pebblewriter

The Waiting Game

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As we discussed yesterday, this week is shaping up as a waiting game.

Given the propping up that’s going on, I’m going to assume that the ECB triangle has already begun.  Any sizable moves will likely come in the opening hour (or even minutes) and the rest of the days will be about backfilling and testing the top/bottom of a narrowing triangle with apex on Thursday.

We certainly saw this over the last 24 hours, when USDJPY and CL conspired to keep SPX from declining during trading hours (dark blue), and the reset occurred overnight (lighter blue.)2015-10-20-ES 15 0615Last night, however, there was an important twist involving USDJPY.

continued for members…

USDJPY broke out of the falling red channel it’s been in since Aug 11.2015-10-20-USDJPY 15 0615It was an ugly channel, and I was surprised over and again how it held together.  But, it put a lid on rallies for over two months — a pretty impressive feat.2015-10-20-USDJPY daily 0615

So, it shouldn’t be too hard to reverse this morning’s dip.  SPX has reached the TL that propped it up yesterday, so we should get a nice bounce here at 2027.78.

But, I suspect the SMA200 (5-min) or the red channel bottom will come into play later today.  Ideally, the previous high at 2020.86 would be (back)tested.2015-10-20 SPX 5 06382015-10-20 USDJPY 5 0638 Note that CL has technically lost the support of the rising purple channel — worth keeping an eye on. 2015-10-20 CL daily 0635UPDATE:  9:55  AM

USDJPY is testing the top of its triangle.  I’d try a short position here at 2032.93 and see if it can reverse to at least 2025.  Tight stops are advised.

2015-10-20 SPX 5 0655 2015-10-20 USDJPY 5 0651UPDATE:  10:00 AM

About 60 seconds after that last post, this happened to VIX:2015-10-20 VIX 1 0700 And, CL just shot up to the broken channel bottom:2015-10-20 CL 5 0700

Bottom line, this puts a damper on the downside case. TPTB want a higher high and won’t stop until they get one.  I’ll close the short position here at 2032.50 and revert to long until USDJPY and/or CL actually reverses.  Best estimate at this time is this morning’s original upside target of 2036.66.

UPDATE:  10:45 AM

SPX shot through the 1.272 and is closing in on the SMA100 at 2040.05.  Note that ES will reach its SMA100 first (2031.64).  So, SPX might well stop short of its (2040.05.)2015-10-20 SPX 5 0745Keep an eye on VIX, which continues to flit all over the map.2015-10-20 VIX 1 0749UPDATE:  10:53 AM

ES has tagged its SMA100, so this might be as high as SPX gets for now.  I’d take profits on our long position here at 2038.55 — even though we might be a bit early.

2015-10-20 SPX 5 0752Note that even though USDJPY has pushed through the top of the little triangle we’ve been watching, it is fast approaching the bottom of the Pennant Pattern that broke down last week.  This should offer some resistance.2015-10-20 USDJPY 5 0749And, VIX has popped back above and backtested the red TL.2015-10-20 VIX 1 0755If SPX reverses, the initial downside target is a backtest of the red channel top at around 2031 — perhaps as the SMA200 crosses it at around 2030ish.

UPDATE:  11:11 AM

Depending on how fast it reverses, there are lots of backtest options.  A couple are shown here, along with an alternative rising purple channel based upon the recent lows.2015-10-20 SPX 5 0811UPDATE:  11:15 AM

If the purple channel is legit, we could see a reversal here, a little higher than our white target.  Judging from how USDJPY and VIX are acting, I’d take profits here from the short and see how things develop.

2015-10-20 SPX 5 0813Note, also, that ES has reached its moving average support.2015-10-20 ES 5 0815 I wouldn’t necessarily go long at this time, as USDJPY has that Pennant bottom just above current levels.  And, I think pushing back into it is being saved for something bigger.2015-10-20 USDJPY 5 0815We’ve have a decent enough run this morning, and the next few hours is likely to be the usual series of head fakes and false alarms.  I’m perfectly content to sit in cash until we have a clearer indication.

