Is it any surprise that CL and USDJPY have rallied sharply in response to yesterday’s mini-meltdown in stocks?  After ES and SPX both completed H&S Patterns that might have sent them down to backtest (horrors!) their SMA200s, CL is up 7.3% and USDJPY 1.3% off yesterday’s lows.

News or fundamentals?  Nope.  Just talk…aimed at averting a negative outcome for equities.  The BoJ is talking more QQE or even more negative rates since they’ve both been so successful (not!) in turning around the Japanese economy. And, oil?  What can I say?  If there’s a limit to this manipulation insanity, we haven’t found it yet.

Needless to say, equity futures are loving it.

continued for members…

ES was up as much as 18 points earlier, surging past and backtesting its SMA10.  Look for SPX to reach its SMA10 easily enough (2054.43) and potentially surge up to test a TL connecting recent tops at 2062.66.  It should react at the SMA10, but ultimately push past it.UPDATE:  9:33 AM

SPX just reached its SMA10.  We should get a reaction here, but it might not amount to much.  The way it’s worked lately, SPX hangs around resistance until the SMA10 arrives to support another push higher.  It then climbs the SMA10/20 for the remainder of the day, ignoring the obvious opportunities to reverse via well-timed CL and USDJPY spurts.  SPX could push on up to the white .886 at 2063.51 right away; but, if it waits until the close, it can break the red TL connecting the previous highs.  I wouldn’t be surprised if it breaks Wednesday’s highs (2067.33) just for good measure.

UPDATE:  11:35 AM

Getting a backtest of the SMA5 200 here.  Odds are it’ll leak just a little lower to backtest the falling white channel top (2048.50ish) – something it tried and failed to do yesterday without the support of USDJPY and CL.  It could also dip down to the SMA5 100 at 2047.70. Note that ES has traced out a pretty well formed rising channel with the SMA5 200 as its bottom.UPDATE:  11:51 AM

This is about as low as I can see it going without risking the trend.  CL has backtested the gray channel midline and USDJPY the bottom of the rising white channel.  Back to long. CL could head down to the .500 Fib at 38.87, which would mean SPX at least tests its SMA20 and closes this morning’s gap (2042.85.)  So, watch to make sure CL holds 39.31.The test should come at 2051.38, where SPX runs into the SMA5 200 it just broke below.

UPDATE:  12:18 PM

Looking a little dicey here at the white channel top.  SPX is threatening to drop down to the red channel or SMA20 for a backtest.  I would duck into cash on any sustained drop through the SMA5 100 at 2047.46.USDJPY and CL are holding on, but certainly not rebounding with any kind of vigor. UPDATE:  12:27 PM

Shorting here for the drop. I expect it’ll stop when ES reaches 2037.50, about the top of the red channel for SPX at 2044.75ish.  But, with the SMA20 at 2042.36, we can’t discount the possibility.  I’d go back to long in a jiffy if CL and USDJPY make up their minds and do something.UPDATE:  1:58 PM

ES is getting a boost from VIX and NKD, so presumably it’s dropped as far as it’s going to.  I’d dump the short position here, though I suspect it’s a head fake.  If it reverses at the SMA5 200 and drops back through the purple channel bottom, I’d be happy to short once again.Just checked, and VWAP for ES is 2046.21, about 2.50 above current prices. That would put it around 2053.20 for SPX.

CL and USDJPY are both going nowhere, so it pretty much meets the sniff test.  That being the case, it’ll probably go sideways for the next two hours.

Since I’m off my game anyway today, I’m going to take a break, walk around the block and take a look with fresh eyes. UPDATE:  3:14 PM

SPX just closed the gap and ES just tagged its neckline.  Should get a bounce here.  I’d try a long position with relatively tight stops.The daily SMA20 is 0.43 lower, and that would make for a modestly cleaner backtest of the broken red channel.UPDATE:  3:36 PM

Full backtest and SMA20, both.  If it goes any lower, it’s just MMs screwing with you, in which case it’s a good time to go to cash for the weekend.  Note CL’s perched very comfortably above the MAs and channel line.  No reason for it to come down unless it’s trying to induce selling — which would typically be a trap coming on a Friday afternoon like this. USDJPY is already doing it, but so far stocks have ignored…UPDATE:  3:59 PM

Done for the day.