After collecting 64 points on last week’s short and 39 points on yesterday’s bounce, the past week has delivered over 5%.  I was gradually getting more comfortable with our swing positions, and yesterday felt a lot like many past melt-ups that barely paused — let alone corrected on their ascent.

But, a little voice in the back of my head kept whispering “backtest.”  Seeing that S&P 500 futures are off over 17 points, I’m glad I listened yesterday afternoon and booked profits from our long at 2120 rather than holding overnight.

This is exactly the sort of overnight move that has made swing trading so difficult.  Big gains during the day often mean gaps down overnight.  And, vice versa.  It’s a by-product of the constant manipulation of currencies and futures which has expanded over the past 5 years.

continued for members…

I was up most of the night with an awful headache, so am just going to post my thoughts for the day and then crawl back into bed.

Brainard’s comments should have sent the dollar spiraling lower as it did futures. But, it’s back above the resistance zone at the moment in order to prop up stocks.

This, of course, has also propped up USDJPY.

And, CL, which should be tanking on the latest EIA report is holding at a backtest of the falling red channel.  Will we get another intraday ramp in order to prop up stocks?  Probably.

VIX is toggling between a bounce and a breakdown after closing yesterday’s gap at the larger falling white channel midline and smaller falling white channel .786 line.  24.04 appears to be a reasonable target if it gets going again.

ES looks to be zeroing in on a backtest of 2127…… though I wouldn’t be surprised if there’s a bounce in the correction before the open that allows SPX to limit its losses to 2150 — a 9 point loss from yesterday’s close vs. the 17+ point loss that ES suggests.

If not, then that 2127 tag should allow SPX to backtest 2134 — which it should have done yesterday.

Other charts worth watching: NKD and EURUSD.

Bottom line, look for SPX to backtest 2134 (unless we get a ramp in the next 30 minutes that limits it to 2151.)  At that point, SPX needs to bounce in order to keep the bull case alive.  It should, even if it means pushing USDJPY and CL higher.  If not, it would be better to stay on the sidelines.

I’ll check back in later.

UPDATE: 2:00 PM

Apparently 2am in Tokyo is the perfect time to release a story in the Nikkei Asian Review that the BoJ might push negative rates even lower.  It is, if the NKD futures are about to drop through the SMA100.

It sent the USDJPY spiking out of its falling channel…

…which saved the NKD…

…with the side benefit of saving the USD…

…all of which saved the SPX.

You can’t make this stuff up.  Er…I guess you can.

No question about it, this is an ugly development for the bulls.  To drop back through the 2015 highs is bearish.  To backtest them from below and reverse is bearish.  About the only thing that hasn’t happened is new lows.

I expected a continuation higher after backtesting those lows, and it has utterly failed.  Perhaps they can get something going overnight with CL or just spoofing ES.  With an hour to go, I’d have no problem riding any bounce into the close — if it happens.  But, I still wouldn’t feel comfortable holding long — or, short — overnight.

Sometimes, it just makes more sense to wait it out.  And, I think this is one of those times.