If you can’t resist the temptation to buy this dip, at least use tight, trailing stops to protect yourself.

UPDATE:  11:55 AM

Coming up on the purple channel bottom (2029.68) with the SMA200 just below at 2028.61. Looks like either will do as a bottom, with CL, VIX and USDJPY leading the way.2015-10-20 SPX 5 08552015-10-20 VIX 5 0855 2015-10-20 USDJPY 5 0855 2015-10-20 CL 5 0855UPDATE:  12:28 PM

SPX just reached bottom of purple channel and the 5-min SMA200.  Could go long here, but I’m wary of a double dip to the SMA200.2015-10-20 SPX 5 0925The five previous tags of this line weren’t preceded by a SMA100 tag.  And, note that the 5-min SMA10 has stopped every bounce since this morning’s high.

UPDATE:  12:41 PM

Here’s the SMA200 tag, along with a slightly altered purple channel.  I’d try a long position here at 2029.05, but with tight stops in case it’s a head fake.

2015-10-20 SPX 5 0940USDJPY has found moving average support, but is still below the broken TL.2015-10-20 USDJPY 5 0940And, VIX appears to be interested in at least backtesting the broken white TL.2015-10-20 VIX 5 0940UPDATE:  1:26 PM

Would ditch the long position below the purple channel bottom here at 2029.36.  Next support is the purple channel midline at around 2024.2015-10-20 SPX 5 1026UPDATE:  1:32 PM

ES getting support here.  Could be enough to turn SPX around.  Back to long, with very tight stops.  SPX has completed a little H&S that targets 2017.64 and our downside targets from this morning are as legit as they ever were.2015-10-20 SPX 5 1032 2015-10-20 ES 5 1032CL just now waking up, but has better support at 45.82.2015-10-20 CL 5 1035USDJPY not showing any particular weakness.  It dropped below the solid white TL, but has been climbing back on the underside with SMAs. 2015-10-20 USDJPY 5 1037 SPX is a bit confused at present.

UPDATE:  1:45 PM

ES just broke that TL, so it’s back to short here.  Tight stops, of course, as this could easily be a head fake.2015-10-20 SPX 5 1045UPDATE:  1:55 PM

Conflicting signals here from USDJPY, CL and VIX.  Going to cash while they fight it out.  It would appear that SPX is headed lower; but, the frequent 2-3 point pops and the fact that VIX has broken the rising TL have left me feeling quite unsure of when/where.

Remember, also, that while ES tagged its SMA100, SPX didn’t quite get there.  So, a rally to 2040.50 late in the session or first thing tomorrow is entirely possible.2015-10-20 VIX 5 1054 2015-10-20 SPX 5 10542015-10-20 CL 5 1054UPDATE:  2:35 PM

Still no clarity.  USDJPY is losing some momentum, seeking support at SMA50…2015-10-20 USDJPY 5 1138…while VIX just plunged below the supportive white TL. 2015-10-20 VIX 5 1131SPX is going sideways.

UPDATE:  2:52 PM

Looks like a melt-up into the close.  I’ll go long here and see if there’s any momentum left.  2015-10-20 SPX 5 1152Tight stops, as VIX might find support at the SMA100.2015-10-20 VIX 5 1152UPDATE:  3:50 PM

SPX can’t get out of its own way, at least for now.  Back to cash for the night.  The potential H&S Pattern (targeting 2013) is hard to miss. But, then again, it’s hard to read too much into it with the amount of propping up going on.  A gap up to 2040.05 in the morning would surprise nobody.2015-10-20 SPX 5 1249The others we’ve been watching…2015-10-20 ES 5 1249 2015-10-20 USDJPY 5 1249 2015-10-20 VIX 5 1249More later.

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