Moving Pieces

Sometimes the moving pieces work in your favor. Sometimes they don’t. With Iran’s announcement that they’ll be back to 500,000 barrels per day within a week after sanctions are lifted, CL wasn’t about to break out of the falling channel it’s been in since October 7.So, the bump that began with the Dec 14 lows has officially fizzled — stalling that particular algo mechanism. Fortunately for TPTB, there are others.

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A rather vulnerable looking USDJPY has come with 3 cents of the critical .618 Fib at 120.11 — probably close enough to justify a bounce. And, it had better start bouncing. Because SPX has already tested its SMA200. So, with ES pointing to another 6 point loss, the rally is in danger of falling apart.There aren’t a lot of great support levels below the SMA20 at 2055.22. The white .618 at 2049.51 would be the initial one, with an hourly SMA20 intersecting. Otherwise, we fall all the way back to the white .500 and red channel midline at 2041 before running into anything I’d consider potentially strong.

But, it all depends on CL — down as much as 4% from Thursday’s highs earlier this morning. It doesn’t usually have to contend with real selling pressure. But, with end of the year positioning and real, fundamental factors outweighing the usual manipulation, it’s a very inconvenient reality for the “markets.” It appears susceptible to at least the red, dashed TL from Dec 14. But, it might try to make a stand at the .786 channel line. UPDATE: 9:48 AM

CL is slipping further, but still hasn’t broken down through the .786 channel line. And, USDJPY has held at short-term horizontal support.Hence, SPX found support just above the .618 we discussed above, bouncing at 2050.17.If CL and/or USDJPY broke down, then I’d consider shorting for 2041 (depending on what the other one did to compensate.)

UPDATE: 10:00 AM

USDJPY just dipped below that horizontal support while CL was in retreat mode. So, I’ll assume it’s safe to short SPX here. Initial objective is 2040, with the secondary support at the SMA100 at 2025.75. Keep a close eye on USDJPY, which loves to head fake in these situations. A rise back above the white TL and/or sharp break above the purple TL could easily scuttle the short.

UPDATE: 10:08 AM

USDJPY and CL both rose back above support, stopping SPX dead in its tracks. In other words, they didn’t like the pace at which it had started to drop. Be careful with your stops.

UPDATE: 10:41 AM

Our short requires careful watching here as USDJPY just reached the .618 retracement of its bounce from yesterday’s lows.

UPDATE: 11:00 AM

It’s a little unclear which is the best initial downside target at this point. The channel midline and red .382 overlap at about 2040.33. However, the white .500 is at 2041.1 and the daily SMA10 is at 2038.36. With so many choices, it’s going to be tough to single out just one as the best spot for a bounce — assuming it does bounce.

But, it looks like USDJPY should bounce at the purple .786 at 120.247. So, hopefully, we’ll be able to use that as a guide.

UPDATE: 11:02 AM

USDJPY just reached that potential bounce point. So, I’m watching the position very carefully here. CL has also bounced, but hasn’t made its mind up yet about breaking back above the channel line.UPDATE: 11:09 AM

Dumping the short position here at 2046.09 as CL just pushed through the channel line and USDJPY has stalled at that .786. Will gladly reopen it if CL reverses. It could happen as soon as a few minutes from now when SPX’s SMA20 (thin white line) catches down with the index. UPDATE: 11:17 AM

USDJPY just plunged below the purple TL to tag the .886 Fib — a strong signal that the downside might not be over.Now, if CL can just stop climbing…The SMA20 at 2047.83 or .618 at 2049.51 are looking good for a reversal.

UPDATE: 11:22 AM

I’ll try for a reversal off the SMA20 here. Back to short at 2047.81.It’ll require USDJPY to not rebound at the .886, and/or for CL to get back below the purple midline very soon.

UPDATE: 11:35 AM

Neither of those things is happening, so I’d dump the short position and revert to cash here at 2046.85. There is clearly more downside, but we could get a bounce all the way back to the SMA200 (2052.50 and rising) before it plays out. CL is now riding its SMAs higher. But, USDJPY is the biggest problem. Still, I have a feeling 120.11 will come into play before the day’s over.UPDATE: 12:17 PM

CL is back below the midline and MA support. And, USDJPY has stalled at the purple .618.So, there’s a decent chance SPX will follow along if it can break below the 5-min SMA10 at 2049.90ish. I’d take a short position if it does.Otherwise, 2053.24 is the obvious next stop higher.

UPDATE: 12:20 PM

Back to short at 2049.90 with a target of 2038.36 (if it hurries.) Tight stops until it drops through the SMA20 at 2048ish.FWIW, NKD has backtested a little TL of support that it broke through this morning.UPDATE: 12:38 PM

USDJPY isn’t cooperating. CL is even back above the midline. So, our short position is looking iffy. Watch your stops. UPDATE: 1:11 PM

I’m giving up on the short position here, as CL continues to find horizontal support and USDJPY isn’t budging. There might be another opportunity if SPX goes up and tags the 5-min SMA200 (2054.3) right away and doesn’t bust the falling red channel. We’ll see.

UPDATE: 1:16 PM

SPX’s red channel top/SMA200 might provide a reversal, as USDJPY has reached its purple TL and CL its 5-min SMA50. I’d try a short position here with the SMA20 at 2055.22 as a stop. UPDATE: 1:31 PM

Once you turn USDJPY on, it’s hard to turn it back off. Dumping the short position here at the SMA20 unless USDJPY and/or CL turn back in the next few minutes. UPDATE: 1:55 PM

This might be as good as it gets – a backtest fo the broken red channel. I’ll close the short here and only reopen it if SPX can at least break down below the channel top/SMA20. Still looks to me like it’s going lower. But, with the red channel not reaching the SMA100 until tomorrow morning, we might have to wait for any further declines. I’ll just set an alarm at 2051.30 and another on NKD at 18855 and work on some other stuff.

UPDATE: 2:15 PM

SPX is back below the SMA20 and USDJPY gave up the red TL. CL hasn’t yet capitulated, but looks like it will soon. I’ll try a last little short position here and see if we can get a sell off into the close. This is a low-probability setup, but it’ll be pretty easy to see if it busts: SPX back above the 5-min SMA10.

UPDATE: 2:26 PM

Never mind. Back to cash here as CL dipped almost to the TL but got a huge bounce back.UPDATE: 2:48 PM

Probably just a head fake, but NKD just dipped below the 18855 support it’s clung to all day. But, USDJPY is still propping stocks up.SPX is going to have to break through the SMA20 again or break down through the SMA10/20 combo just below.UPDATE: 3:17 PM

It has come to push or shove. I’ll try a short position here just for grins — mostly due to the failure to retake the SMA100. Though CL hasn’t really expressed any interest in another plunge……and, USDJPY is still propping things up. ES dipped below and is backtesting the white TL. UPDATE: 3:24 PM