Did you like yesterday?  We have futures off 4-5 points this morning on higher inflation (+2.5% yoy), lower real earnings (-0.5% mom), surging oil inventories, hawkish Fed testimony, etc.  But, we also have retail sales and Empire Fed popping and, of course, another day of Yellen testimony.  So, a mixed bag.

The one key difference chart-wise is VIX, which has popped up above its SMA10, SMA20 and SMA50.  This makes sense, as SPX has very specific targets in mind.

continued for members…

CL has broken down, but has, so far, refused to drop — even after yesterday’s disastrous API inventory report.  It was a repeat of last week’s with a build of 9.94 million barrels.

USDJPY continued its ramping, but has run into the red .886 that might spell at least a pause.

SPX is very, very overdue for a backtest — something that’s been almost impossible to achieve for weeks now with all the VIX inspired meltups.  Here’s the picture at 8:30 this morning…

…and, now at 9:45.

Given the size of VIX’s pop this morning, I suspect it might finally be time to allow a backtest — perhaps on the back of the 10:30 EIA inventory report?  It will require CL and USDJPY to cooperate, of course.

UPDATE:  9:55 AM

VIX is settling a little below its SMA50, which along with CL spiking back above its SMA10 SMA20 and the red TL, has SPX right back to yesterday’s highs.  USDJPY continues to settle lower after tagging its .886 and ES has yet to break out in any way.  

So, I’ll assume we’re heading lower from here following the 10am peak.  If you didn’t hold short overnight following the 1.618 tag, this probably represents another good opportunity.  Tight stops, of course.

UPDATE:  10:45 AM

The EIA report came in with a 9.5 million barrel build in crude and a 2.8 million barrel build in gasoline.  Against all logic, CL is actually rising.  I’d cover the short and get ready for another meltup.  The next overhead resistance is around 2345.

Having popped up to 12 with no effect on stocks, VIX has plenty of room to decline — which would, of course, have a great impact on stocks.

UPDATE:  11:18 AM

SPX has reached the yellow midline, and CL and USDJPY just started reversing.  I think we’ll get a decline from here, though possibly not much of one unless VIX gets back above 11.80, USDJPY drops through 114.45 and CL drops through 53.  I’d revert to short here at 2344.36 with tight stops.

UPDATE:  11:53 AM

Despite USDJPY  dropping through support and CL being back below (marginally) the SMA10 and SMA20, VIX is dipping back below its SMA50 and SPX is getting a bounce at the white midline/purple TL.  Keep a close eye at this point, as we could see a nice bounce as kept occurring yesterday.  The safe play is to cover here, and re-short if VIX bounces instead of breaking down below the SMA5 10 at 11.78.

UPDATE:  12:07 PM

Should reverse here if it’s going to.   Although USDJPY is slipping and VIX is bouncing, CL is edging higher, almost back to the SMA10.  Back to short with very tight stops.

UPDATE:  12:25 PM

It’s not happening.  VIX is edging back below the SMA50, CL is back above the SMA10, and USDJPY is getting a bounce at its red .618 after reversing at the .886.  Going to cash here.  Long is also probably safe, with reasonably tight stops guided by the purple TL, the white midline and the SMA5 10/20.

I would gladly re-short if SPX surprises me by dropping through the purple TL which would also mean the SMA5 10 at this point.  I suspect, however, that the only drops we get through the rest of the session will be limited to the rising SMA5 10 or the purple TL.

I’m going to take a break for an hour or so.

UPDATE:  1:15 PM

FWIW, SPX just dropped through the purple TL a few minutes after Yellen’s testimony ended.  Perhaps we’ll get some follow through, but I’d hold off on shorting unless it falls through the white midline.  CL immediately shot up through the SMA10, and VIX reversed before even finishing the little backtest of the purple TL it was about to do.  

I mentioned yesterday that DB was sitting at overhead resistance, noting the possibility that it could pop back above in the event TPTB want to convince investors that everything is alright.

Today, apparently everything is alright.  Because it’s back above resistance.  It isn’t back inside the rising red channel yet.  But, everything’s possible when you consider the degree of manipulation going on.

UPDATE:  2:18 PM

The House hearing is finally over, with SPX having rallied 13 points from this morning’s lows.  VIX is still dropping, albeit in a falling wedge, and CL is still ramping higher.  Only USDJPY seems ambivalent at this point.  But, that’s only because it hasn’t been needed.

UPDATE:  2:40 PM

SPX has reached the yellow channel line again, which means we could theoretically get a reversal.  CL continues to increase exponentially.  And, VIX continues to tick lower, though in a bit of a falling wedge — which suggests it might bounce higher soon.The SMA5 50 (purple) is almost to the white channel midline, which means any drop through the SMA5 10 would probably only fall to it.  It’s about 4 points below current prices, so not much of an opportunity unless it keeps going.

The other problem is that VIX is sitting right below resistance from its falling SMA5 10.  At the very least, it would need to push up and through the MA, not to mention the wedge top.

UPDATE:  3:18 PM

Just tagged the top of the white channel.  I’d revert to short here with tight stops.

UPDATE:  3:53 PM

VIX is back up above this morning’s highs, and SPX has dropped through the purple TL again.  USDJPY is drooping, and CL is perched right on top of the SMA10.  All together, it makes me inclined to hold short overnight.  Though, as always, don’t do it if you can’t handle the risk of an overnight ramp job.  

We’ve seen plenty, and this could be nothing more than a head fake.  Even if it plays out, the bottom of this rising white channel is only about 10-11 points below current levels.  In other words, it might not be a huge payoff even if it declines from here.

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Thanks, and good luck to all.

 

 

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