ES and SPX had no trouble finding our downside target yesterday, the neckline of a large H&S Pattern.  They even had help from, of all people, two FedPrez’s who insist we’re not taking a June rate hike seriously enough (we’ll believe it when we see it, gentlemen.)ES is trying to bounce higher, but CL and USDJPY haven’t been much help overnight.

continued for members… Despite their losses overnight, CL and USDJPY are sitting at channel support. But, will they remain there?ES will set the tone, depending on whether or not it can maintain the rising purple channel and, of course, yesterday’s lows.I’d stay on the sidelines with SPX until it’s a little clearer.UPDATE:  9:38 AM

Note that SPX is currently below the white neckline.  CL and USDJPY are being rather non-commital so far, but ES is bouncing back into the purple channel.  Should it break out past the red SMA5 200 at 2038 and, after that, the white TL, it would be a pretty good sign to take a long position.  We have leading indicators coming up at 10 EDT, and that could provide the help SPX needs. UPDATE:  10:42 AM

ES just popped through resistance, so I’ll take a tentative long position in SPX.  Watch your stops, as CL and USDJPY haven’t yet confirmed the move.UPDATE:  9:52 AM

Probably a head fake, but I don’t like the way this is going.  Back to cash.  Likely heading for 2032.59, the white .886 Fib.UPDATE:  10:03 AM

Conference Board LEI out at 0.6%, a beat vs 0.3% expected.  While mildly positive, this won’t help assuage fears of a June rate hike.  SPX dropped through its .886, and is backtesting it.  USDJPY is doing the same, while CL is plumbing new lows. 

I’d short on the backtest for 2022 — the Mar 24 low, and the falling white channel bottom.   Keep an eye on USDJPY, as it could decide to pop back above the purple TL.  And, ES has its .886 coming up at 2022.85 and its white channel bottom at 2019.25. UPDATE:  10:18 AM

Given that CL is bouncing back above support, this isn’t going to be one of those quick plunges.  The timing could be as late as 12 ET, meaning we’re probably going to have to wait around for the SMA5 10 to drop down and provide further downside pressure – as just occurred with USDJPY. UPDATE:  10:34 AM

Another potential backtest, this one with the SMA5 10 tag.  But, CL is spiking higher -40 cents in two seconds.  Back to cash here, though they’re likely just trying to get up to the SMA5 20 at the purple channel line. 

It’s hard to tell in such situations.  There have been many of these I regarded as a head fake, only to regret it as it melted up another 5-10 points.  And, in this case, USDJPY is still arguing for lower prices.  For now, I’m assuming it’s just part of the delaying tactic.  If I’m wrong, we’ll miss out on a 10-pt short.  If I’m right, we’ll get a better shot at it at 2037ish. UPDATE:  10:52 AM

Algos really have their wires crossed this morning…  CL is plunging — before the SMA5 20 arrives — so USDJPY just spiked to compensate.  It would be funny if it weren’t so messed up…  Happy to be on the sidelines for now.  If it makes it on down to 2022.49 on this push, we’ll look for a potential bounce.

Otherwise, it could still pop back up to the SMA5 20, now at 2035.50.  And, remember, ES still has an .886 Fib at 2022.85 that could provide a bounce at about the same time as SPX’s 1.272 at 2027.10. UPDATE:  11:07 AM

ES .886 and SPX 1.272… Could get at least a little bounce here.  Back to 2032.59?  The SMA5 20 is almost there. UPDATE:  11:21 AM

Bounced up to tag the SMA5 10, should be a decent shorting opportunity here.  The SMA5 20 is about 1 point higher in case it decides to bounce more.  Target remains 2022.49, a 7-pt drop from here.UPDATE:  12:06 PM

CL popping out, and SPX just pushed above the white falling wedge.  I might kick myself later, but I’ll give it some reins, having seen it reverse so often at 12:09.  And, very often CL will break out, only to facilitate a SPX drop on a backtest. UPDATE:  12:14 PM

Getting stopped out here at the .886.  Will take another look at shorting if we get to the SMA5 50 at 2035ish.  Should be okay riding it out, as we’ll likely get a backtest to the SMA5 10/20 at 2029.76 anyway. UPDATE:  12:33 PM

If the dot is placed correctly, SPX will tag it around 1:15 PM.  We might bet another spurt up to the SMA5 50 at 2033, at which point we’ll have another shot at a 10-12 pt short.  Or, it might just drop through support here and head for 2022 right away.  Hard to say, though I’m okay taking a flyer on here and now.  Back to short.UPDATE:  1:15 PM

Well, it’s 1:15 and SPX is rallying, not diving.  Thank CL for that.  On the bright side (for bears) SPX is approaching the SMA5 50, which might provide the impetus for a decline.  On the not so bright side, CL appears headed for the .618 at 48.63.  Ideally, it would reverse here and backtest the white TL at the bottom of the rising purple channel.  Stay tuned… UPDATE:  1:29 PM

Bailing on the short here, as it just keeps melting up with no obvious resistance until 2037-2040.  Back to cash.UPDATE:  2:17 PM

CL just backtested the .618 at 48.63, and SPX tagged the SMA5 100, and ES the white TL.  So, the state is set for a decline here, except for USDJPY — which looks bound for the SMA5 200 at 110.00.  Shorting here with low expectations and very tight stops. UPDATE:  2:26 PM

Switching sides on CL and USDJPY breakout. UPDATE:  2:36 PM

I’ve been whipsawed every which way today.  CL and USDJPY have broken out, but SPX is dipping.  Back to short on the drop through the purple channel line, though I’m probably going to regret it.  Please feel to ignore this one. There are many truisms in trading.  One is that the day after a really profitable directional move like yesterday’s (+20%) is often a bust — whether due to trader/investor confusion or market makers and HFTs picking off traders.  Another is that I should stick to my 3 strikes and you’re out policy:  3 bad trades in a row and it’s time to go take a walk around the block.  Unless something really compelling presents itself when you get back, hang it up for the day.

So often, frustration sets in after a few head fakes, and it can cause a revenge reflex (“I’ll get those bastards!”) that just isn’t healthy for trading.  Trading is an iterative process that requires you to constantly learn — especially when the competition is increasingly an HFT programmed to take advantage of human emotion.  I think I’ll sit down this weekend and jot down some more thoughts, but these were on my mind today, sadly for obvious reasons.

UPDATE:  3:03 PM

Could get a bounce here, as VIX is getting hammered.  CL and USDJPY are dead stop.  Back to cash, likely for the day.  UPDATE:  3:21 PM

FWIW, I think they might try to close it positive (2047.47 — which is also the .618 of the drop from 2060 to 2025.)  Worth trying a long position here on ES’ breakout.  If nothing else, it should reach the white neckline at 2042.  And, if it pops above it, then that would really put a dent in the bearish case.UPDATE:  3:31 PM

Rally’s fizzling.  Done for the day unless the purple channel miraculously breaks down in the last 30 minutes.UPDATE:  3:39 PM

VIX, USDJPY and CL did a pretty good job today of helping SPX melt up, reversing at spots that had very little to do with the SMAs.  Last chance for a melt-up to even on the day.  Personally, I wouldn’t chase it.