All eyes will be on the Fed minutes today, but only after Bullard gets a chance to convince us that: (1) a rate increase is a real possibility; and, (2) they might just have to lower rates some more.

The problem, as yesterday, is that the dollar still looks susceptible here.  And, the US needs the dollar to remain strong (we are importers, after all) without actual higher interest rates (we are in debt up to our eyeballs.)

It’s not helping the yen carry trade much at all.  And, with CL at a point of inflection, the riskcontinues to be to the downside.  Yesterday’s targets remain in place.

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USDJPY has, so far, only backtested the broken yellow channel.

While CL has likely topped out for now.

Leaving SPX with more potential downside.  It would have been easier had the tag occurred yesterday.  Now, the SMA20 is aligned with the purple midline, meaning 2173.81 might be all we get.  But, it wouldn’t reach the new white channel midline.  That would entail a drop below the previous low of 2172.  In other words, it could get tricky between 2170-2175.

FWIW, ES makes a better reversal at 2170 — about 2172 on SPX.

Stay tuned…

UPDATE:  9:38 AM

SPX just tagged the SMA20……but, ES isn’t quite there.  Again, FWIW, the 2170 tag would look better in about an hour.

UPDATE:  9:45 AM

ES just reached the SMA20, so now they’ve both done so, as well as having reached their respective .886s.  I’d go long here with reasonable stops.  

If I’ve drawn the purple channel correctly, there’s overhead resistance at 2174, and the bottom of the channel still beckons down at 2158ish.  There’s also the new rising white channel midline at 2172 around 11:30 — though a tag later in the day at a higher price would do just as well.

Bottom line, it might not be over, so remain cautious until we see that overhead resistance taken out and SPX push up past its SMA5 10, now at the SMA10 at 2178.15.

UPDATE:  9:53 AM

NKD and USDJPY are still slipping lower, so I believe SPX isn’t quite done.  I’d revert to short here for the white midline at 2171 and, if that doesn’t hold, 2165.

UPDATE:  10:00 AM

There’s the white midline.  I don’t have great confidence in its placement, so we’ll keep an eye on CL, NKD and USDJPY for a signal.  So far, nothing dramatic.  The next level down is the white .500 at 2170.69, followed by the red 1.272/white .618 combo at 2165-2166.

UPDATE:  10:11 AM

NKD and USDJPY are getting a little bump, so I assume SPX will too.  However, the SMA5 10 is falling fast and only a few points overhead.  And, the SMA20 is right there with it.  Hopefully this is just a pause.

UPDATE:  10:30 AM

EIA oil inventories just came out and CL is spiking higher.  VIX dumped, and recovered just as quickly.  SPX is slipping up past the SMA5 10 and is likely to at least backtest the SMA20 at 2173.81 as the SMA5 20 arrives.

UPDATE:  12:44 PM

With about 1:15 to go before the minutes are released, SPX continues to inch higher.  I’d cover the short position here on the move through the red midline.  And, I’d short it again if it were to drop back through after the minutes are released or if we get a strong enough immediate negative reaction.

UPDATE:  12:50 PM

Looks like they might take it all the way to the SMA10 at the white channel top at 2178.  That fits with VIX, which is likely headed to 12.8 or so.  Though, I’d be surprised if the

purple midline doesn’t offer some resistance.  I’d short here with relatively loose stops.  And, don’t be surprised if the drop (should it occur) to 2165 happens within 30 seconds, only to rebound strongly.

UPDATE:  1:38 PM

A little over 20 minutes to go and the algos are already going at it.  NKD just popped for no particular reason, and VIX plunged mere seconds later.  I’d dump the SPX short on any sustained move through the SMA10.

UPDATE:  2:07 PM

Nice initial dip, followed by a pretty strong rebound that looks like it will top the SMA10 on CL ramping and VIX hammering.  Note that NKD, USDJPY and DX are all dipping.  Again, close the short on any move through the SMA10.

UPDATE:  2:16 PM

CL pump and VIX dump was enough to offset DX and USDJPY’s slide, pushing SPX back above the SMA10 and our stop.  It appears to be headed to the SMA5 200 or red channel top at 2182-2183.  But, I’d be prepared to short it, should it reverse back below the SMA10.

UPDATE:  3:05 PM

SPX is attempting to put in a backtest of the SMA10 here.  The obvious message is to go long, yet from everything I can see there’s additional downside.  With the SMA5 200 and red channel top only a few points above, I can’t get too excited about riding it higher.  I’d stay on the sidelines, but short if it drops back through SMA10.

My expectation is that it’ll melt up and tag the red channel top around 2182 on the close, and then gap lower in the morning.

UPDATE:  3:51 PM

Just tagged the red channel top.  It should reverse here if it’s going to.  NKD and VIX, in particular, suggest a reversal.  My suspicion is that it will, so I’d be comfortable staying short overnight.  The usual caveats apply.

 

 

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