Yesterday was another one of those days when the folks minding the store got a little over-anxious.  A simple backtest of SPX’s 10-day moving average never happened because CL and NKD started ramping prematurely.  Could it have been the bearish moving average crosses that got them so nervous?

continued for members…

NKD’s sudden rebound was premature.  And, its spike this morning on this morning’s lower than expected US job growth is just plain silly.

ES is making noises about breaking out, but no new highs yet despite VIX’s best efforts. I’m looking for SPX to hold the line and not break above 2272.52.  But, we’ll see.  Futures are flat at the moment.  Our initial target is the SMA5 200 at 2263.63, followed by the SMA10 at 2259.44.  The SMA20 is just below at 2258.84.  Unless SPX makes nice gains in the next six hours, its 10/20 cross will happen today as well.

Ditto for RUT…

The SMA10 dropping below the SMA20 isn’t an iron-clad guarantee of lower prices, but it’s pretty reliable.  The drops over the past year, marked with yellow arrows, have been highly predictive.  The rises back through have been even more effective — though in periods of very high volatility like last Jan, Feb, Jun and Nov, the lag effect can be dangerous.

If you shorted on the bearish cross, but didn’t cover until the bullish cross, you might have been whipsawed and/or missed all the gains from the initial short.  This is why, of course, I combine moving averages with chart patterns, harmonics, etc.  No one method works 100% of the time, though TPTB’s very strong aversion to drops below the SMA200 comes close.

The other thing the above chart shows is that when a bearish 10/20 cross is about to occur, we often get a sudden rise in SPX, followed by the drop a few sessions later.  When this occurs, it’s because those in the know (CBs and other insiders) are positioning themselves ahead of time.  They do this by running stops and getting short (or at least hedging) while others are scrambling to cover.

It’s happening right now, as this morning’s initial plunge has been almost entirely erased.  This is why I’m still open to the idea that our analog is off by a day or two, and that we’d get another slightly higher high before things turn down in earnest.  Truncated 5th waves are all the rage, lately.

But, is it worth it at this point to TPTB?  It would take VIX dipping well below a long-established channel bottom, USDJPY doing more than backtesting a broken channel, and/or CL creating even more of an inflation problem to get a few more points.

With the end of the year in the bag, I think they can afford to at least allow some backtesting — as soon as the insiders are hedged, of course.  The only question is whether it’ll happen from here or on the other side of 2277.53.   I’d want to be long for 2284.75 or 2298.66, especially once it pushes through 2277.53.  But, I’d be very cautious about staying long if it closed in the 2277-2280 range — as it could set up a gap down on Monday.

UPDATE:  11:39 AM

VIX made another run down to 11, and CL is bouncing back after testing the SMA10 for the third time in the last two days.  USDJPY is likely backtesting the SMA10/20 and possibly the broken channel as well.  All this has helped SPX edge higher on the day, with 2277.53 clearly a target.  Short-termers might wish to play along on the long side with tight stops, though swing traders should be okay holding short.  Note that at 2277.53, SPX is backtesting the broken purple channel.  It’s been doing so for several days, now, moving higher from underneath.  It’s not an optimal position to be in for bulls, but it has often led to new highs over the past year — even if they ultimately fail.

UPDATE:  12:15 PM

Again, my inclination is not to chase this push above 2277.  But, if you do, please use very tight stops and don’t hold long over the weekend.   USDJPY has backtested its SMA10, but could still go up to 117.4 to backtest the white channel.  VIX is essentially out of room. And, CL seems very reluctant to rise any higher — something to do with the unresolved oil glut, no doubt.

I have a little road trip this afternoon, so will take off a little early.  I’ll check back in after the close with thoughts on where things stand.

GLTA.