Oil futures pushed above the 100-day moving average this morning, providing the boost the ES needed to make new, new highs. All-together, CL is up 15.2% since Aug 3, enabling a 41-pt (1.9%) SPX rally over the same period. Great trade-off, no?
continued for members…
Given ES’ overnight gains…
SPX will have no trouble making new highs again, today.
Though there might be little follow through to the initial pop.
UPDATE: 9:46 AM
SPX made new highs with no problem. If the rising purple channel is legit, we should get a reversal here. I’d short at these levels with tight stops, with an initial target of the .618/gap close at 2185ish. If that doesn’t hold, the next support is at the .886 and SMA10 at 2174-2175.
I’ll post it to the analog page, but I have completed the initial charting of the 2007 analog for SPX. If it follows the same path as then, it would look something like this:
We’d soon get a breakout from the rising purple channel that peaks around Aug 29, falls about 3.5% into early Sep, pushes up to new highs again by mid-Sep, then dips a little further by Sep 23, then pushes up to 2270 by Oct 11.
At that point, we’d finally get the backtest of 2138 — a full 73 days since the initial push up through it on Jul 12.
The tricky part is knowing when the breakout will occur. This morning, SPX is pushing above the channel top by 2-3 points, but I don’t consider it significant enough to count as a breakout. And, with CL at a channel top and important Fib level, I’m not sure we can count on much more than 45.85.
If the breakout comes on significant size, preferably on positive news, and properly backtests the channel top, I’d consider it more likely.
UPDATE: 3:19 PM
Another water torture kind of day. SPX finally returned to backtest the purple channel top. I suspect it’ll decline a little further and tag the SMA5 200 when it emerges from beneath the falling red channel at around 2187.42.
But, it’s hard to say. CL is pegged at the SMA50…
…and, USDJPY is on top of all its short-term MAs.
And, ES just tagged its SMA5 100.
My best guess is it continues a little lower to 2187ish. But, I’d be cautious either way.
Comments
2 responses to “Melting Up”
PW, maybe this question is ahead of your post. If the current analog is following 2007 analog, we can anticipate the huge rise of SPX. However, we all know what happened a year after SPX reached a record in 2007. So, is the current analog implying a similar outcome similar to 2008 such as the Bear Sterns or Lehman events? (If this will be covered in your Aug 3 analog, I will go there and find out. Thanks!)
I wish I knew. I think it’s safe to assume that TPTB will pull out all the stops in order to prevent it. The question that no one can answer is whether it will be enough, given that so much has already gone into getting SPX to where it is, now. How much lower can rates go? How much more direct purchases of stocks and bonds? How high can oil go? All of these things have consequences, yet we won’t know the limits until we reach them. And, at that point, it will probably be too late.