I hope everyone had a great Thanksgiving.  It should be a quiet day, today, with things continuing as discussed on Wednesday.  I’ll post a few big picture charts, and follow up with updates on EURUSD, DX and USDJPY.

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Here’s wishing all of our readers a safe and enjoyable Thanksgiving holiday.

Chalk today up as capitulation, holiday style.  Having gotten DJI up over 19,000 and SPX up over 2,000, CL has backed off its rumor-driven, equity driving rally.  It faces another inventory report this morning, this one from EIA.

USDJPY is rallying to compensate — with the US dollar putting in one of those ridiculous rallies that only a central planner could love.

But, today is all about the backtest we’ve been discussing.  DB is even contributing to the cause, tagging our downside target from Nov 15 [see: Deutsche Bank: All Better?] 

Re SPX, we remain short from 2204.01 with our downside targets unchanged.

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Wasn’t that amazing news regarding oil?  All that excess supply, sloshing around reservoirs, weighing down queued-up tankers clogging ports around the world — not a problem any more.  Our Peak Oil forecast?  Fuggedaboudit.

What?  You missed it?  Surely, you noticed equity prices melting up to new all-time highs on the back of spiking crude prices?  Anyone can see that.

The Nikkei 225 is up 13% in the 13 days since the US election (of a man who has pledged to dismantle the TPP) — even though the value of the yen has plunged 10% since election night lows and oil has spiked 16% in the past week or so.

You might be forgiven for wondering how all these machinations are so great for Japan, Japanese companies, and the Japanese people that they justify a 13% spike in equity prices.

When we talk about algos driving equity prices, that’s the rub.  Whether or not the OPEC deal comes together (I’m thinking not), the constant jawboning has driven equities higher anyway.  Long after oil plunges into the 30s, we’re looking at new all-time highs.

Like Uncle Seymour’s ill-advised political rant over Thanksgiving dinner, all-time highs can’t be taken back — no matter how unjustified they might be.

From a charting standpoint, new highs dramatically change things.  Though, it’s worth noting that they dramatically changed things in October 2007, too.

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It has taken a ramp job for the ages in both USDJPY and CL, but SPX came within 4 points of new highs on Friday.  With a low-volume holiday weekend coming up, and breathless, moment-to-moment updates on the amazing, colossal, stupendous impending OPEC deal, what could go wrong?

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The past few years have entailed many instances of markets “not making sense.”  The latest iteration I hear about a lot is stocks’ continued rise in the face of a Fed hike, a bond meltdown, political uncertainty and an EM currency crisis.

It’s important to understand that it has been years since stocks traded mostly on fundamentals.  At least, if not more important, are the yen carry trade, the oil-driven algos and other central bank interventions.

And, all this has occurred against a backdrop of aggressive corporate leveraging in a historically low interest rate environment in order to buy back stock and, thus, leverage what little growth in sales/cash flow most corporations have been able to muster.

With six weeks to go until year end, the market has a good strong whiff of the barn.  With TPTB giving it the whip, we shouldn’t be surprised that it’s seemingly picking up momentum.  The big question is whether we can get there without stumbling.

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The past few years have demonstrated how easily stock prices can be manipulated higher.  Whether by direct central bank buying as is practiced by the BoJ and SNB, or indirect actions such as the Fed’s timely interventions in VIX, traders no longer question it.  “Buy the f-ing dip” has gone from a humorous quip to a legitimate investment strategy.

Such was the case yesterday when, moments after the second strongly bearish inventory report in two days, the Russian energy minister announced that he sees “big chances” for OPEC to agree on an output deal.

Coupled with concerted buying in the futures market — an investment — CL broke out of the falling purple channel it’s been in since mid-October where it now sits atop the SMA100 and SMA200.

SPX, which was in the midst of a backtest of a falling channel that dates back to Brexit, popped out of the backtest and retested an important Fib level.  As seen here on the e-minis, the levitation has continued overnight on repeated rumors of an impending deal.Such is the nature of today’s “market” when, once again, traders must question whether or not prices will ever again be allowed to swing freely.

Now, it’s crunch time for the manipulators.  With the bond market melting down, and the US dollar hitting our breakout threshhold, it’s time to put up or shut up.

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Updated: Nov 16, 2016

In May of 2015, SPX completed a huge Butterfly Pattern set up by the 57% drop between 2007 and 2009. It helped us call an important top [see: The Last Big Butterfly] and made for some pretty profitable shorting opportunities.

Since then, as TPTB wrestled with a way to get SPX back above 2138, the Dow slowly worked its way higher. Just Monday, it came within 40 points of completing its own Butterfly Pattern for the same time period.

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Might this signal another important top?The daily picture shows a deep dedication to breaking above the 2015 highs and backtesting the falling channels established by the subsequent drop — whichever channel you happen to like.Forty points is nothing to the DJIA – a measly 0.2%. So, it would take very little effort to push it on through. However, as we’ve been discussing for the past several days, SPX is currently in need of a 1.5% retracement to backtest its broken white channel and, most likely, its SMA10.

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note to members: the above was originally added onto the DJIA page under the “markets” tab.  I thought it might be easier to follow the progression if it had its own post.

Monday’s Big Picture update was one of our most important posts in a while. It not only explains the past several months, but offers specific price targets going forward into next year. 

If you’re new to pebblewriter.com or have been away for a while, we’re offering a great way to get acquainted.  Auto-renewing monthly subscriptions are available for half off the first month.  For details and to sign up now…

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In May of 2015, SPX completed a huge Butterfly Pattern set up by the 57% drop between 2007 and 2009.  It helped us call an important top [see: The Last Big Butterfly] and made for some pretty profitable shorting opportunities.

Since then, as TPTB wrestled with a way to get SPX back above 2138, the Dow slowly worked its way higher.  Just Monday, it came within 40 points of completing its own Butterfly Pattern for the same time period.

Might this signal another important top?

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Thank God for the news cycle, eh DB?  With orange people and snowflakes and Italians hogging the spotlight, DB has slipped on a pair of dark shades and is mingling with all the other regular Joes which are rallying because… well, it doesn’t really matter, does it?

It’s a good thing, because after bouncing 42% since our bottom call on Sep 21 [see: Deutsche Bank: Will it Survive?], DB is clearly ahead of itself.  

It has broken out of the falling red channel and the rising red channel and has broken above its SMA200 — all good things.  But, it has also completed a Butterfly Pattern that should see it shed at least 7%, probably back to its SMA200 — currently at 15.62.

At some point, folks will start to wonder, again, how many trillions of unhedged FX exposure DB has.  Until that happens, this should be a corrective wave amidst an ongoing stock buyback operation rally.

If the SMA200 doesn’t hold, there is a gap to fill at 14.87 and a forlorn red channel to flesh out at 14.61 or 13.88.  But, I wouldn’t hold my breath.

ES’ levitation off its election night lows has drawn very little attention.  But, as we discussed yesterday, it was a stark reminder of the ability and willingness of the central planners to do “whatever it takes” to keep stocks on track.Frequently, though, these stick saves are more than was necessary, and they’re left with the question of how to back fill a rally without panicking the masses.  Such is the situation this week.

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