Sometimes, markets can’t seem to get out of their own way.  They manage to make modest new highs, but on poor breadth or without breaking through resistance.  Like many investors, this sets my spidey senses to tingling.

Most of the time, the markets grind higher anyway.  But, once in a while, the warning signs were right on the money.  That’s where we are today.

Thanks to FB’s meaningless stock buyback plan expansion announced Wednesday, the stock popped back above its H&S neckline and even its SMA200 (by 22 cents, go figure.) SPX was obliged to surpass its own IH&S neckline — bullish, by any measure.  But, it stopped just short of its SMA10.

AMZN, which dutifully bounced at our most docile downside target on Wednesday, had a clear path lower.  But, after hours, it announced bang-up earnings — which sent the stock to new all-time highs overnight.  Bullish, right?

So, how come S&P futures are flat as can be, and failed to push through their SMA10?  At this rate, FB won’t even break out of its falling channel.

Occam’s Razor says that when presented with two explanations for something puzzling, the simpler one is usually right.  Translated to investing, since 2009 at least: when presented with faltering markets, buy the effin’ dip.

But, Occam died in 1347, a couple of years before algorithmic trading took over the financial markets.  Pebble’s Precept says that markets sometimes move in a way that will screw over the most people (admittedly, it’s somewhat cynical…)

What gives?  Is there a reason to be nervous?

continued for members…

Both SPX and ES came up a couple points short of their SMA200s (about 2.3% away, now) the other day.  But, the market has ignored such things many times in the past.

Both have technically broken out of the channels established over the past two weeks, but haven’t launched yet.

Likewise, DJI (2.6% away from its SMA200) is just sitting at its channel top — nothing but blue sky above it if it can pop through the cluster of moving averages.So, I’m still looking at COMP as the problem.  It’s nearly 5% away from its SMA200, and the gap won’t get any smaller if it keeps gapping higher.

Even VIX hasn’t really let go.  Sure, it threatened a deep plunge.  But, it’s hanging in there in a rising channel.Okay, besides my COMP hunch, is there anything else really troubling?  Yes!

ZN bottomed at the yellow channel bottom yesterday, and has a lot room to rally — meaning rates have most likely topped out and are about to plunge.  As mentioned the past two days, GC has good support here and DXY (prematurely) reached overhead channel resistance.  EURUSD even reached strong channel support and has plenty of upside potential to our 1.2597 target. Put it all together, and it looks like a sharp plunge is dead ahead.  If it’s 5%, like COMP’s SMA200, then that puts SPX at 2540 — a very playable short with simple stops.

Besides the warning shot from VIX, RB and CL have steadfastly refused to crack — even in light of bearish data this past week from both API and EIA. So, what’s the hold up?  Maybe TPTB are trying to get through the end of the month without more damage (the old adage: sell in May…)  Maybe OPEC is throwing too much money at trying to drive oil prices higher.   Maybe a lot of things.  I don’t really know.

But, the longer we hang here without breaking out, the more nervous I get about the market’s ability to break out.

UPDATE:  10:50 AM

COMP is making nice progress — currently off 23.  What if it drops through its SMA200 to real support like the C=A target and channel line at 6488 — an 8.7% drop?

That actually fits pretty nicely with SPX 2450-2460 and DJI 22544.  Our timing remains focused on May 8th or so.  But, that sharp a drop often comes faster than expected.Stay tuned.

 

UPDATE: EOD

Pretty weak close.  ES was off 3.25, while SPX was up 2.97.  Importantly, both made an effort to close below their SMA10s — so either a headfake or more downside to come next week.  I believe it’s the latter.

Taking a look around — I see that Amazon gave up much of its gains……AAPL is inching still lower, with multiple downside targets that make sense and earnings due next Tuesday. FB is back below its SMA200…… and GOOGL closed below its SMA200 again.  It argues for either a modest sell-off or something pretty darned scary (if the H&S pays off.)

As discussed in today’s Update on Bonds, bond prices have probably bottomed, and interest rates have probably topped.  This is a fine setup for lower equity prices.

VIX could go either way — with clear paths by May 2 (next Wedneday) to break out or break down.