When I called a top in oil last October, I added the caveat that we could get a replay of the previous year’s delaying ramp that would keep stocks rising into the year-end.  As it turned out, it wasn’t just a delay; it produced marginally new highs (+3) that sent SPX to new highs as well.

This all occurred against a backdrop of soaring inventories in crude and an increasing rig count — which made the price manipulation all the more obvious.  Yet, here we are.  CL is back to where it was in October, at roughly double its Feb 11 lows.   With inflation having reared its ugly head, thanks largely to oil, is it any surprise oil is off sharply the past two days?  And, is it any surprise that the other members of the “market” support troika are working overtime to keep stocks from following suit?

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USDJPY is threatening to break out of the falling white channel…again.  If the overnight ramp is to be preserved, we should expect a breakout.  If it reverses at the channel top, our downside targets should be allowed to play out.Together with VIX’s overnight smackdown……it should get SPX up to 2297 on the open.  I’d look to short at that point, but will wait and see what VIX is doing at the time.

UPDATE:  9:32 AM

I’d fade the rally here at 2297.02 and revert to short.

VIX is cooperating, but will need to push through the SMA10 at 11.32.   And, USDJPY has balked on breaking out…so far.

UPDATE:  12:24 PM

Here’s the first level of support we need to worry about…  CL is still dipping — off 2.04% at present — so I would expect the SMA5 200 to fail.

Next up is this morning’s gap at 2292.40.  Looks like it could occur at the same time that VIX reaches its SMA20 and the white TL backtest.  And, just below at 2291.80ish is the yellow midline.

UPDATE:  12:31 PM

The gap just got closed, and the yellow midline is just below.  We should get a bounce here, at least up to backtest the white TL and SMA5 200 around 2294.50.  If VIX can break out past the SMA20 at 11.51, then the additional downside is in play.

UPDATE:  1:48 PM

The latest bounce is getting a little energetic.  I had expected a tag of the SMA5 200, which SPX didn’t quite reach before.  Now, it’s potentially taking another swing at it but with a bit of a break out of the falling purple channel.  Still CL is off about 2%, and VIX is about to backtest the SMA10.  So, swing traders should be okay hanging in there.

Something just came up and I need to take off early today.  I’d look for the decline to reach the SMA10 (2288) either this afternoon or tomorrow morning.  Our next lower levels of support are 2285, 2282 and 2278.

I’ll check back in after the close.  GLTA.

UPDATE:  7:24 PM

SPX managed to close just barely in the green for the day despite a strong decline in oil.  As expected, VIX and USDJPY worked to moderate the losses.  

Still, SPX closed with a backtest of the yellow midline.  All in all, I’d call it a win for the bulls in keeping SPX as high as they did in the face of a strong CL decline.