The next phase of our analog has arrived.

The currency pairs we’re watching have all broken trend, sending a strong signal as to how the next month will unfold.  Consider USDJPY, which broke a nine-week TL/channel top overnight (not to mention the 44th session above the critical .618 Fib at 120.11.)

continued for members…We’ve wondered whether SPX will attempt its assault on 2138 before or concurrent with the USDJPY SMA200 tag — now likely to occur around the July 4th holiday if it involves a dip to 118.02.

The currencies are the key (though CL also plays a role.)

DX broke out of its falling wedge before reaching a key Fib level…

…while EURUSD finally (and tardily) reversed and is headed for a channel backtest.

…all of which is enabling CL to flesh out the white channel (the purple one is finally kaput, as we pointed out previously.)Taken in the aggregate, it would seem 2138 is destined to arrive any day.  It’s all the more likely given that Monday is a market holiday in the States.

But, it’s important to note that each of these trend breaks/reversals is not major. DX was only a smidge away from major Fib and channel support at 92.32.

And, USDJPY still hasn’t broken above the midline of the rising red channel that I think will govern the next few months of prices (not a meaningful breakout until it does.)As mentioned before, EURUSD has some serious consolidating to do (or more.)  And, CL still has that major Fib up at 67.50ish.

In short, this is likely to be a weak test of 2138 — much like the initial December test of 1823.  It will most certainly approach it — maybe even pop through a bit as it did on another May 22 (in 2013.)

But, there will very likely be a pushback that rattles central bankers to such an extent that they let the free money flow yet again.  My guess is that it will be driven by interest rates — which are threatening to break out past 2.32% or break down below 2% again.But, it could be something as simple as horrid economic data such as is being projected by the Atlanta Fed.  Leading indicators come out this Thursday, and Durable Goods and GDP (2nd est.) come out next week.

SPX broke to a new high yesterday, reaching 2131.78 — only 6.26 away from the 1.618 Fib.  Obviously, this shifts the downside Fib targets slightly — with the red .786 Fib being more in line with a dip to the SMA100 if it should occur in the next day or two.Likewise, 2038 is the new 2033 (.618 retrace of the rise from 1980) and the SMA200 is due to intersect it next week.  One lovely idea is Janet Yellen pissing on equity valuations this Friday when she speaks about the FOMC minutes coming out tomorrow.

Lots of moving pieces, so we’ll summarize:

• SPX within 5 points of major Fib at 2138
• USDJPY short-term overbought unless BOJ announces more QE — or —
• FOMC announces a rate increase
• CL fastest channel broke down, but potential upside to 67.40 (+15%)
• DX coming up on overhead resistance at channel bottom
• EURUSD with upside to 1.18 and down to 1.06
• TNX with upside to 2.35+ and downside below 2.00
• VIX straddling the fence as well

Bottom line, I see a very good chance of some significant downside here that will set up a response that exceeds 2138 once USDJPY’s SMA200 catches up.

The fact that SPX inches higher every day without busting 2138 either means a pop through 2138 on “news” or a weak reversal that offers bears a brief celebration.