Last week, ES and SPX broke out of a falling channel on a combination of Bullard’s and Kudlow’s jawboning and USDJPY’s breakout. This was followed up by some truthiness from Jay Powell and a failure of DXY to break out, which landed ES/SPX back in their falling channels at Friday’s close.
With a bullish IH&S Pattern completion 68 points higher and the SMA200 a mere 11 points lower, stocks are still at a crossroads. With dozens of central bankers in the US and abroad due to speak this week, traders will be parsing each word for signs of whether stocks can continue to rely on central bank support.
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DXY is tumbling again after backtesting the red TL.
CL, on the other hand, put the brakes on its backtest.
VIX has been pretty hard to read lately. It’s currently just above its SMA10, but barely. The white channel backtest on Friday suggests it’ll move lower. But, it’s sure being tentative about it, which makes me suspect there’s a reason — another leg lower, at least for COMP.
COMP still needs a SMA200 backtest. It continues to look like AAPL will lead it there.
If so, that could easily put SPX and ES back into their falling channels.
But, take a look at DJIA – which made an extra special effort to break back above its SMA10 and back into its rising white channel.
Piece it all together, and you get a bunch of conflicting signals — basically, back where we were on Wednesday, when the breakout looked okay but couldn’t hold.
I want to believe that, at the end of the day, the falling DXY will override the rest of the algo drivers. But, until SPX, ES and DJI drop back below their SMA10s, we have no confirmation of such. So, it’s best to be cautious with directional bets for the time being.
UPDATE: 10:20 AM
Decision time. ES, SPX and VIX are sitting right at their SMA10s.
UPDATE: 12:38 PM
COMP has reached its own crossroads, meaning things should at least take a breather or have reached a turning point. Note that VIX is nudging back above the little red TL. I believe this is a good time to try a short position, with a 4-6% drop across the board for equities by Wednesday or Thursday. As always, reasonable stops are strongly recommended.
