The idea of shorting the markets these days reminds me of the iconic scene in A Christmas Story where Flick is triple-dog-dared into touching his tongue to a frozen flagpole.  It sticks of course.

And, while not quite as painfuul as shooting your eye out with a Red Ryder carbine action two-hundred shot range model air rifle, it reinforced the notion that adages exist for a reason: to protect us from disaster.

Be careful what you ask for.  Look before you leap.  Beware the ides of March. They all pale in comparison to “don’t fight the tape.”  It’s an old expression that originates from the days of the ticker tape.  Put simply, it means you shouldn’t fight the prevailing trend.

These days, we might rephrase it “don’t fight the Fed.”  Sure, Neel Kashkari insists it’s not the Fed’s job to protect investors against losses.  Yet, given that maintaining extremely accommodative monetary policy does exactly that, it’s a rather disingenuous claim.

One of the easiest ways to witness this protection in action is to watch VIX and its influence on the algos that guide the markets these days.  VIX is once again on a precipice — off over 36% from its recent highs and clinging to the bottom of a channel that could easily break down if need be.  But, let’s not overlook the fact that two of the spectacular plunges over the past six weeks have been followed by even more spectacular spikes.  Could a third be right around the corner?  Or, is taking a long position in VIX inviting disaster?

continued for members…

As we’ve discussed, the dollar is acting quite weak.  While the BoJ could (and has) always “out-weak” the Fed, the USDJPY is having trouble getting out of its own way.Ignore all the channels and Fibs, and the dominant feature of the chart below is that USDJPY has failed to retake 115 seven times in the past year since the post-election ramp job.If VIX doesn’t plunge, and USDJPY can’t rally, this leaves CL and RB as the only reliable means of igniting the algos (well, aside from announcing that the tax plan is about to become law — which has worked pretty much every day for the past several weeks.

RB is back in the price range of December 2016, meaning the inflation influence should be rather muted.  The only thing keeping it under pressure is the cloud above and the pull from the SMA200 below.CL, on the other hand, has been propped up since Nov 22 and isn’t due to drop until the end of the year, when the influence will be muted in the low-volume holiday sessions.SPX and ES both have potentially significant overhead resistance coming up at 2703 and 2728 respectively.  This suggests to me that yesterday’s suggestion that a long VIX position at 9.33 might pay off nicely — even if it takes the rest of the year to play out.More later…