After a couple of months of less than normal manipulation, February has been an exercise in just how far TPTB can/will go in propping up prices.  The chief culprit has been CL, which came within a few pennies of our ridiculous upside target Friday.

It ramped again off its overnight lows (+3.7% in 5 hours) allowing ES to turn yesterday’s 20-pt loss into a 2.50 point gain this morning.    continued for members… (more…)

We left off yesterday with a rather bullish forecast through the end of the month based on CL and USDJPY continuing to push higher.  They both have, and futures have responded in kind.

Note that CL exceeded the Feb 18 highs, invalidating a significant downside Fib Pattern, and will do the same to Jan 28’s when it reaches our 34.82 target.  If you’ll forgive a small pun, it’s been crude but effective.

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SPX plunged to just past our 1897 target yesterday, putting in a massive reversal that left it green on the day.  The reason, as most now recognize, was the 6% spike in CL.   We’ve been writing about this a lot lately [see: Manipulation Becoming Laughably Obvious.] But, of course, it’s no laughing matter.  The stock market isn’t a market anymore when central bankers or their lackeys can essentially set the level of the SPX or DJIA by throwing billions into the oil futures market any time they get a little nervous.

Today, we see another example of that.  On a day when durable goods order data are so far above expectations that it practically screams “rate hike,” we see the market rally again on the opening.  Why?  CL’s tag team partner: the yen carry trade.The USDJPY — which also rallied sharply yesterday — has continued on above the bottom of the purple channel from 2011, broken out of the falling red channel, and broken back into the falling white channel that has guided its demise since November — all, to turn around what could have been an ugly open.Not to worry.  The “market” has a lot of back-filling to do.

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Much has happened since our bottom call on Feb 11.  USDJPY shot up from 110.97 to 114.87 in 4 sessions.  CL spiked 31% in 6.  And, SPX tacked on 6.7%, climbing back on top of some key overhead resistance.

But, the underpinnings of the rally are crumbling.  USDJPY has lost nearly 88.8% of its gains — calling the yen carry trades health into serious question.CL — almost half of its (despite the rumors which sent it soaring being disproved.)  For its part, SPX has dropped a mere 20% — propped up primarily by intra-day CL and NKD ramping.

As the algo drivers continue to tumble, we can expect SPX to at least test our downside target floated earlier this week, and possibly drop through it.

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Without a doubt, there were plenty of fundamental reasons for oil to crash.  For an excellent summary, check out Jesse Colombo’s June 9, 2014 (as in you had ample warning) article HERE.

I’m also fond of the notion that it had a lot to do with the yen carry trade [what’s this?]  In order to sell the BoJ on devaluing the yen and, thus, supporting the YCT, The Powers That Be had to make it politically acceptable.

The cheaper the yen gets, the more expensive oil (which is priced in USD) becomes.  Remember, Japan was already reeling from higher energy expenses in the wake of the Fukushima disaster.  CL had been steadily climbing ever since the nukes went offline.

What better quid pro quo than to crash oil prices in exchange for the BoJ crashing the yen?

USDJPY rallied from 101 to 107, and SPX rallied from 1911 to 2134.  It had the added benefit of thumping the oil producing countries’ and Russian economies.

Tin foil hat, stuff?  For sure.  But, it’s an interesting thought…

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Final 24 hours for our membership promotion…  If you’re tired of taking cues from perpetually bullish talking heads, this is a great time to take the plunge.  Volatility is high, and we’re racking up some great results [see: HERE.]

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The next time someone tells you that the price of oil has nothing to do with the stock market, tell them that they’re dead wrong on two counts:

1.  propping up CL is all it takes to prop up stocks;

2.  given #1, the stock market can hardly be considered a “market.”

We started writing about this kind of manipulation months ago [see: CL Algo Madness.]  But, lately, it’s become laughably obvious.  This tells me that The Powers That Be are getting desperate.

This should not be interpreted as “the market is about to crash.”  I mean, it might.  But, it doesn’t have to.  As long as TPTB are willing to pay the price, they can keep the crap game afloat.  As we illustrated yesterday, it’s fairly straightforward.  It’s just not cheap.*

Fortunately for the guys who script this crap, funding is cheap.  Investors all over the world are now paying central banks interest for the privilege of investing in their bonds.

The Bank of Japan was the most recent grand prize winner.  Technically bankrupt, it has the most to gain — and, the most to lose when it collapses.

That’s right.  It will end in tears.  But, what central banker has the balls to stand up and admit it?  It’s much easier to continue easing, ostensibly for the sake of combating disinflation and promoting full employment.

With any luck, you’ll collect a $1 million advance for a book in which you can blame the meltdown on your successor and tell everybody just how courageous you were.

The ironic thing is that central bankers who made this manipulation possible in the first place.  By crashing oil [my personal tin foil hat theory, EXPLAINED HERE] they scared the crap out of banks, investors, oil companies, derivatives underwriters, etc. — exposing them to potential massive losses.

It got out of hand, and now those potential losses are becoming very real.  So, any rebound in CL is enough to get the algos all excited — which, of course, means the “market” gets and warm and giggly.

* As for the cost, consider that it took a 31.2% ramp in CL to produce a 6.7% rally in SPX.  And, lest you think these are isolated incidents, note that CL ramps featured in every single SPX rally or stabilization since Feb 11 — the day we called a bottom in CL [see: USDJPY Finally Relents.]

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Final 24 hours for our membership promotion…  If you’re tired of taking cues from perpetually bullish talking heads, this is a great time to take the plunge.  Volatility is high, and we’re racking up some great results [see: HERE.]

