SPX and ES nailed our downside targets yesterday, bringing our month-to-date performance to a tasty 6.77% — an 11.71% margin over SPX which has slumped 4.93%.   It’s the best start to a month we’ve had since September.After SPX reached our targets, the usual USDJPY- and CL-inspired ramp jobs failed to materialize.  In fact, every time they started to bounce, they were almost immediately brought back down.

We’ve seen this happen countless times in the past few months: SPX reaches an obvious turning point, but isn’t permitted to react during the session.  Instead, the reaction occurs overnight in the futures market, when the average Joe is precluded from participating.

As the session wound down yesterday, I wrote:

So, what’ll probably happen here is a close at or near 1940-1943.  Then, around 3AM ET, something wonderful and miraculous will happen that sends ES up about 40-50 points. I’m thinking 1980ish.

Sure, enough, ES rallied as much as 36.25 overnight on no particular news — just the fact that CL is back above its 2009 lows and USDJPY had a massive bounce off its intraday lows.Will it last?

continued for members…I think so.  In fact, my expectation is for a very strong rebound in order to prevent another death cross in SPX.  Note the SMA50 (blue) is curling back toward the SMA200 (thick red) in the chart below.  The last time it fell below, some very bad things happened to bulls.

As I pointed out yesterday, SPX and ES both tagged the bottom of channels going all the way back to 2009.  These are trends that should be maintained.

What I don’t know if the mindset of Kuroda and Abe — whose USDJPY remains the key to any sustained upside.  It’s till below the critical 120.11 Fib.  As long as it’s bumping along sideways, stocks will have a hard time recovering.

I’d be long on the open, with an expectation of reaching the purple .618 at 1962.31.  And, if it’s breached, the bottom of the red Flag Pattern back at 1981ish.

I’ll be watching CL, which has backed off its initial gains that essentially backtested the broken purple channel bottom……and, USDJPY, which is progressing nicely up through the falling white channel in a new purple channel.UPDATE:  9:36 AM

Off to a good start, but CL and USDJPY are putting the brakes on a bit. UPDATE:  9:46 AM

Keep an eye on CL.  It is back below 33.20 — the 2009 low — which has apparently become the method by which TPTB will signal the “market” higher or lower much the same way USDJPY at 120.11 did for many months.  Here, it was used to make sure that SPX backtested the support of its rising 5-min MAs.

BTW, the rising white channel I sketched in earlier for CL is a little suspect.  The true placement will probably be determined by how far it falls in the next hour or so.  Here’s an alternative that I like a little better.UPDATE: 10:05 AM

ES just tested its channel bottom as SPX backtested its SMA5 20.  If it breaks through, I’d want to dump the SPX long position. UPDATE:  10:08 AM

It did, so I am.  Back to cash here at 1948.02.  Though, I would jump right back in if SPX regains the SMA20 — currently at 1948.84 — or if ES bounced right back through that channel midline.

UPDATE:  10:15 AM

While the top of USDJPY’s rising channel is pretty clear, the bottom is a mess.  But, it just pushed through the .618 retracement of yesterday’s lows — which isn’t all that bullish.  For its part, CL seemed to like that revised channel bottom. If SPX can push back through the SMA resistance, I’ll gladly go back to long.  But, USDJPY has yet to start bouncing — a huge problem as stated earlier.

UPDATE:  10:21 AM

ES is still thinking about it, but USDJPY and CL are potentially bouncing.   A more precise channel off its lows at 1700 yesterday leaves USDJPY out of room for further downside. I’ll try a long position here at 1946.02 with very tight stops. 

I’d imagine there are a lot of carry trades unwinding right now with its recent losses.  This bounce is going to cost TPTB. UPDATE:  10:28 AM

Do or die time for SPX.UPDATE:  10:40 AM

It just ain’t happening.  Back to cash if it breaks through the channel bottom here at 1946.01.USDJPY and CL can’t seem to get out of their own way — certainly not showing any signs of supporting a strong rally yet. UPDATE:  10:53 AM

No joy.  I’m going to cash here at 1947.46 and will wait for something to get excited about one way or the other.UPDATE:  11:28 AM

This is interesting.  USDJPY just broke down below it’s TL off yesterday’s lows, and SPX followed it lower.  ES is just about there, too.  This is a bearish development that suggests a short position, but I’m concerned that it could be just a stop running exercise.  CL, in particular, hasn’t broken down.  So, I’d stay on the sidelines for now – even if it means missing out on a nice short.  If USDJPY makes new lows, then I’ll start getting excited about serious downside. UPDATE:  11:36 AM

I’ll play the bounce off the purple channel bottom here at 1933.75.  Back to long, with tight stops.  If it does bounce, I’ll be looking for the SMA5 10 or 20, currently at 1941.87 and 1944.76.

The timing might be right.  Europe just closed for the weekend, meaning anyone that was slightly nervous about the S&P losing 5% so far this week was probably selling to avoid the weekend risk.

UPDATE:  11:56 AM

About to tag the SMA20 at 1943.46. We’ll watch for signs of a reversal there.

UPDATE:  12:00 PM

Safely through the SMA20.  On to the red .618 at 1947.07?  Note that this is the purple channel bottom, so technically it’s a backtest.  This is a nice bounce, so I think I’ll take profits here at 1943.23 and see if it can gather more strength for another leg up.

UPDATE:  12:05 PM

Still going, so I’m back to long for 1946.26 and potentially 1952.16.UPDATE:  12:11 PM

I think I’ll take profits here at the SMA50/.618.  This Fib level is the most common target when we get a strong reversal off of 1.272 extensions.I do expect another leg up to 1952.16, possibly in the next 30 minutes.  But, I think we should get at least a breather here.

UPDATE:  12:17 PM

I think we’re going to get the rest of this move right now.  Back to long at 1946.78 for 1952.16. UPDATE: 12:20 PM

May have goofed on that last call.  ES is about to run into a backtest of its broken channel, well before SPX does.  This could be all over at ES 1942.35.  I’ll be looking to go back to cash there unless it blasts through. UPDATE:  12:30 PM

Yep, sorry about that.  I should have noticed the ES backtest.  Back to cash here at 1950.25. I have to admit, folks, I’ve felt half a step behind all day.  It was a late night, and it’s been a long week.  Since we’re up some, I’m going to take a little break and see if I can get my energy back.

I should be back in 30-60 minutes.  I continue to feel we’re going to get a nice bounce off the purple channel bottom, but the day could close ugly again just fake everyone out.

More later.

UPDATE:  2:39 PM

If I were an evil Master of the Universe, had many billions at my disposal and had no compunctions about manipulating the “market” I would close SPX just below the key channel line from 2009 (currently at 1944.29) and convince millions of muppets that the sky was falling.

I would be buying their call options and selling them put options left and right, and I would amass a large, leveraged bullish position in the process.

Then, on Sunday night I would shove USDJPY or CL much higher — maybe with some BS report that made it seem logical, or not — which would ramp ES up by 40-50 points prior to the open.  I would sell as the bulls came rushing back in (as they’re stopped out of course) and go pay cash for that new Hylas 63 I’ve had my eye on.

Of course, I have no billions, no minions and no muppets at my disposal.  I’m just a guy who’s been ripped off my such people on too many occasions.  And, as bearish as I might feel right now, I can’t bring myself to scream “SELL!”    I’d stay in cash unless SPX breaks out of its falling wedge.  And, even then, I’d maintain tight stops and go back to cash before the weekend.

Note that SPX is now fairly oversold.  The only other times it has pushed this low in the past few years, it either bounced quite significantly or plunge much deeper.  Why place that bet on a Friday afternoon?