ES spent 6 1/2 hours yesterday anguishing over the trend line/neckline we discussed.  When the Fed minutes came out, it even broke down a bit from the rising channel it had constructed overnight.  The breakdown seemed like it was sticking.  But, just after the close, WTI spiked and VIX dumped. That’s all it took to put ES back into bullish mode, prompting a 21-pt pop which fell apart overnight but is back in place as we approach the open. Meanwhile, VIX has constructed a little TL which could break down any minute and boost the algos if they should need help.  But, what if it holds?  (For the answer, see yesterday’s: This is a Test.)

Should be a very interesting day.

continued for members…

There are several Fed interviews from Jackson Hole still to digest — any of which could significantly affect sentiment.  For now, ES remains broken out above the neckline — a bullish sign until/unless it falls back below.

ES has been doing just well enough this morning to be technically in the clear.  But, it has been far from convincing.The purple TL just above was a potential neckline from June which, by not bouncing in early August, ES ignored.  Nevertheless it represents a TL of overhead resistance that has contained the market on 4 previous occasions.  So, we’ll keep an eye on it even as the red TL has been broken.If the rally continues, which it appears likely to do, we’ll have to assume the Aug 5 and Aug 15 lows served as the two downturns called for by the analog and that stocks will continue to melt up from here.

By dipping back into the broken red channel, VIX certainly supports this thesis.  A move back above it (16.40ish) would change things.CL, by regaining the yellow TL and testing its SMA200 again, also continues to support stocks — even if it is just marking time. Ditto for USDJPY — which is going nowhere but has, so far, avoided the apparent downturn to come. UPDATE:  10:15 AM

Between Manufacturing PMI slipping back into contraction territory for the first time since Sep 2009, Presidents George and Harker sounding very hawkish, another 2s10s inversion, and LEI data which doesn’t help support a rate cut, stocks are falling into negative territory.

VIX is testing the red channel top again……and ES is testing the red TL.  If it breaks down, then the red neckline is the next line of support at 2924ish.Note that DJI has tested and fallen back from its SMA100.

Meanwhile…Stay tuned…

UPDATE:  10:55 AM

Nice drop so far… The key will be whether or not VIX can remain above its SMA200.

UPDATE:  1:25 PM

The answer: no, it can’t (won’t.)  VIX has been hammered and CL is getting goosed — same as before. ES is back above its neckline, so (theoretically at least) back in bullish position. However, DJI hasn’t yet climbed back above its SMA100, so that’s a small consolation.

I have to run out for an appointment and won’t likely be back until around the close.  This is an exceptionally sketchy situation where stocks obviously want to crater, but keep getting propped up.  It raises lots of questions.  Who is doing the propping?  If the Fed, why?  so far, this is shaping up as the Fed not supporting Trump.  And, of course, what does this mean for our analog?

This is a 2014-style V-shaped recovery that can’t be trusted but also isn’t really safe to fade. If ES drops back through the neckline, I’d want to be short — especially if VIX ends up above the SMA200 again.  But, beware of the overnight risk or, better yet — don’t make any big overnight bets.

GLTA.