The past two weeks has been a delicate balancing act between a declining USDJPY and rising CL.  Several times, TPTB have had the opportunity to break stocks out of the falling white channel from last November, but have passed — choosing instead to merely keep SPX in a relatively tight trading range.

Just yesterday, CL came within 0.45 of its SMA200.  Instead of dashing across the goal line, it punted — only to face an even closer call this morning.  And, like yesterday, USDJPY is rallying in the preopening hour, but without really making any serious headway. Will this be the fourth day of no follow-through, or are stocks actually ready to backtest a little?

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Given CL’s unwillingness to break out, and USDJPY’s meager rebound, we might actually be in for some downside.

I think the falling white channel is intended to get SPX down to the SMA200 over the next week or so.  At this point, it isn’t a great drop: about 30 points.  It would no doubt involve plenty of whipsawing and false breakouts/breakdowns.

I’d fade this morning’s modest ramp and go short at the open.  Our downside target, reachable today or tomorrow morning, is the purple .886 at 2028.48.

CL — within striking distance, but why no follow-through, especially as stocks were selling off the past two sessions?  The SMA200 at 41.10 is there for the taking.UPDATE:  10:17 AM

Getting some nice follow-through here.  SPX could get some support here at its neckline, but I expect it to drop through. The question was asked below about SPX dropping in spit of USDJPY ramping.  Three reasons:

1. the IMF just lowered global growth projections again
2. CL failed to reach its SMA200, turning tail instead
3. USDJPY ran out of room in the rising channel.

No one really expects USDJPY to break out.  This morning was about providing a little early morning support for stocks – but no follow through.  If it had pushed through the red channel top, it would have helped.UPDATE:  10:31 AM

CL just spiked higher, taking SPX along with.  Back to cash here until we see how far it goes. UPDATE:  10:33 AM

Someone really doesn’t want that H&S Pattern playing out!  CL shot up past its SMA200, and is trading back down to it now. SPX didn’t even reach the SMA50/200 nexus at 2049.56.  I’m going to try re-shorting here with tight stops. UPDATE:  10:45 AM

Bloomberg just reported an oil freeze (not cut) agreement between Russia and Saudi Arabia.   This might support CL for a bit, so I’d be cautious with our short position.  Could easily spike up to 2050.UPDATE:  10:55 AM

Stopped out of the short, as it pushed past 2050 and is making a bid to break out past the red TL.This is all algos, of course, as CL has just barely topped the SMA200 and is making no headway whatsoever.UPDATE:  11:05 AM

It’s pretty telling that CL, perched just above its SMA500, is helping SPX stay perched just above that red TL.  If CL goes, SPX will drop, too.  But, at least for now, it seems content to keep prices where they are. BTW, the agreement has been downgraded to a consensus (not an agreement?) and isn’t an announcement, but a (presumably reliable, this time) moment of candor by an unidentified, “informed diplomatic source.”

UPDATE:  11:33 AM

CL just reached the white channel top and .886.  I assume it’ll back off from this point, which should give SPX a chance to do the same.  Might be early, as the red TL is still a few points away, but I’d go back to short here. UPDATE:  12:55 PM

Do or die time for this breakout.  I expect they’ll try to push it at least a little beyond the red TL, and hold CL above 41.66 until after the close, at which point: (1) Saudi Arabia will deny that any deal was reached, or (2) traders will realize that a freeze does nothing to prop up oil prices since SA and Russia are already producing at record levels.In the meantime, USDJPY is also doing its best to support higher stock prices.UPDATE:  2:12 PM

Looks like that breakout is about to occur.  I’d move to the sidelines here and wait it out.  Definitely wouldn’t chase it, as CL is almost certain to drop back down after the close and this is very likely a head fake.  For those with more chutzpah than I, riding it out should be safe.  I don’t see this as new highs, but rather, a delaying of the decline until it can occur without breaking major trend.And, if, as I suspect, it closes on the channel top, I’d be short overnight if you’re able to hedge or watch it closely.

UPDATE:  3:20 PM

Should reverse here if my theory on today’s close and tomorrow’s decline is correct.  For those intending to hold short overnight, this should be a good entry.