To watch C-SPAN’s coverage of today’s House Financial Services sub-committee on Monetary Policy and Trade featuring Esther George and Jeffrey Lacker, CLICK HERE.  Watch for the two bubbly central bankers to make their best case for unchecked power.

I read this morning that the volatility in the Dow over the past 40 sessions (high to low range of 2.27%) is the lowest since at least 1915, possibly ever.  While it fits nicely with our analog, and is therefore somewhat heartening, it also suggests a great deal of volatility lies ahead.

Consider the US dollar’s continuing climb in the same channel for over four months.  If the FOMC really isn’t going to raise rates in a few weeks, is there any reason for DX not to have sold off by now?

continued for members…

ES looks likely to backtest the broken red channel, which is around the SMA20 at 2178.36.  Unfortunately, this is at the very end of the day.  So, it could be another very quiet day if all we get is a 5-pt decline.  If, on the other hand, the red channel breaks down… VIX reached close enough to support, yesterday, but could have a little more downside for a really good fit. While, USDJPY has more downside potential — if they allow it to unfold. DX’s daily chart — still can’t get over the SMA200 miss a few days ago.  Extraordinary weakness, but it’s obviously being propped up.

CL continues to be a wild card.  Had a nice falling channel going, but had to abort it in order to effect yesterday’s pop at the close.  BTW, this week’s EIA report is delayed until tomorrow at 11am ET due to the holiday.  API will come out today at 1:30 pm ET.

SPX’s excess at the close doesn’t look as much a breakout as ES’.  So, the jury is out on a backtest versus a breakdown.  I remain short from yesterday afternoon.

UPDATE: 9:42 AM

There’s the white TL tag by VIX.  A bounce here, and we should get that sell off.  A dip below, and we’re heading up to 2200.

For those who are interested, C-SPAN is broadcasting the House hearing on Federal Reserve Governance.  LINK HERE.

UPDATE:  10:28 AM

VIX is breaking down, and so SPX is inching higher.  NKD is also toying with the SMA200.  I’d revert to cash here, and not short again unless SPX breaks below the SMA5 20.  I have to run out for 20 minutes.

UPDATE:  11:14 AM

VIX is back above the white TL, so SPX and ES reversed their earlier ramps.  SPX crossed the SMA5 20 at 2185.60, putting us back to short.

UPDATE:  12:27 PM

SPX and ES both just tagged their SMA20s, and VIX is backing off its little spurt higher.  So, I’d close the short here and likely go long if it’s able to push back above 2180.

Note that this is the scenario discussed up front: ES has backtested a breakout, while SPX has failed to break out of a falling channel.  As always, I’d keep a close eye on CL, USDJPY and VIX for hints as to what they’re planning.

One chart that remains somewhat bearish is DX — which hasn’t even backtested its resistance zone at 95.18ish.

UPDATE:  12:38 PM

VIX is reversing off the little flag pattern, so I’d go long SPX here with tight stops.  We still have the SMA5 10 and 20 to push through just overhead.  SPX should hold the SMA5 200 if it’s going to rebound much.

Note that ES also has a TL backtest just above at about 2180.

UPDATE:  1:57 PM

The Fed’s Beige Book is out in a few minutes.  SPX  has reached the top of the red channel, again, which will be the top for this bounce if the “market” is disappointed.  I’d tighten up stops at this point: the SMA5 10 at 2182.77 should do.

UPDATE:  11:09 AM

Something just came up which will take me away from the office, probably through the close.  So far, the beige book response has been quite muted.  SPX didn’t break out, but hasn’t broken down either.  I’d tighten up trailing stops to the SMA5 10, currently at 2183.

UPDATE:  2:15 PM

VIX just reached the white TL again, as ES reached its SMA5 200.  I’d take profits here, and short on any move back below 2183.40.