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In an impressive pump by both CL and USDJPY, ES rallied 14 points off its weekend lows and is now sitting at a slight gain.  This has, of course, become a trend over the past month.  In fact, it’s gotten to the point where TPTB don’t really seem to mind if it’s blatantly obvious. continued for members… (more…)

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With the holiday-shortened hours today, I’ll focus on catching up on some secondary charts.  In the meantime, look for ES to backtest the SMA20 at 2077ish and for CL to regulate whether it dips much lower than that.

It has a chance to break out on a small, completed IH&S (purple) on Wednesday.  It backed off, choosing instead to wait until yesterday when it completed a larger IH&S (red) — which it also failed to follow through on.CL is repeating last week’s pattern of dipping overnight.  The question is always whether or not it’ll rebound back to the rising purple channel, ramping stocks higher in time for the close. For its part, USDJPY is poking up above the falling white channel top — with the key word being “falling.”  The regular pre-opening ramp has been underway since 3am.  One would think traders would catch on to this pattern of rallying during NYSE market hours, followed by new lows.

But, traders are far outweighed by the influence of algos, which care not about such things.  When USDJPY rallies, they’re right there with it.  Though a concurrently falling CL, as we’ve seen, can outweigh the bullish impact.Should our initial target not hold, there are a number of more interesting (and more supportive targets down below.)  Some key moving averages, in particular, are long overdue for a backtest.

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For the fifth time in the past week, DX is threatening to break out.  Today, it’s courtesy of a “leaked” threat by the ECB to lower interest rates even further.  Somehow, even more negative interest rates are supposed to help the eurozone with its various and sundry problems.

DX is, yet again, pushing above its .886 Fib — if only intra-day — but, faces serious overhead resistance just above.

EURUSD is also pushing below its .886.  But, as we discussed in our last update, faces serious support just below.Will they both break out/down in the coming days?  Only central bankers know for sure.  But, it’s important to realize that it’s all just a smoke screen.

That’s right.  The real action is taking place daily in USDJPY and CL — both of which are obviously affected by the dollar’s actions.  Both are being used in a virtual tag team of well-timed bounces to instigate rallies and prevent drops.

The pattern lately has been quite consistent.  USDJPY is letting some air out after its rising channel from mid-Oct recently broke down.  After ramping stocks higher the day before and resetting overnight, it drops just before the open.  CL, for its part, drops overnight, then rallies at the open to provide cover for USDJPY’s drop.  An hour or so into the session, USDJPY finds its feet and starts a steady climb throughout the day to pump stocks higher — or at least prevent further drops.Note that today was different.  Very different.  And, there’s an important reason why.

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The overnight news cycle has all the earmarks of events spiraling out of control.  Yet, consider that:

• EURUSD and CL bottomed right where we anticipated
• DX and TNX topped where expected
• USDJPY has bailed out of the rising channel from mid-October as expected
• SPX should tag the downside targets we identified several days ago.

In other words, the news cycle has actually accommodated our charts, confirming tops/bottoms we called and enabling other targets to be met.

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Today, EURUSD reached a key technical level, completing a Bat Pattern that should see it rebound strongly.  We’ve been anticipating this day ever since DX broke out three weeks ago.

And, it begs the question: if EURUSD rebounds and the US dollar falls, what might become of USDJPY — the single biggest factor in driving stock prices?

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Since SPX completed a Bat Pattern on Nov 2 [see: Beware the Bat] it fell a normal enough 97 points to just below the .618 Fib.  Though, as I recently pointed out, the bulk of those points came in gaps lower in the opening minutes and were, thus, only available to futures investors or those willing to hold short overnight — a dangerous game for many years, now.They also came almost entirely courtesy of a carefully controlled decline (purple channel) in USDJPY which merely took it from the top to the bottom of a steeply rising (white) channel. So, we took notice last week when the channel that’s guided USDJPY higher since Oct 15 finally broke down.

Surely, it would precipitate an overdue drop in equities — or, at least make a dent in the acceleration channel that’s guided the 77-pt rally since the Nov 16 lows.  But, that’s not what TPTB had in mind at all.

As we anticipated on Nov 13 [see: Why Oil Should Bounce Here] CL bottomed out and began a vigorous 7% bounce that, combined with well-timed USDJPY ramp jobs, produced just enough reason for the algos to stay happy.   Thus the melt-up was spared any unsightly divots.

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Another OPEX, another overnight ramp job – this one courtesy of Mario Draghi who, not so surprisingly, is prepared to do whatever it takes to blah, blah, blah…ES rallied 11 points off the overnight lows, while USDJPY has been working to put a damper on things.  Could it have anything to do with max pain being way down at 2050 today?

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Isn’t it swell that the “market” can soar 33 points on nothing more than the repetition of bad news?  Despite the talking heads pleas, there is nothing fundamentally good about higher interest rates unless you’re a financial institution.  And, even then, there will be winners and losers.

The post-minutes algos kicked in as they always seem to — perhaps in an effort to assure those few human investors left that the FOMC’s utterances are always wise, always bullish.

In reality, it was our old friend USDJPY which was almost solely responsible for the melt-up — as it has been for well over a month.So, it’ll be interesting to watch what happens as it again approaches channel support this morning.  Will it hold again, or will TPTB allow a little off the top, just for appearances sake?

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The US dollar’s breakout from a long-standing falling channel on Oct 28 was accomplished with the assistance of the euro and the yen — both of which have been steadily weakening.

What might it mean, then, that the dollar just reached a point of important overhead resistance as the other two reached important support?  Might it take on added importance since, as BofA/Merrill pointed out yesterday, the long dollar is currently the most crowded trade?

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