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In the continuing farce saga that is the oil “market” rally, CL has now spiked 23% since Jan 20 — the equivalent of over 3,600 DJIA or 435 SPX points in a little more than a week — all on unconfirmed rumors of a 5% production cutback by OPEC members.

CL, which is pushing back above the falling white channel midline, should push back above the bottom of the falling purple channel by the time it’s all over.Needless to say, ES is off yesterday’s lows to the tune of 30 points or so and will at least test, if not push back into, the broken rising white channel.  You can’t make this stuff up, folks.Where does this leave SPX?

continued for members…While USDJPY continues to only inch higher… …this morning’s rally is all about CL.  And, who knows when they’ll take their feet off the accelerator?Look for SPX to test 1900 on the opening salvo.  If it breaks through, the next upside targets are 1908 and 1915.In the time it took me to post this, ES broke back above the white channel bottom, tagged the .786 and reversed back down to the red TL connecting most of the recent highs.  I imagine it’ll try to use this TL as support.This could be a very wild ride.

UPDATE:  9:31 AM

1900 down.  ES slipping but USDJPY and CL are holding at support.  I wouldn’t sell unless CL drops back through support of some kind. UPDATE:  9:40 AM

CL is off its highs, but is closing in on a backtest of the broken purple channel bottom and rising white midline.  I suspect it’ll make its stand there, enabling SPX to backtest the falling white channel midline at 1894.85.  If CL drops through 33.40, SPX’s pop should drop. Let’s not take our eyes off USDJPY, though.  CL is a bright, shiny object capable of igniting the momo algorithms — albeit at great cost: a 23% spike in CL to create a 4.8% rally in SPX.  But, it’s tonight’s BoJ meeting and a resultant rise in USDJPY (or not!) which will determine which way the “market” ultimately goes.At 119.05, USDJPY will run into the falling white channel top — fairly well defined.  If it breaks through, it’ll support CL’s efforts.  If not, CL will have to rally much more to keep SPX on the rise.UPDATE:  9:56 AM

CL and USDJPY are backing off their initial push.  I’d switch to a short position for a possible quick drop to the white channel line at 1894.85 or the SMA5 10 — currently at 1892.55.  Odds are the drop won’t happen until the SMA5 10 reaches 1894.85.It should conclude with a drop by CL to 33.4 and USDJPY to 118.81.

UPDATE:  10:03 AM

Didn’t take much effort by CL or USDJPY.  SPX just tagged the SMA5 10 and is still going.  Maybe shooting instead for the rising white channel midline at 1891.19?  If not, the SMA10 is just below at 1887.27.UPDATE:  10:16 AM

USDJPY has reached 118.81, but CL is still dropping.  SPX should drop through the SMA10.  Next support is at ES 1874 and CL’s backtest of the purple channel bottom at 33.40. UPDATE:  10:22 AM

I’d switch back to long here at 1882.19, as CL just tagged our downside target and is bouncing.  Now, it has to push back above the falling SMAs — as does everything else.  SPX now faces the daily SMA10 at 1887.27 and plenty of overhead channel resistance. UPDATE:  10:27 AM

CL isn’t bouncing, and USDJPY seems fixated on the rising red TL.  I’m closing the long position and will revert to short.Apparently, the Saudis just denied the production cut rumors.  Oops.  If 1872.70 doesn’t hold, look for the white channel line and/or red IH&S neckline (yes, the same one again) to be tested at 1866-68.  Recall, this was our last downside target yesterday until the last second ramp job intervened.

Here’s your economic recovery in one snapshot.  The Fed succeeded in finally raising rates…at exactly the wrong time.

UPDATE:  10:36 AM

Closing the short here.  USDJPY is putting in a big bounce to either slow or reverse SPX’s fall.  Could be the bounce that lets the SMA5 10 — currently at 1880.62 — catch down with SPX.  If so, we should get another chance to short at 1885 or so.Note that ES might be backtesting the red TL it just broke and is likely targeting 1858 on an A-B-C move.

UPDATE:  10:45 AM

Might be a little early, but I’ll go back to short here at 1882.06.BTW, for anyone who’s curious, that purple line running through the chart that SPX just backtested?  It’s the bottom of the purple channel — aka the neckline for SPX’s big H&S Pattern targeting 1530.  Not good if they can’t push back above it.

UPDATE: 10:58 AM

Dumping the short here as CL is pushing back above the red TL.  Back to cash, though I’d resume the short if SPX reverses off the SMA10 at 1887.27 and CL gives up the red TL. USDJPY has channel bottom support just below (that it couldn’t quite reach, as it was causing SPX to fall.)UPDATE:  11:09 AM

That’s a lot more bounce than I expected.  CL is somehow back above the red TL.  From a chart standpoint, this looks like a good place to short SPX.  But, it’s back above a lot of overhead resistance.  And, DX looks like it’s bottomed out here.  So, tight stops are advised.  Might just be testing the daily SMA10 again. UPDATE:  11:50 AM

CL is getting a bounce off a SMA, so SPX is getting some support here.  USDJPY should dip down and tag that SMA200 at 118.54, but is holding back for now.  I’d go ahead and close the short here at 1881.29 as we’re likely to get a bounce into the 12:00 hour.  If CL breaks down below that SMA100 at 32.90 and USDJPY reverses off the purple channel bottom, I’d probably get back on board the short.  I still like the idea of ES 1858 on the measured move.UPDATE:  12:08 PM

Shorting again at 1884.91 as SPX just backtested its SMA5 10 & 20 and CL it’s SMA5 20 and USDJPY the purple channel bottom.  The target is wherever SPX first tags the white channel bottom.  It’s currently at 1870, but rising.  Getting there will probably require USDJPY dipping below 118.54, but maybe CL can get it done all by itself by declining to its SMA5 200 now at 32.44. UPDATE:  12:20 PM

It’s not happening.  I’m going to step aside here and let this little drama play out.  Back to cash.Just saw this on Zerohedge.  It’s the old “gee, the CL rumor didn’t work out so well and we can’t very well ramp USDJPY higher without BoJ action and we don’t dare let the index make new lows so let’s block all the shorts” trick.UPDATE:  1:28 PM

Triangle, anyone?UPDATE:  1:56 PM

More of the same.  Watch out for the false breakout or breakdown.  ES’ VWAP is 1883.22, or right about current prices.  As such, I might stay on the sideline for the remainder of the day unless something really interesting occurs.