Good morning, all. Virtually nothing has changed from yesterday morning’s post. The upside and downside targets remain the same, with CL the big wildcard. I’m still traveling, USDJPY and CL will still determine equity prices, the oil summit is still this weekend, and today is still OPEX.
Trade safe, and hold over the weekend at your own peril. I’ll add more later if I’m able.
A reminder: I’m traveling today and won’t be able to update charts intraday. So, I’ll leave you with a few key charts worth keeping an eye on.
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Yesterday saw SPX tag two more of our upside targets. The remaining targets from yesterday’s update remain unchanged. If we get a backtest of any magnitude, it should be to the gray channel midline somewhere between 2071.20 and 2073.70 (depending on when.)
USDJPY, having dragged SPX out of its downtrend, has fallen back to its more reasonable red channel. Unless CL offsets by remaining above its SMA200, USDJPY might be sending the all-clear for the backtest mentioned above.
DX is certainly ready for at least a small backtest to let its moving averages catch up, while another post-OPEX leg lower remains my leading scenario. 
CL is digging its heels in, having pushed above and backtested the 200-day moving average (40.94) in advance of this weekend’s big oil summit in Doha — which is almost certain to disappoint (but, certainly not until after OPEX.)
Check out this nice piece by Bloomberg on the players’ strategy to put a floor under prices [aka price manipulation] at current levels [aka the SMA200.] If it holds, it opens up the .786 and .886 at 45.6 and 48.06 respectively. 
The past week or so has seen repetitive ramp jobs starting around 3am, just in time to get “markets” nice and frothy by the time they open and, not so coincidentally, continuing until about the time they close.
This being OPEX week, look for more of the same.
GLTA.
If bad news is good news, the economic data this morning was terrific. Retail sales and PPI both came in well below expectations, bolstering the argument for fewer rate hikes in the months ahead.
Of course, this policy ignores the reality of rising oil, housing and food prices. That’s fair, as those price increases only affect folks who sleep, eat or drive (and the growing number of people living in their cars.)
From briefing.com:
What the data doesn’t explain, of course, is why DX ramped so much overnight. With rate hikes presumably more firmly on the back burner, it should be plunging rather than strengthening.
The answer, which won’t come as a surprise to any of our members: central bankers got out ahead of the news, ramping USDJPY much higher in advance of the data. The NKD gained as much as 3% overnight on rather suckish news out of Japan.
The USDJPY ramp explains why ES notched all of its 10+ point gains overnight, before the good/bad news even hit the wire. And, don’t forget, Friday is OPEX.
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The good news for traders is that the recent volatility has been somewhat predictable and, thus, tradeable. The bad news is that CL and USDJPY-driven manipulation is alive and well. We got a great reminder just today, when the latest unfounded rumor of an oil production freeze from a supposedly knowledgeable insider saved SPX from breaking down.
A quick peek at SPX shows a fairly tight rising channel with minor retracements along the way. It originated back on Feb 11 when we called a bottom in CL (it was) and USDJPY (it wasn’t.) And, it topped out just past our Feb 18 upside target of 2065, at which point it started going sideways. 
The nifty thing about sideways movement is that it often sets up Head & Shoulders Patterns. Such is the case here. Only, the folks in that windowless room pushing the big red “RAMP USDJPY” and “RAMP CL” buttons have steadfastly prevented any H&S patterns from playing out.
The chart below shows several that were either prevented before they could get going or were interrupted midstream by very deliberate moves in CL and/or USDJPY. We’ll focus on two in particular, labeled in red and yellow.
Many members were puzzled that SPX could rally even while USDJPY was plunging in value. Yet, as the chart below shows, every single SPX bounce was enabled by a USDJPY bounce — even when it was just intraday.
And, some were downright sneaky, like #3, where USDJPY popped back above a broken trend line. The stunt was repeated with bounce #5. Bottom line, it didn’t matter much what happened to USDJPY overnight, as long as it was on the rise heading into the daily trading session.
CL presented a similar pattern — bouncing at coincidentally convenient times. Note that SPX’s pattern of sharp reversals at one of the H&S neckilnes was foiled only twice:
When CL gapped back above that yellow TL, SPX was only too happy to pop back above its yellow neckline and tack on 30 points.
SPX fell back below the yellow neckline again just this morning. For whatever reason, something about another IMF downgrading of global growth rubbed investors the wrong way. No problem, as within minutes, CL popped back up past its SMA200 on the afore-mentioned production freeze rumors.
Since it topped the SMA200 at 41.10, CL has clung to its rising SMA5 10 in order to keep SPX on the rise. It’s only in the past 20 minutes or so that CL has settled lower, no doubt in order to facilitate an SPX close on the white channel top rather than above or below it.
