OPEX Friday: May 20, 2016

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Another OPEX Friday, another overnight ramp job. CL has dropped back down, but not too far, in order to position itself for another pop.continued for members…

USDJPY has just plain ramped — but to overhead resistance.And, ES has popped just high enough over TL resistance to have clear sailing to the next resistance — if that’s the plan. The 5-min chart shows Fib and TL (purple) resistance for SPX at 2047. If it pops through there, the .786 at 2053.18 should offer resistance. Depending on when it happens, it might even line up with the falling white channel .786 line. This will obviously take it through the white necklien (yellow arrow) again, meaning the confirmed H&S Pattern is “in remission.”

The bigger picture for CL, USDJPY and ES…

If it pops through the red SMA5 200 at 48.94ish, CL’s target might be this purple TL currently at 49.18.UPDATE: 9:43 AM

There’s the purple TL tag for SPX. Odds are it’ll at least pause for the MAs to catch up. Ideally, a 4-5 point drop. Move to the sidelines or ride it out.UPDATE: 9:53 AM

CL is reversing, and USDJPY reached that .618 at 110.45, so I think we’re looking at the gray .618 here as a reversal, at least back to the purple TL. Shorting here, but with extremely tight stops. Existing home sales come out at 10 EDT. UPDATE: 10:02 AM

Existing home sales was on the mark, 5.45 versus last month’s 5.33. It won’t help get folks’ minds off a June rate hike. But, it doesn’t matter much, as SPX is going to sit atop the purple TL until the SMA5 10 arrives at which point it’ll probably melt up some more. I’d close the short here and sit in cash for the time being. CL has sold off to TL support-ish……but USDJPY is popping just enough to compensate. It has now reached the midline of its rising white channel again, with the .786 just above at 110.523.

Maybe it’ll take a rest and let CL carry the water for a while. Funny that it’s up .50% on a day when Aso said there’d be no more currency games.UPDATE: 10:14 AM

ES just reached 2054 — probably close enough for those playing the eminis. SPX just reached the red .886, USDJPY the purple .786. I’d ordinarily short here, but I think cash makes more sense.

The SMA5 20 is almost to the purple TL, so the gain would only be 5-6 points if it makes it that far. Could be it finds support at the white channel line at 2053.50ish with the approaching SMA5 10.

Besides, I was watching very carefully for a sign of reversal, and USDJPY literally just gapped above the .786. So glad they’re not playing currency games anymore! If you short here, watch your stops.

UPDATE: 10:42 AM

Looks like cash was the right call… Note that CL has broken down through that white TL, same as yesterday. If they need to reverse SPX’s tiny fall, here, it might pop back up through it and whoot for the purple TL now at 49.16. It’d be a good trade for anyone who enjoys playing CL. Just wait for the breakout to confirm first — no need to anticipate it, as SPX is doing fine so far all by itself. With USDJPY reversing here, we could get another small dip down to the purple TL. UPDATE: 11:20 AM

Looks like CL is playing out as expected, right as the SMA5 20 comes along. Should be safe to go long again using tight trailing stops.

Next resistance for SPX is the SMA50 at 2059.29, followed by the gray .786 and channel top at 2062.04. If it pops through there, then 2066.64 — the gray .886 and SMA20.

Note that CL will run into TL and SMA5 200 resistance at 48.9 — could correspond with one of the above resistance levels for SPX.

Because I truly loath following along when SPX is melting up like this, I’m going to sign off for a bit and work on the bigger picture, maybe update a few other charts. In general, you’re safe with stops a few points below current prices.

Quite often, the rising SMA5 20 is a pretty good level — though we can expect a dip or two slightly below it. Watch CL and USDJPY to see if they’re plunging before dumping or shorting.

Be back in an hour or so.

UPDATE: 1:05 PM

Sorry that took longer than expected. For anyone still long SPX, you’re back to even on the last long position. USDJPY has support here, but CL is dumping. It’ll probably bounce on the upcoming SMA5 50 at 2053, but there’s also nothing wrong with exiting here and getting on with your weekend. And, if it drops through the SMA5 50, then the SMA5 200 at 2044 might be in the cards.

Okay, here’s what I’ve been working on. I start with the weekly chart, showing the huge white channel whose midline we just tagged last year and the rising red channel that’s guided us from 2009. The falling purple channel is a contrivance, but it seems to fit pretty well. SPX reversed just 4 points shy of its 1.618 extension last May. Afterwards, it backtested the 1.272. Big whoop. In an unrigged market, it would have backtested at least the previous high at 1576, the .886 at 1472 or the .786 at 1381.50.

That’s not to say it won’t. If you look out past the next year or two, it could backtest the falling purple channel top and reach any of those levels. Of course, it first has to breach 1823. It’s tried to four times, getting strong support each time.

Note that yesterday’s strong bounce came as SPX backtested the broken yellow channel below. I had thought we’d get a backest of the falling white purple channel .786 line, but no such luck. It confirms the importance to TPTB of remaining above the yellow channel top. But, it doesn’t guarantee higher prices from here on. The channel is falling, after all. So, another backtest could occur at lower prices next week or later.

I’ll play around with this more over the weekend, but wanted to share it now. The falling white channel we’ve been in since mid-April has obviously had a very bearish tone to it. And, all the recent talk about rate hikes has contributed to that.

If they actually pull the trigger in June (I don’t expect them to) then we could see some of these downside targets play out. Otherwise, I rather expect the yellow channel top to hold, and the losses to be limited.

UPDATE: 1:26 PM

Remember, a drop through the SMA50 is a good shorting opportunity. I’d go ahead and take a crack here, with tight stops in case CL suddenly spikes. I think we’re heading for 2049, but it could drop a little further to the SMA5 100/200 at 2044.50ish.Here’s the ES version:UPDATE: 1:57 PM

ES has reached the bottom of its white channel. Could drop to the SMA5 200 at 2046 if they want a decent SPX backtest. Bottom of its channel now at 2047.35 — the red .618. Just need CL to drop through the red TL and/or USDJPY to drop through the SMA50.

If ES’ channel broke down, and it dropped through and backtested the falling purple TL, then SPX could reach its SMA5 200 at 2044.63. But, that’s probably just wishful thinking. UPDATE: 2:28 PM

Well, USDJPY isn’t willing to go below its SMA50, and CL isn’t willing to break below the purple channel line. So, it’s back to cash here as SPX is likely to pop up through the SMA5 50 again. Will it melt up into the close to the top of the white channel at 2061? Probably. Pretty much depends on whether or not CL can put in another leg down.

Gotta admit, with CL on the backtest, there’s a good chance it’ll fade into the close. Let’s watch what it does up here at 43.40ish.

UPDATE: 2:39 PM

CL dropping, maybe enough to get SPX back through the channel top. Back to short here.UPDATE: 2:58 PM

Bad sign for it to melt down into 3pm. Back to short here just in case it gains some momentum. If so, we could pick up 8-10 points to the SMA5 200. Feel free to ignore this one, as they’re just as likely to hold it at the red channel bottom – a few points.UPDATE: 3:12 PM

The channel was broken, but it looks like the SMA5 100 is going to hold, thanks to CL’s timely rally. Back to cash for the duration, though I suspect this is a headfake that’ll end with SPX closing at the SMA5 200 at 2044.63. UPDATE: 3:50 PM