Yesterday, we got a taste of what happens to United Airlines passengers who are “disruptive and belligerent.”   In what is being described as one of the biggest PR fails in recent memory, United CEO Oscar Munoz defended the action taken to forcefully drag an Asian-American doctor from a flight that United had overbooked.

No doubt United would have found the volunteers it needed had it upped the compensation it was offering to $1,000, $1,500 or even $2,000.  Instead, it will pay millions to the passenger, and many more millions in lost revenues from prospective passengers who are too horrified to “fly the friendly skies.”

The stock is likely headed for at least 61.72, a 14% drop from yesterday’s highs — about $3 billion off its market cap.  And, that would be a positive outcome — if it’s able to hold both horizontal support and its SMA200.

While the event itself was shocking, it’s equally surprising that the CEO of a major airline could be so tone deaf as to email his employees that “I want to commend you for continuing to go above and beyond to ensure we fly right.”

The most interesting CEO on the world stage, right now, is our own Donald Trump.  He faces much greater challenges than Munoz did: escalating military conflicts with both Syria and North Korea and, by proxy, Russia and China.

We’ve had a taste of Trump’s leadership skills with respect to the battles over health care, tax reform, and scores of executive orders relating to the environment, energy, etc.  He won some, and he lost some. None of those, however, involved the risk of nuclear war.

Is it any wonder that investors are a little nervous and stocks have, so far, not shaken off this particular geopolitical risk?

On Feb 10, SPX broke out of a large, year-old channel that was averaging 17% YoY returns.  It has backtested that channel top seven times in the past several weeks — including a serious plunge below it on Mar 27.

Today, it’s happening again.  Will it survive this test?  It might just depend on whether or not Trump survives his.

continued…

SPX’s initial downside target is the .618 at 2343.68, which also represents the midline of the falling white channel.

A bigger picture.

And, VIX’s close ups:

UPDATE:  10:15 AM

SPX should get another leg down to the .618.

And, for those following UAL, I added a close up chart up above.  Here’s the big picture.  Note that UAL has failed to hold the white channel midline.  The next support is the SMA200 and .382 at 61.72 — also horizontal support.  If this fails, then the channel .236 comes into play around 55-57 — depending on when.

UPDATE:  10:23 AM

SPX has just about reached the .618.  I’d cover here, but be prepared to re-short if it drops through 2343.68.

Much will depend on whether or not USDJPY holds horizontal support.

UPDATE:  10:31 AM

Back to short, here with tight stops.  The next key levels are the .1.618/.786 combo at 2334-2335 and the .886 at 2328.65.  The H&S points to 2323.

UPDATE:  11:32 AM

SPX is making a bid to top its SMA5 10, even as the SMA5 20 dips below the .618. I’d like to think SPX will reach at least the 1.618/.786, but there’s a chance that ES will spoil the bears’ fun.  This is a reminder to watch your stops as the SMA5 20 approaches.  Sometimes it offers additional downside; but, sometimes it’s a catalyst for a recovery.

A favorite trick of TPTB is to smash VIX over the head at that critical moment that will put SPX back on top of its moving averages.  From there, the algos can drive prices higher.

Note that VIX is slipping below its SMA5 10, and USDJPY is testing its.

UPDATE:  12:04 PM

SPX is on the cusp of either a recovery or a further breakdown.  The algos’ goal is for the SMA5 20 to support a recovery, so I would cover here unless it breaks down in the next 5 minutes.

VIX appears to be waiting for instructions…

Fairly often, 12:09 marks the turning point where a bounce begins to roll over.

UPDATE:  12:12 PM

Looks like the bounce is happening.  For those who haven’t covered, this is the time.  But, be prepared to re-short in case this is a head fake.  Immediate upside targets include the SMA5 50 at 2349ish and the yellow neckline at 2355

UPDATE:  12:33 PM

Next test for SPX here at the SMA5 50.  Note that CL just spiked up to the white .786 — which got SPX to the SMA5 50 — but, is now backing off.  With VIX at potential support, we could get a reversal here.

If not, we’re likely to see a backtest of the yellow neckline at 2355 by the close.  Note that the yellow channel top passes right through it, probably about the same time that the SMA5 200 reaches it.  SPX would be back in the green around 2357.16.

UPDATE:  12:43 PM

SPX seems to be reversing off the SMA5 50 and white .500 Fib.  Note that VIX is bouncing off its former high, and CL is backing off the .786.  USDJPY has reached short-term SMA support.  In short, watch your stops.

The SMA5 10 will be along shortly, probably around 2347.  Any drop back through it would be cause to consider shorting.

UPDATE:  1:12 PM

The only thing standing in SPX’s way is ES, which just came within an inch of tagging a TL connecting the past two days’ tops.  Look for both to back off here, backtest, and perhaps take another run later in the session.  The safe play is to take profits here.  But, don’t be surprised if there’s another surge after the SMA5 10 or 20 catches up.

UPDATE:  1:50 PM

SPX just tagged the SMA50 as ES tagged its TL of support.  If they can get VIX turned around here, we should get another leg up to 2355 or even 2359.26.  If VIX breaks out and heads to 16.48, we’re likely to see new lows in SPX.

Note that USDJPY is threatening to break down, again.

UPDATE:  2:10 PM

VIX’s TL held, and USDJPY is making new lows.  Back to short here, though we have to watch out for the SMA50 at 2348.14.

UPDATE: 2:29 PM

VIX is behaving, and USDJPY is behaving…but CL just ramped up past its .786 again on the latest OPEC “news” that compliance is even better than anticipated.  

Since SPX bounced off the SMA50, there’s a good chance that it crawls along the underside of the red TL, up to that upside target after all.  I’d want to be long if it tops the SMA5 20 at 2350.  Keep a close eye on VIX.

UPDATE: 2:54 PM

Just pushed though the SMA5 100 on a little pop in USDJPY and dive in VIX.  The next upside target is the yellow neckline at 2355.  But we’ll want to see SMA5 10 support, as well as see VIX drop through its SMA5 100 at 14.92.

UPDATE:  3:05 PM

SPX is slipping through its SMA5 100.  Back to short, though we want to watch out for the SMA50 all over again.  And, if I’ve drawn the rising red channel correctly, there’s a possibility it’s aiming for the SMA5 50 as it crosses 2348.14.

There’s obviously plenty of selling pressure at this level.  But, TPTB have a lot riding on getting back above 2355.  I’d be surprised if they don’t give it another try, especially going into the last half hour of the session.

UPDATE:  3:25 PM

The SMA50 is holding, so far.  So is USDJPY.  And, VIX has reversed at the SMA5 50 — again.  Last chance for SPX to rally up to green if it’s going to…

I feel crummy that we’ve been all over the map for the last few hours.  But, consider that SPX has crossed the SMA50 seven times!

UPDATE:  3:44 PM

SMA5 100 broke down again.  I’d want to be short below it and long above it.  Can’t help thinking that VIX’s SMA5 200 will come into play by the close.  Holding any position overnight is only for the well-hedged or well-capitalized daredevils.

UPDATE:  EOD

Almost back to the neckline…

 

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