Remember when making good investment decisions meant studying earnings reports, deciphering economic events and evaluating management and competitors? Not one of those things matters anywhere near as much, anymore. Successful investing has become all about anticipating when those USDJPY and CL buttons get mashed, and very little else.
The past two weeks has been a delicate balancing act between a declining USDJPY and rising CL. Several times, TPTB have had the opportunity to break stocks out of the falling white channel from last November, but have passed — choosing instead to merely keep SPX in a relatively tight trading range.
Just yesterday, CL came within 0.45 of its SMA200. Instead of dashing across the goal line, it punted — only to face an even closer call this morning. And, like yesterday, USDJPY is rallying in the preopening hour, but without really making any serious headway. 
Will this be the fourth day of no follow-through, or are stocks actually ready to backtest a little?
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On Friday, SPX successfully spiked back above the neckline of a bearish H&S Pattern, then spent the rest of the day backtesting it. With USDJPY and CL both on the rise this morning, look for SPX to try once again to break out of the topping pattern it’s been in for the past week.
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In our Mar 4 Update on Gold, we identified 1286 as an important turning point. It was one of two upside targets we had assigned on Feb 10, when gold closed at 1197.
GC topped out six days later at 1287.80, presenting a nice shorting opportunity. By the end of March, it had tumbled a respectable 6.3%.
Since then, however, it has climbed steadily higher. It begs the question: is this just a bounce in the midst of the drop, or are higher prices in store?
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This is currently one of those situations that’s too close to call. GC has retraced .886 of an .886 of a .500 of an .886. It is a hair’s breath from breaking out, even though it’s in the midst of a downturn.
I’ll explain. The white grid above is nestled within the red grid below which is nestled in the larger purple grid below. And, it’s the purple grid that matters most.
The drop from 1287 fell from the white .886 to the white .618. We draw the purple grid there, and note that the bounce to 1246 on Mar 30 represented a .500 retracement. Some corrective waves, that’s all you get.
But, the subsequent drop (to a higher low) sets up a potential Bat Pattern to the purple .886 at 1278.50 — also a reasonable bounce for a corrective wave.
GC frequently trades in the same direction of stocks — the “all one market” theory. But, lately, it’s maintained an inverse relationship — a result of growing fear. So, it’s not surprising that it’s in the same situation as SPX — on the brink of a breakout or breakdown.
If it breaks above 1246, then the purple .618 at 1257 is a gimme. From there, we have potential resistance at 1270, which is also about where the purple midline currently resides.If it breaks above the purple midline, then 1379-1380 is the next logical target, perhaps in Sep/Oct. So far, it’s been doing a nice job of rising the rising moving averages, with the SMA50 around 1220 coming into play the last few days.
Note that the SMA50 would also represent a backtest of the red channel it recently broke out of. If that doesn’t hold, then the white channel bottom around 1207 makes sense.
GLTA.
Is it any surprise that CL and USDJPY have rallied sharply in response to yesterday’s mini-meltdown in stocks? After ES and SPX both completed H&S Patterns that might have sent them down to backtest (horrors!) their SMA200s, CL is up 7.3% and USDJPY 1.3% off yesterday’s lows.
News or fundamentals? Nope. Just talk…aimed at averting a negative outcome for equities. The BoJ is talking more QQE or even more negative rates since they’ve both been so successful (not!) in turning around the Japanese economy. 
And, oil? What can I say? If there’s a limit to this manipulation insanity, we haven’t found it yet.
Needless to say, equity futures are loving it.
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Depending on your affinity for conspiracy theories, the BoJ has either failed to keep a lid on the value of the yen, or has allowed it to appreciate to the point where it now compensates for the 60% increase in the cost of oil since Feb 11. Regular readers know where I stand.
Regardless, USDJPY’s flat red channel from Nov 2014 broke down long ago. The falling white channel from December 2014 has broken down. And, the rising purple channel from 2011 is now officially dead.
It hasn’t mattered all that much to the “market” yet, as CL has taken over as the most important driver of day to day equity ramps.
But, at some point, the other 3-4 trillion in equity investments that rode the yen carry trade up from 2011, money that might not be tied in to the CL carry trade — or, might have some well-placed reservations about its long-term viability — are going to wonder if USDJPY is well and truly dead.
Not to worry. I believe the BoJ has a plan. And, since all their other plans are working out so well, what could go wrong?
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Yesterday marked an epic battle between algos driven by CL and those driven by USDJPY. CL won. As USDJPY melted down to lows not seen since Halloween 2014, SPX refused to budge — not until CL announced it wouldn’t bounce any higher.
We won’t mourn the impending death of the yen carry trade, as we’ve seen too many resurrections over the past year to assume it’s truly toast. Besides, this latest turn of events gives it the freedom it needs to reach the next lower target on our list.
But, we’ll focus more on CL, and how reversals like yesterday’s can impact intraday swings. 
Hint: there will be more, and they will be even wilder.
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