breaks down completely…

UPDATE:  10:47 AM

SPX just fell to the white midline, backtesting the Nov 10 highs.  Good chance we’ll see a bounce here as USDJPY is spiking higher.  I’d cover here at 2181.88 if it starts to bounce back, but re-short if it drops through.  Hopefully, it’ll drop to at least the SMA5 200 at 2180ish.  It looks like it would align with ES’ rising purple channel bottom.

UPDATE:  11:09 AM

I have to take a quick break.  SPX came within .40 of the SMA5 200 and seems to be firming up.  I’d cover here at 2180.98, and only reshort if it drops back through it — in which case the white channel bottom at 2174 becomes the next target.

UPDATE:  12:06 PM

Got the bounce, which merely backtested the white midline.  Back to short here if SPX should drop through the SMA5 200.

BTW, we seem to have periodic slowing of the website today.  I see that traffic is higher than usual, which could explain it.  I’ll talk with the hosting company after the close.

UPDATE:  12:31 PM

Looks like that’s as good as we’re going to get. I’d go long here at 2181.76 with relatively tight stops until we’re back above the rising white channel midline and the SMA5 100 at 2184ish.  Targets include 2184, 2187 and 2194.  Watch for a head fake, though, as CL is backtesting its SMA100 and SMA20.  If it pops through, we’re probably okay.  Ditto for VIX, which gapped lower a moment ago but hasn’t confirmed by dropping through the channel bottom.

UPDATE:  12:12 PM

Stepping away again for 15 minutes.  Watch you rstops in case it decides to reverse at the midlines.

UPDATE:  2:40 PM

Not much action, today.  The SMA5 200 is still support and the SMA5 10 and 20 are overhead as resistance.  Needs to break one way or the other.

I’m going to move on to some work I’m doing on bonds, but would encourage traders to stay long so long as SPX remains above the SMA5 200.  If it drops through, look for 2177 (depending on when) and, below that, 2170.

To the upside, the first target past the MAs is the white midline at 2185.36, followed by 2190 and 2194.

GLTA.

UPDATE:  3:06 PM

SPX havng trouble getting out of its own way.  I suspect we’ll get a sell-off Monday, so would short here.

The more convincing chart is ES, which is clinging to support and not having a very easy time of it.  Note that the .618 retrace of the rise from 2148.50 is also the SMA10.  Call it 2166ish on SPX.

Still in an excellent position to ruin that trade:  VIX.  Dump it if we get a sustained push above the SMA5 100 at 2183.85ish.

UPDATE:  3:42 PM

Just popped up over the SMA5 100 with help from VIX making new lows and USDJPY pushing to new highs.  Gotta hand it to TPTB.  They know what works and they’re going with it.  This feels like a very weak and desperate close, but since it’s the weekend there’s a risk in staying short.  Only hold short if you can deal with the gap risk or hedge your position.  I’d not be surprised if it drops to 2177.59 by the close or on Monday morning.

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