Baffled by soaring futures in the wake of an election which ushered in gridlock?  Don’t be.  As we witnessed after Brexit and the US election in 2016, algos were easily driven higher by VIX and USDJPY.  Last night was no exception.

USDJPY, which had dropped below its latest straw man TL, suddenly reversed and spiked higher exactly at the same time that ES dropped through its yellow channel midline.  Only after ES pushed through its SMA200 did USDJPY settle back down.Likewise, VIX dumped below its horizontal resistance just in time to ensure a big, green opening. Oil futures even got in on the action, just for good measure.  Following a very bearish API inventory report, CL spiked higher anyways.  The net result: ES is not only higher but is accelerating higher and will easily allow SPX to gap above its SMA200 on the open. With ES’ and SPX’s 2.24s and SMA200’s behind them, is the coast clear for equities?  Hardly.

continued for members…

For starters, we’ve been here before.  SPX spent May through most of October above the 2.24 and Mar 2016 through Oct 23 above its SMA200.  It didn’t stop the October plunge, right?

As we’ve discussed, VIX in and of itself has marginal downside support here. But, the SMA200 is just below at 16.03.UPDATE:  9:40 AM

Now that SPX has reached the top of its rising red channel, we can start looking for a backtest of its SMA200.It could easily be accommodated by CL’s drop down to 59.47. Even though gas prices are already low enough to support a low CPI number, a drop in CL would seal the deal and give CL a better point from which to bounce. If CL drops that far, RB should have no trouble reaching 1.6519 or 1.5915. Keep a close eye on it around 10:30 when EIA’s crude inventory report comes out.

COMP remains a ray of hope for patient bears.  With the falling wedge looking more like a falling channel, I’m tempted to push the .886 tag at 6801.97 out to around December 24 where it can intersect with the white channel midline and red TL backtest — more easily seen on the charts below.  If COMP should drop through the backtest (which I doubt will happen) its next support isn’t until 6221-6227, followed by 5702-5716.

If COMP pushes above its SMA200, then things get complicated.  We saw a great deal of nonsensical behavior in Feb and April when COMP came quite close to its SMA200 but couldn’t even manage a backtest — soaring 1000 or more points. UPDATE:  10:55 AM

Plenty bearish for both CL and RB, which are both making good progress toward our targets. BTW, as we move into the holiday season I want to let folks know about planned time off.  I expect to take the weeks of Nov 19-23 (Thanksgiving) and Dec 24-28 (Christmas) off.  There will probably be some additional days which I will announce as far in advance as possible.

UPDATE:  3:50 PM

Time for a reversal.  SPX has finally reached its .618……and ES is approaching its… …as VIX is nearing its SMA200.  USDJPY is still threatening higher……and CL/RB are seemingly stuck just above their next downside targets. Perhaps significantly, COMP is poking above its SMA200.The suggestion is that the downside case is off the table.  But, let’s see if COMP can maintain these levels.