Pebblewriter.com has provided uncannily accurate market guidance since our first post on May 2, 2011 where we noted a top was close (May 2 was the top) to our latest top call on May 19, 2015 [we were one day early, see: The Last Big Butterfly] and our latest bottom call on Feb 11 [see: USDJPY Finally Relents.]

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Is there a way TPTB can erase the damage done over the past few months and have SPX resume its bullish ways?  Consider that SPX is back above the neckline of a large H&S Pattern, back above the midline of a rising channel dating back to the 2009 lows, and back above the midline of the channels that have guided the decline since last May.

The cost of getting here, however, was substantial.  USDJPY required a strong rebound (sorry, Japanese consumers and manufacturers.) Interest rates also had to rebound strongly (sorry, borrowers.)  And, most importantly, CL had to bounce an insane 31% off its Feb 23 lows.  Think about that next time you’re filling up the Family Truckster.continuing… (more…)

 

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Final 48 hours for our membership promotion…  If you’re tired of taking cues from the clueless talking heads, this is a great time to take the plunge.  Volatility is high, and we’re racking up some great results [see: HERE.]

Pebblewriter.com has provided uncannily accurate market guidance since our first post on May 2, 2011 where we noted a top was close (May 2 was the top) to our latest top call on May 19, 2015 [we were one day early, see: The Last Big Butterfly] and our latest bottom call on Feb 11 [see: USDJPY Finally Relents.]

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With nonsensical policies failing to create any real upward momentum in global economies, central bankers have resorted to what they do best: overnight ramp jobs.

USDJPY has bounced over 1%, back above the falling white channel bottom after testing the rising purple channel from 2011.And, CL has rebounded over 5% off last week’s downside target of 31.47. continued for members…

Look for SPX to test Friday’s upside target of 1936.32 in its opening salvo.This will get it up past the falling white channel midline and the falling purple TL.  Then, we’ll look for some backtesting and consolidation and further ramping up to the SMA50 — probably tomorrow.

Once the SMA50 is topped, the upside case shifts to the purple .618/SMA100 combo at 1999, followed by the white channel top and purple .786 at 2050 in late March.  An alternate target is the .786 of the drop from 2134 to 2010 at 2065.

Either is legitimate, but 2065 means SPX will have broken out of the white channel — which is, of course, the path the central planners have in mind.

UPDATE:  9:33 AM

There’s our initial target.  Shorting here for the moving averages to catch up.UPDATE:  9:35 AM

Stopped out.  Back to cash.UPDATE:  9:37 AM

Just tagged the gray channel top.  This looks like a reasonable place to pause. I’ll revert to short here at 1941.38.UPDATE:  9:44 AM

Looks like they’re determined to bust ES 1940 to stop out a few folks and to establish a higher high for wave purposes.  Watch your stops.9:49 AM UPDATE

Just topped ES 1940 — backing off now that the trend is established.  ES/SPX should settle a bit until the SMA5 10s catch up.  CL has increased exponentially this morning.  It’ll probably test 33.88 before it’s all over, but maybe after some backtesting.And, USDJPY is already settling lower.UPDATE:  10:01 AM

So far, it’s shaping up as a repeat of the ramp sessions from last week: big gap open in the morning, and solid support until the SMAs arrive to drive it further.  Back to cash until we get some support, at which I’ll probably look for a long entry point.It appears ES is now going for its SMA50 up at 1944.23.UPDATE:  10:15 AM

SMA5 10 caught up.   Will probably look for an entry point when the SMA5 20 catches up.This is how it looked last Wednesday.  Note the slight dip below the red SMA5 10, a bounce back above, then a drip to the white SMA5 20 — at which point it got back on top of the SMA5 10 for a 7 point bounce.  It faltered at that point, but only dropped to support by the rising purple SMA5 50.  UPDATE:  10:58 AM

USDJPY and CL are testing support, SPX should test the white SMA5 20 and the gray channel top and then bounce.  Ideally, CL will tag its SMA5 50 or the purple TL around 33.31-33.35. UPDATE:  11:06 AM

ES just tagged its SMA5 100 — a decent sign that this horrific 6-pt slide is over.  I’ll try a long position here at 1939.51.UPDATE:  12:10 PM

CL just dipped below the purple TL, so I’d go back to cash here.Shorting would make sense — except for the fact that USDJPY is breaking out…UPDATE:  3:00 PM

SPX has been riding the rising SMAs all day.  There’s about a 50:50 chance it’ll dip at the close to either the red .500 at 1936.22 or the purple TL at 1930ish.  I’ll take a chance on a short position here at 1942.47 with tight stops in case it ramps up to 1954.05. UPDATE: 3:28 PM

SPX rallying past SMA5 20/50 on NKD bump.  Back to cash here at 1942.36.UPDATE:  3:47 PM

Last try.  Back to short here at 1944.44.  I like the idea of a tag of the SMA5 100 at the red .500 fib at 1936.32 as a headfake to set up a pop in the morning — though the sell-off itself could just as easily happen in the morning.No point in holding short overnight, though.  We’ve seen way too many overnight ramp jobs lately.

UPDATE:  3:57 PM

Not happening.  Back to cash.UPDATE:  4:53 PM

Algos put to bed for the time being…  probably just a coincidence that the prop job ended the very minute SPX closed for the day.  Looks like it would have nailed the white target at 1936ish.  Oh, well…

Time for a quick update on the big picture.  When USDJPY and CL bottomed on Feb 11, we called for and got a sharp rally.  CL responded with a 31% spike, while USDJPY rebounded 3.5%.  SPX tagged on 120 points for 6.6%.

We’re at the point now where the bounce can do one of three things: (1) backtest support, (2) push through the next line of resistance, or (3) fail and produce new lows.  The ES 60-min chart illustrates:

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