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Since reaching our 111.60 target (the yellow .500 Fib) on Feb 11 [see: USDJPY Finally Relents] USDJPY has managed to maintain upward momentum — though it’s struggling a bit today.CL has likewise been on a tear since reaching our 26.22 target (the yellow .886 Fib.) It goes to show that algos are alive and well and very much in charge.  But, can it last?  We’ve seen over and over again how TPTB can push prices one direction or the other by manipulating algo inputs — primarily USDJPY and CL.

But, they face basic economic limits.  As the BoJ further devalues the yen, rising oil prices start to bite even more than they otherwise would. There’s a natural limit to how far they can push them both before real damage is done.

As we’ve discussed countless times, the BoJ has painted itself into a corner.  The BoJ can ramp up USDJPY and save the huge securities portfolio that totals over 15% of GDP, but it’ll further decimate what remains of the real economy.

The ECB and FOMC are on the same path, by the way.  It’s just not as dire, given that the debt levels aren’t as stratospheric…yet.

continued for members…

Look for SPX to test the intersection of the red and white midlines at around 1914 today.It might not get there all at once.  In fact, USDJPY and CL are backing off their earlier highs.  So, we have the potential for a pop and drop after the initial surge.  Watch ES.

UPDATE:  9:41 AM

Just reached our 1914 target at the white midline.  I’d take profits here at 1914.18 and switch to short with tight stops.  At the very least, we should see some back-filling — it could be as little as the SMA5 10 catching up.  It’s now at 1898.91 — about where the red midline is.  Or, we could get a backtest of the red midline itself.CL has fallen back into the falling red channel.  The red line is its top.And, USDJPY has backtested the broken purple channel rising from Feb 11, and it hinting at another backtest even higher up.UPDATE:  10:10 AM

USDJPY has pushed higher to backtest the broken red channel that is itself a backtest of the broken purple channel.  CL has pushed back above the red channel top.  SPX has followed directions.  I’d dump the short position and revert to cash until things settle down. UPDATE:  10:22 AM

USDJPY and CL are backing off, now.  Look for SPX to shed some of the last 10 points. I’ll go back to short if NKD will back off of the white TL below.  The white Fib at 1920.17, BTW, is the 14.6% retracement of the rise from 666 in 2009 to 2134 last May. UPDATE:  10:25 AM

I’d like to short here and see if we can’t get down to the SMA5 20  — currently at 1905.94.  But, crude inventories will be released in a few minutes.  Let’s see how that shakes out.  If CL nosedives, I’d immediately go short.UPDATE:  10:55 AM

Shorting here at 1923.33 as USDJPY and CL are backing off from earlier exuberance.  Extremely tight stops, as CL data due out any minute. UPDATE:  11:10 AM

Just wandered over to the EIA website to see what the holdup was with the inventory report.

CL spiked leading up to the normal report time, and seems to be settling back now.  Apparently Iran said they would support efforts to prop up oil prices — as long as they don’t require Iran to cut production.  Right…I’m looking for USDJPY to settle down to the 114.09 area — which might get SPX down to backtest the white midline at 1914.80 or so. So, now our focus returns to the Fed’s minutes coming out at 2PM EST.  Euro close coming up…

UPDATE:  11:39 AM

NKD and CL continue to push higher, dragging SPX and ES with them.  Back to cash here at 1922.96.  We could get a sudden drop to 1915 if CL and NKD would stop nudging higher.  But, it’s likely to come all of a sudden — and, at this rate, might not come at all.  UPDATE:  1:31 PM

More of a hunch than anything, but I think NKD is headed for 16104 (or, a rendezvous with the white TL and/or yellow SMA5 100) — meaning that SPX is probably headed for the white dot at 1914-1915.  I’ll take a short position here at 1926.34 with tight stops. UPDATE:  2:00 PM

USDJPY plunging… UPDATE:  2:14 PM

USDJPY is tanking, but CL is spiking to compensate.  No downside possible until something gives.  Back to cash.UPDATE:  2:18 PM

Updated CL, USDJPY and NKD charts.  USDJPY’s initial selloff substantially reversed.  NKD sold off beyond 16104, but is back above the broken TL.  Now…a ramp to demonstrate to investors how beneficial the FOMC’s involvement is. UPDATE:  2:34 PM

CL is losing TL support (purple TL) and USDJPY just dropped through the little neckline again.  I’ll try a short position here and see if we can’t get down to backtest the midline.   Probably another head fake, but maybe this’ll be the one that takes. Tight stops, as usual. It’s probably occurred to many of you by now that any pullback might simply be delayed until tomorrow’s open — meaning today’s very positive close would be a head fake.

UPDATE:  3:09 PM

CL is starting to sell off now, but USDJPY is bouncing.  I’ll close the short and revert to cash here at 1925.54.

Now that the SMA5 10, 20 and 50 are bundled together, a drop through them would be pretty impactful.  I’m still not ruling out a dip to 1915 at the close, so would take another shot at it if USDJPY/CL reverse.  Note that NKD is back below the white TL — a good sign for bears.UPDATE:  3:22 PM

USDJPY and CL are slipping, so I’ll take the bait.  Back to short here at 1926.54. ES is even falling through support.UPDATE:  3:38 PM

Sudden surge by USDJPY and CL means that might be all we get today.  I’ll bail on the short here, though it’ll very likely pay off in the morning.Just like the bad old days — the slightest decline in SPX sets off a sudden burst of algo-juice.  It could still dump into the close, but by now we’re all a little too fatigued to jump at what has, up until this point, been a bunch of head fakes.