It was five years ago today that I first got it into my head to write about the markets.  SPX, in particular, seemed like it was topping out.  I wrote two posts that day that laid out what I thought was a pretty good charting argument for a decline:

Charts for May 2, 2011  and  Collision Looming?

My charts were arguably simpler and easier to read back then — as were the markets.

As it turned out, May 2, 2011 was the high for the year.  SPX dropped from 1370 to 1074 before it was all over.  It included a nifty analog that allowed us to call the July/Aug correction to the day/dollar, thus cementing my confidence in chart patterns.A lot has happened in the past five years, and that confidence has been tested many times — chiefly because central banks around the world have decided it’s not enough to establish monetary policies that would be beneficial to markets.

They’ve taken it upon themselves to reinflate the bubbles that existed in 2007 via the yen carry trade, suppressing interest rates, injecting vast sums of money directly into fixed income and even equity markets, and of course, the constant threat of more QE.

They, and their functionaries, have also made a concerted effort to understand, anticipate and deliberately bust major chart patterns that might have facilitated corrections — hence the countless H&S Patterns which have failed to play out over the years.

This morning, they (predictably) trotted out Warren Buffet to quiet the markets.  But, the fact remains that a number of factors that have wrestled stocks higher over the past several months, not to mention years, are broken.

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Is there any amount of CL ramping that can compensate for what’s going on in USDJPY?  Apparently so, because the eminis are off only 10 points in the midst of a USDJPY bloodbath. Were it not for CL’s coincidental 1.25% rally, it would be much, much worse.

SPX tagged yesterday’s target, then eased a little lower still — meaning the next downside target was probably in play.  Look for it to be nailed in the opening hour.

BTW, don’t watch the above clip if you’ve a dentist appointment any time soon.  Otherwise, it’s a masterpiece.  Enjoy!After that, it’ll depend on when the BoJ blinks.

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Everything was going so well.  New highs on USDJPY and CL were producing new highs on SPX.  The all-time highs were only a ramp job away.  And, then, Kuroda et al decide to stand pat on an obviously failing stimulative package?

I’ve written all too often about the overnight resets on USDJPY and CL, all in order to repeat the ramp the next day.  Thus, the same rallies can be recycled over and over, and passed off as new highs.  Last night’s “reset” will put that practice to the test. There will be many who suggest the yen carry trade is toast, and that SPX should now give up hundreds of points.  While I sympathize with the notion, remember that just because the BoJ didn’t expand QQE, it doesn’t mean that they’ve stopped manipulating currency and equity markets.  Far from it.

For anyone who took our parting commentary to heart yesterday afternoon and shorted at 2098.75, congrats!

That’s probably about it for this leg.  If you’re a contrarian and can hedge overnight and don’t believe BoJ has any ammunition left, this would be a great place to short.

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Since the next two sessions will be dominated by central bank market manipulation, I’m going to focus today on the big picture.

CL is up almost 2% this morning, an almost daily occurrence (market hours are highlighted in the chart below.)  This allowed the sell off which might have occurred after the world’s biggest company lost $40 billion in market cap, following a disastrous earnings report, to be limited to about 8 points.Likewise, USDJPY continues to be pressed into service to prop stocks up, even though its influence has been overshadowed by CL’s.  Often, like Friday’s massive 2.4% spike, its actions are designed to compensate for CL’s weakness.And, like CL, its spikes are generally confined to market hours in order to have the greatest impact on stocks.  After hours, when futures are more easily propped up, it’s reset in order to be ready to repeat the charade the following day.

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With the FOMC announcement coming tomorrow, we can expect every move from here on out to revolve around the question of whether or not they’ll entertain a rate rise in June.  Given the overwhelming weakness in both earnings and macro, it hardly seems possible.  Yet, they’ve been talking up a storm, trying to portray it as a viable option.  Why is that?

Could it be the US dollar, which has had one heck of a time regaining any momentum.  The chart illustrates a continuous prop job over the past two weeks.  Imagine that, the world’s reserve currency needing to be propped up. continued for members… (more…)

We should get the follow through to Friday’s downside target today.  Beyond that, it depends on how much CL and USDJPY are ramped as the “market” opens.

USDJPY hit our upside target on Sunday, then tested the waters on a reversal until the eminis began to sell off in earnest before rebounding to its SMA5 200.  Interpretation: more downside.

While CL continues to conveniently ramp just as the daily session opens, giving stocks a boost until, conveniently again, the “market” closes.The past few days illustrate how CL is being recycled to provide its timely daily boost, then reset overnight.

Anyone who has read any of our many articles on BoJ intervention, or yesterday’s Bloomberg article on how the BoJ has become a top-10 owner of 90% of the Nikkei 225, should have no trouble putting two and two together.  A good primer:

How to Engineer a Rally

Bottom line: these daily CL ramps are without doubt the handiwork of the BoJ, probably in concert with other central banks.  Of course, we’ll potentially get another dose of central bank reality with both the Fed and BoJ meeting this week.

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The USDJPY is soaring after the latest machinations out of Japan (rumors of helicopter money), and the futures are yawning.

But, even so, the S&P 500 futures are actually off a little — very unusual behavior for a “market” fueled almost entirely by USDJPY and CL.

CL, for its part, is currently up 1.5% — a very typical snapback rally after losing trend overnight.  Still, ES isn’t responding.

I’d like to think it’s because TPTB would like us to nail our next downside target.  But, I suspect something more important is at work.

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The EURUSD did an about face this morning, as everybody and their uncle seems to have front run the ECB yet again (I’ll be surprised, one day, when it doesn’t happen.)The hilarious part is that the USD decline occurred right in the middle of a (rare) CL decline.  Our forecast had called for a declining dollar, so we’ll overlook the obvious incongruity.  Since when does anything involving CL make sense anymore?

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With the narrative so egregiously inconsistent with reality, even central bankers are having a hard time maintaining a straight face while propping up oil.  And, the credibility ship sailed a long time ago for these guys.

With CL going sideways overnight (the equivalent of a disaster in any other security), it’s back to propping up stocks with a good old fashioned USDJPY ramp.  It was good for 12 points on the eminis overnight.

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Sometimes, I take no joy in being right.  Such was the case yesterday, when CL’s utterly nonsensical rebound led stocks to new highs.

…just watch CL’s rebounds during today’s session.  I promise you that one will occur every time SPX starts plunging just a little too fast.

The rebound was good for 20 points on SPX, and 30 points on the eminis.  Even if TPTB bought every single contract on the push through the SMA200, it would amount to only $324MM in margin (which central banks needn’t pay, of course.)

That, in turn, pushed $150B in e-minis 0.75% higher (about $1.125B) and $20 trillion in the S&P 500 0.75% higher (about $150B.)  Not a bad return on your money for a little harmless intervention.

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