As CL continues to tread water, USDJPY is doing its best to pick up the slack.  But, investors know the yen carry trade is a mere shadow of its former self.

Kuroda’s most recent comments reveal the BoJ, like the ECB, has lost the ability to make us believe.  It is reduced, instead, to blatant currency manipulation.  Now, even that manipulation has become suspect.

Here’s the breakout which is supposed to have bulls jumping for joy.  Futures have responded by giving up 7 points from their overnight highs.  Why?

continued for members…

Simple.  CL is selling off again.

The bigger picture…And, DB’s channel has finally broken down.

This is all ES cares about, and why it’s given up its overnight ramp job gains and is clinging to its SMA20.

SPX, which had a clear shot at 2160, won’t reach it unless CL and DB can recover.  This probably means a backtest of the white channel .786 line at 2146 or purple channel midline at 2144.  And, as we discussed yesterday, the SMA100 (2143.48) was never properly backtested.  I’ll be watching to see whether CL can recover to the falling purple TL.

DX is nearing its .886 at 99.606, at which point USDJPY should run out of steam and CL will have to step up to the plate.

Last, keep an eye on VIX.  It’s breaking out again; but, it could be a repeat of Friday’s head fake.  12.46 still looks like a viable target.

Bonus chart: NKD, which is nearing its .886 at about the same pace as DX.

UPDATE:  9:54 AM

The initial drop has been mostly reversed, probably on a backtest with more to come.  But, CL is making noises about recovering, so it’s possible SPX will pull an ES-style recovery and rejoin the rising red channel.  Traders might be tempted to short here for 2143-2144; but, it’s only 5-6 points and, remember, SPX hates to sell off before 10AM.

UPDATE:  10:13 AM

Consumer confidence just came in at 98.6, well below the last reading of 103.5 and consensus of 1101.50.  Traders are trying to figure out whether this is “good” bad news or just plain old “bad” bad news.

Traders, this looks like an opportunity to short for 2144-2145.  It could even reach 2142.63 to close the recent gap as we discussed yesterday.  However, SPX is still above its SMA5 10 and SMA20, so it might not go anywhere.  If you play it, use reasonable stops.   SPX has fully backtested the red channel and is backing off as VIX seems ready to bounce and USDJPY is backtesting the former highs and DB has completed a backtest. 

UPADTE:  10:59 AM

Just about closed the gap, which might be as good as we get on the short.  Covering here at 2143.75.  I’m leery of going long just yet, as CL’s dip feels unfinished, and USDJPY is threatening to dip below the former highs.  And, VIX is in no-man’s land, with the .618 and SMA50 up there at 13.85ish.  In other words, we could get another leg down after the SMA5 10 catches down with SPX – probably around 2145.60.

Anyone remember this chart from yesterday afternoon?  Pretty accurate except for the timing.  Guess they needed to delay the white channel bottom tag so the SMA100 wouldn’t be busted so badly on the open.

UPDATE:  11:12 AM

CL has reached the white neckline again.  Now they have a great tool with which to nudge stocks as needed.  A dip below and you can force ES/SPX lower… a quick spike above and it’s off to the races.   It should be very helpful with our forecasts.

UPDATE:  12:17

There’s the actual gap close.  Back to long here at 2142 with tight stops.  Note that VIX just tagged that .618.And, USDJPY has backtested the white Flag Pattern.While CL has managed to stay above the neckline.   If it suddenly drops through, we’ll know there’s more downside ahead.

Last, NKD has reached TL support.

UPDATE:  12:55 PM

This certainly isn’t launching like it’s going to tag 2160 in the next 3 hours. The way it’s going, I’m thinking tomorrow morning.  I’m changing the white channel to purple, and drawing a new white one that has a well-formed top that intersects late today or tomorrow morning with a backtest of the broken red channel.  If this is the plan, it also carries a risk of another leg down to 2138ish.  So, use stops and keep a close eye on this one.  A drop back through the SMA100 at 2143.38 would be a pretty good sign — as would CL dropping through its neckline at 49.78.

A plunge by VIX to backtest the broken white TL would do the trick…

…as would a big bounce by USDJPY.

Note that ES’ .618 is down at 2133.37, which would correspond with SPX 2138.

UPDATE:  2:32 PM

CL is breaking down, so I’d revert to short here at 2145.54.

It did this twice earlier without dropping through the neckline, so there’s a possibility this is a head fake.  But, I’d rather be safe than sorry.

VIX, which has been staying ahead of its SMA5 100 all the way down from the .618 earlier, just popped back above it.  Heading for the SMA50 at 13.89?

UPDATE:  3:43 PM

Getting down to the last 15 minutes of trading, and SPX is still looking weak.  At this point, we have a decent chance of getting down to 2138 or even 2134.72.  Bulls getting no help from VIX or CL.

UPDATE:  3:49 PM

This is not a great looking channel, yet SPX is slipping lower as we head into the close. As much as I would like to see another reversal up at the channel  top, I’m becoming increasingly doubtful that it’ll make it up there tomorrow. Yet, a close at or near the SMA100 leaves it within striking range.  I’d recommend going to cash here unless you can hedge overnight or are comfortable with the gap risk.

 

 

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