The algos are still in charge this morning, on pins and needles over VIX, currently threatening to drop through its SMA200.Meanwhile, CL and RB are taking care of their backtests ahead of the open, leaving ES/SPX perfectly positioned for its next knee-jerk move.

continued for members…Note that SPX’s upside target encompasses both the SMA200 of 2741 and the A=C target of 2732.  For the bears, I think it’s very important that it reverse between here and there.I find it very interesting that SPX’s A=C target lines up pretty closely with ES’ 2.24 Fib at 2728.79. It lends credence to the SPX 2732.47 target.Believe it or not, the dollar continues to angle higher as EURUSD is still resisting/delaying its SMA200 tag.

The 10Y is bumping a little higher, also supportive of the USD.  I continue to favor a swift drop to 2.498 and, potentially, 2.172.ZN should be a good indicator to watch.The 2s10s has bumped back up to .18 — the sideways move we’ve been talking about which — like EURUSD — should buy bulls some time.The big picture and closeup on oil and gas…  We’ll take a stab at another, less steep rising channel based on the recent lows.  It seems a good fit, and suggests a tag of the yellow .382 and SMA100 at 59.38 in the next few days.

A quick spike of that magnitude, along with a dip below its SMA200 by VIX, would easily produce a 30-point SPX rally.  A dip below the SMA10 at 53.25 would obviously open the door to a SMA20 or SMA50 backtest or lower. The shaded rectangle represents CL’s price range for Feb 2018 — a good approximation of flat oil and gas prices and therefore inflation.RB’s daily chart reveals a very interesting candle for today — a shooting star which pushes briefly above the yellow channel bottom before retreating.  Note that it slightly exceeded our 1.47 target, which represented a nice opening for a short to at least backtest the gaggle of SMAs at 1.39-1.40.

If it can hold 1.427, it has potential up to 1.56-1.59 and the yellow channel midline.  If not, look for a test of those SMAs followed by the channel bottom around 1.35.  If that breaks down, it opens up the potential for new lows around the white .786 which was never tagged in December.And, I think it’s worth keeping an eye on DJI, which pushed above its SMA200/100 on Friday but is (at least) backtesting it this morning.  A drop through it would be a sign that the rally might be done without having reached our upside targets.  While DJI has given the (potentially a headfake) all-clear, COMP is just now pushing above its SMA100.  A quick trip to and reversal at the SMA200 would be a fitting end to the rally of the past 5 weeks.

This is probably not the best time in the world to make big, bold bets.  Watching VIX, oil and USDJPY should tell us what to expect and when to commit.

Bottom line, VIX is still calling the shots.  A dip below 16.55 and we can be fairly certain that the highs aren’t in yet.  A bump up through 16.55 and we can expect the party to get started.

Either way, I believe we are on the cusp of a substantial move — either a breakout of the nonsensical rally the bulls has been able to engineer thus far…or its failure and new lows. My gut tells me we’ll be down to 2138 by May, if not sooner.  But, we’ve certainly seen many, many instances of patterns that were scuttled by algos wielded by TPTB.

As an aside, even Cramer this morning was talking about how oil prices seem to be pushing the algos around.  After writing about this phenomenon for several years, it’s odd to finally see the mainstream financial press acknowledge it.

More later.