Today, we get a chance to find out whether or not our analog from several months ago is still on track.  It’s shaping up nicely so far, with USDJPY and CL both coming down off their recent highs and the futures sitting just barely in the green.

Analogs are funny things.  Since we first announced this one on Aug 3, it has taken lots of twists and turns.  I abandoned it twice, only to realize it had merely shifted due to some of the exogenous events along the way.

But, overall, it has provided great insight as to what to expect, even as the trading environment continues to be very difficult.

continued for members…

It remains a little confusing, as the timing has been slightly off a couple of times.  If we make a new low as expected today, it will go a long way towards establishing the correct timeline.  We remain short from Friday.

For new subscribers, here are some of the major updates along the way.

• https://pebblewriter.com/a-new-analog-aug-3-2016/
• https://pebblewriter.com/the-big-picture-aug-19-2016/
• https://pebblewriter.com/update-on-analog-sep-6-2016/
• https://pebblewriter.com/what-to-expect/
• https://pebblewriter.com/the-big-picture-oct-26-2016/
• https://pebblewriter.com/the-big-picture-nov-14-2016/
• https://pebblewriter.com/analog-update-nov-21-2016/
• https://pebblewriter.com/analog-update-dec-9-2016/

Recall that we have two general target areas: a backtest of the rising purple channel around 2243 or the rising white channel at 2210ish.

The equivalent Day 115 in 2007 opened slightly higher from the previous session, dropped 9 points intraday, and closed positive.  So, my hope today is we’ll have a nice drop to complete the drop that began last week and which sets up a buying opportunity for the rest of the year.

CL appears to be rolling over.

And, USDJPY is, for now, backtesting the little white channel it broke out of last week — only to hit major channel midline resistance.

VIX continues to throw roadblocks in our way, with a series of thrusts lower overnight.

UPDATE:  10:15 AM

After getting hammered in the opening minute, VIX has continued lower — losing about 4% since its overnight highs.  It was enough to get SPX up over its SMA5 200, where it continues to linger.  The SMA5 10 has arrived, so this is a key moment in determining whether any downside will be allowed to proceed.  VIX appears to have TL support here, and USDJPY appears likely to drop to the SMA10 at 115.759, so it’ll be up to CL to rebound if they intend to peg SPX at this level.

UPDATE:  10:45 AM

It appears that VIX will continue to dominate today.  It has dropped through TL support, off 4.8% from last night’s highs.SPX has popped up to channel resistance, and should drop back to at least the SMA5 200 for the SMA5 20’s arrival in a few minutes (2262.40ish.)  Depending on what happens then/there, it’s likely time to concede the battle for any downside today and get on board for the year-end melt-up.

UPDATE:  11:02 AM

USDJPY and CL are losing ground, but NYSE just broke and VIX is plumbing new lows.  It’s time to pull the plug.

If it reverses right here, I’ll take it back.  But, for now, it appears they’re not going to allow any downside today.

UPDATE:  11:12 AM

We’re getting a hint of a reversal here.  I’ll try to short position, only because VIX finally poked above its SMA5 10 and CL and USDJPY continue to roll over.  I’d put the odds of this working out as very low.  But, if it’s going to work out, this is pretty much the last chance.

UPDATE:  11:25 AM

So far so good, but the SMA5 200 is coming up.  Watch your stops.

UPDATE:  11:42 AM

This is where it should bounce if it’s going to.  Watch your stops.

UPDATE:  12:16 PM

Even though the yen continues to strengthen, VIX just dipped back below that white TL of support (resistance again.)  I’d revert to long if it pushes above the SMA5 20 — currently around 2263.45.

To make matters worse for bears, CL is in the midst of its third attempt to ramp higher.  Together with VIX, it has managed to get SPX back above the SMA5 200 and its SMA5 10 — suggesting a melt up for the remainder of the day.

UPDATE:  12:35 PM

Breached the SMA5 20 at 2263.45.  Back to long for all the reasons mentioned above.  I’d be happy to re-short if it drops through the SMA5 200 (currently 2263.36) again.  But, I’m not holding my breath.  It  seems pretty clear that someone with plenty enough capital behind them has been given the green light to hammer VIX as much as necessary to keep stocks from declining.  Until that changes, or something more impactful in CL or USDJPY occurs, the meltup should continue.

Given the circumstances, I’m going to take the rest of the day off.  Again, I’d short on any drop through the SMA5 200 — now at 2262.53.  It’s possible we’ll still get that purple channel backtest later in the day or tomorrow when it’s closer to the SMA10.

The comment arose below as to what a failure to decline what portend for the analog.  Simply put, a failure to decline would bolster the upside case.  It would leave our upside targets intact, but imply that a significant, interim decline between now and the end of the year is less likely.

If, by some miracle, we get that decline today (there are still 2 1/2 hours) I would plan on covering at 2243 and go long.  If it drops through 2243, I’d stay short for 2210.  But, again, it’s not looking very positive at this point.  If it’s going to happen, it had better be soon.

UPDATE:  2:58 PM

Back below the SMA5 200.  Back to short for anyone who’s not thoroughly tired of being whipsawed.

 

 

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A reminder… I’ll be out most of this week.