With several indices at inflection points and our next critical date coming up in about two weeks, it seems like a good time to update our analog.  For our new members, I first proposed the current analog back on March 27 [see: A New Analog.]  It has been updated numerous times since.

Analogs have been a favorite tool of mine for many years, beginning with the 2011 as 2007 analog that forecast the dramatic July 2011 correction to the day and dollar.  For more on what they are and how they work, see the general post on analogs HERE.So far, this one has done an excellent job of helping to forecast several major moves since March, including SPX’s recent 90-point decline to close below the 200-day moving average.  If it plays out as suspected, it will leave many investors shaking their heads.

continued for members…

First, a quick note on today’s markets: SPX reached our 2120-2124 range yesterday, stopping right on the white .886 at the upper end.  The natural expectation would be for a pullback on the completed Bat Pattern.  

USDJPY has leapt up past the red channel midline and is behaving as though it will do no more than backtest it.

VIX has tested the yellow channel bottom for the third time in the last two months, and looks set to open below it this morning.While, CL has backtested the white .786 at 50.67 and looks likely to test support at the .618 at 50.11 as well. Tie it all together, and it appears likely that — unless SPX absolutely plunges in the next few sessions — TPTB are going for a 2013 style assault on 2138. Recall that our thesis for the past year has been to storm the 2138 barrier via the yen carry trade.  In March, we focused on how prior overhead resistance has been overcome by USDJPY backtesting and breaking out above its SMA200.  The next tag is due on either July 29 or August 13.

I have vacillated between expecting a slow, steady squeeze higher via overnight ramp jobs (as has been occurring this past week) or a plunge to and bounce off strong support such as occurred in October 2014.

At this point, I’m wondering if the early July plunge to 2044 was as bad as it’s going to be allowed to get.  The next step could be a series of small daily gains that inches up to 2138 and reverses until USDJPY’s SMA200 arrives on the scene.

The way things are going, it would probably exceed 2138 on a big overnight/weekend ramp job as occurred at SPX 1823 (went to 1850.)  The subsequent reversal would put the Nikkei’s 2007 top at risk in a nice backtest, whereupon the BOJ would come to the rescue with a QQE expansion.