SPX came withing 0.61 of closing the gap we were watching Tuesday before the downtick prevention team screamed into action.

Since then, it’s been a steady march higher — with USDJPY/NKD providing most of the boost.  NKD is still languishing below the .886 Fib, suggesting more downside ahead.  But, the chart pattern indicates a good chance of a breakout to the white .786 or .886 first.  I believe TPTB are keeping this card in reserve and will play it in the event of any undesirable downside moves.

USDJPY, likewise, seems stuck at the 2.24 extension, but seems to have found support at the 1618.  Like NKD, a breakout is just a key stroke away.

And, that pretty much sums up the markets lately..  We (sometimes) get a burst or two of “honest” market movement in the opening minutes, after which the central planners and their hedge fund lackeys determine which way stocks will go for the rest of the day — with USDJPY, NKD and VIX as their primary tools.

VIX is at a critical support level, the .886 of the rise from 11.52 to 31.06 beginning on Sep 19.   It tagged this Fib on Oct 31, and closed slightly below it yesterday.  A sustained push below 13.75 would be bullish for stocks.

GLTA.

A link to the webcast of Draghi’s press conference, beginning at 8:30AM EST:

http://www.ecb.europa.eu/press/tvservices/webcast/html/webcast_141106.en.html

As expected, we did have some drama at the .886 Fib, resulting in a pop and drop that was limited to about 6 points by the usual USDJPY/NKD rescue.

For its part, USDJPY reacted at the 1.618 extension as expected, dipping back to the 1.272 before swinging into rescue mode.  ES (the thin purple line) had dropped about 12 points from its overnight ramp job highs when USDJPY firmed up and boosted stocks.

NKD initially declined below the important .886 Fib level (in yellow, below.) Stocks did not react well.  So, they took it back above the line, suggesting that the correction was done.

Note, however, that it fell back below the .886 overnight (as usual) — plunging 165 points.  As long as it remains below 17,068, it suggests further downside.  But, because it was propped up north of 16,740, it leaves open the possibility of a rally to the white .786 or .886 (17,322 and 17,396.)

In short, 17,068 is the Japanese line in the sand.

The algos are driving the futures higher with Draghi’s assurances that the (unanimous) ECB is ready and willing to conduct more easing.  GLTA.

While the talking heads are focused on the election results, it is Kuroda’s latest antics that have S&P futures up 13 points this morning.  Apparently not satisfied with going “all-in”, he emphasized last night that he is more than willing to go all-in’er.

USDJPY shot back through the yellow .786 and nearly reached the 1.618 extension of the drop from Monday’s highs.  Consider me sadder but wiser and stopped out on the short USDJPY call.

Given ES’ action, SPX is pointed right at Monday’s highs.  I’ll be watching to see if we get some drama around the .886 at 2022.

Interestingly, NKD still hasn’t topped the .618 of its drop from Monday.  Keeping the powder dry, or a sign of a pop and drop?  We’ll see.

Keep an eye on the futures action after the cash open for some hints as to the strength of this leg higher.

After spiking higher post-Kuroda’s lunacy last week (1300 points on the 31st alone), the Nikkei 225 ran smack dab into the .886 retracement of its crash from 18,365 to 6,990 between July 2007 and Oct 2008.

It reversed as we expected and has since given up 740 points (4.2%.)  The eminis have since given up a whopping 1.1%.  What gives?

While many tools are used by TPTB to ramp SPX/ES higher throughout the day, NKD is one of the most effective.  Today’s reversal at 11:00 AM was classic. First, some background.

ES is more than happy to rise in lock step with NKD when it’s on a tear.  And, any time stocks are in danger of declining more than would be acceptable, you can count on NKD and USDJPY to reverse higher (along with VIX reversing lower.)But, that would leave NKD and USDJPY on a perpetual rise.  And, well, people might notice how strange that is — might even question whether it made sense (but, probably not.)

So, after the futures close (4:15 PM NYT), NKD and USDJPY typically go back to where they started.  ES, on the other hand, is easily propped up in the after-hours, when volume goes from the normal pathetic to practically non-existent.

The result: a one-way street where stocks get all the gains from NKD, but very little of the pain.  And, there you have it: an unrigged market, courtesy of central bankers.  Ain’t life grand?

Next time you’re trading along, minding your own business, and your short position suddenly starts taking on water — check NKD.  There’s a pretty good chance Kuroda/Yellen/Draghi and their lackeys have decided to:

• stabilize the economy
• prevent deflation
• decrease unemployment
• rig the markets.

It’s another election day.  As always, I find myself wondering if anything will come of it.  Get the money out of politics, and maybe…

In the meantime, enjoy this little clip from satirical genius George Carlin — who insists that if you do vote, you don’t have anything to complain about.

Yesterday’s call for a reversal in USDJPY and NKD was spot on.  It remains to be seen whether US stocks will follow suit.

USDJPY hit the large scale .786 and reversed back below.  A mild, bullish reversal to the yellow .500 Fib at 111.55 would undo most of the post-QQE expansion rally — when ES was 1970ish.  While a garden variety reversal to the .618 would point to 105.57, undoing the Oct rally altogether.

Needless to say, the impact of the carry trade has been greatly skewed to the upside.  That is, USDJPY rallies nearly always get a 100% response from stocks.  While, USDJPY declines tend to take place in the after hours, when ES is more easily propped up and the impact is muted.

NKD reached and reversed off the .886 as expected.  I see no reason why it won’t return to at least the .786 at 15,931.

Since our capitulation call on Oct 15, I’ve wondered whether we’d see another Feb 2014-type rally.

Cue USDJPY for emergency hockey stick operations.  All Fed presidents, report to CNBC.  Mr Buffet, please report to makeup.  Should be a heck of a bounce from here.

In fact, the past two weeks have been even more aggressive — aided, of course, by the Fed, the ECB and the BOJ.  The tougher call is whether the rally can continue in the face of USDJPY/NKD digesting their gains.

Next, some key levels and what the future might hold for SPX. (more…)

Keep an eye on VIX, which completed a bullish (bearish for stocks) Bat Pattern Friday.

This, as USDJPY just tagged the .786 retracement of its slide from 124 to 75 between Jun 2007 and Oct 2011……and, the Nikkei 225 (futures) just tagged the .886 retracement of its crash from 18,365 to 6,990 between Jul 07 and Oct 08.

This is another moment of truth for the Japanese carry trade.  While it’s hard to bet against the momentum exhibited late last week and the (by now, obvious to everyone) script for further coordinated bubble inflation written by central bankers around the world, I would be very leery of chasing this rally.

I think the goal is to establish new all-time highs in all the major indices (SPX just missed on Friday) in time for tomorrow’s elections.  After that, we should see at least a retracement of last week’s spurt higher.

If I’m wrong, the 1.618 extension of 1576 to 666 is up ahead at SPX 2138 (3-4 days at the pace set the past two weeks, but May 2015 if the rising white channel holds.)  Though, there is no reason to expect a serious reaction there as long as the algos and central bankers are in charge of the day to day (remember 1823…)

If 2020.04 were today’s high, the first downside target would be to close the gap at 1994.95 – also the .786 of the spurt higher from 1987 — though we should expect a bounce at 2000 first.

GLTA.