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SPX nailed the upper end of our initial target range on Wednesday, and the bottom of it yesterday — both on a pop-and-drop as expected.  But, I was disappointed not to have reached the overshoot target we discussed in yesterday morning’s post:

While 1887.87 was the upper end of our range, 1880 was the lower end…where the actual neckline of the huge H&S Pattern crosses.  Even then, it’s not carved in stone.  H&S Patterns often complete and then some before TPTB snap it back into place back above the neckline.  So, the ultimate downside for this move, if it hasn’t registered already, could well come intraday at the white .886 at 1856.46…

After tagging 1880, we spent the next hour or so wondering whether or not another leg down would materialize and allow the 1856 tag.  But, the algos took over, driven by CL, USDJPY and NKD.  VIX and TNX even got into the act as TPTB saw an opportunity to reframe some bearish chart patterns.

Though we registered nearly a 3% gain on the day, it was somewhat disappointing to think that the market had resumed its role as a “market.”  On the eve of OPEX, it seemed that 1856 would at least be postponed to Monday — which just goes to show how constant manipulation can warp our expectations.

What a difference a day — or, at least, new lows in USDJPY — makes.  This morning, we will be well on our way to that next downside target courtesy of BoJ’s Kuroda who, when asked last night why he’s not propping up the market, replied “wait, I thought the Fed had that!”

The e-minis are off almost 50 points, and with 15 minutes to go aren’t exactly bouncing.

All this begs the question: “if/when we reach 1856, will the carnage end there?”

continued for members…USDJPY, which had already reached the .886 retrace of its August lows, just pushed lower this morning……which has NKD making new lows (though it just tagged an important .618.)And, CL hasn’t yet broken down, but hasn’t shown any interest in saving stocks, at least yet. I’d start short, obviously, and look for the initial push to test yesterday’s lows, possibly pushing below on the initial thrust.  If it blows past 1880, then we could go straight to 1856.  But, it’s more likely the initial drop will be somewhat salvaged for a few hours until a final dump into the close at 1856.  Whether it’ll bounce back above the neckline at 1880, I’m not sure.  There’s a pretty good chance it’ll close below.

But, will it mean anything?  I’ll be watching to see whether TNX can close above 2.02 and NKD above 16826 — the best indicators I know of at the moment.  In other words, a close above the neckline doesn’t guarantee no further losses; and, a close below it doesn’t guarantee a crash.

Stay tuned.

UPDATE:  9:35 AM

That’s pretty darned close to yesterday’s lows.  I’d take profits here at 1881.86 and see whether it has more to go or will bounce first.  We should get a bounce up to the white midline around 1887.UPDATE:  9:40 AM

Just started down again.  Back to short here.UPDATE:  9:42 AM

Head fake to run some stops.  Back to cash.  Keep an eye on CL and USDJPY as always.  CL will head for or top the white TL in order to boost stocks.  And, USDJPY has this falling red channel to play with. Then, there’s ES itself, which jumped by 20 points in the opening minutes in order to slow and, ultimately, stop SPX’s decline.  Record volume probably went into that maneuver.

As it settles back, we have to wait and see whether the rising SMAs will provide support or go ahead and allow another leg down.UPDATE:  10:00 AM

Looks like its breaking down again.  Back to short here at 1879.56.The un-supporting cast.  Note they each has similar patterns yesterday, and simply broke back above their TLs when TPTB decided things had fallen enough.  Watch out for replay. UPDATE:  10:20 AM

USDJPY pushing up through that resistance.  Dumping the short position here as SPX is likely to retest the channel midline.  A swing position targeting 1856 is probably safe, but after yesterday I can’t get excited about ignoring USDJPY and CL’s ramping.UPDATE:  10:33 AM

I’ll give it one last try, shorting here at the midline (1886.03) to see if it can push lower.  With the SMA20 approaching, it’s iffy.  So, tight stops please.

Note that NKD’s SMA5 50 has been a pretty good indicator of reversals. ES concerns me, as that SMA5 100 might prove too tempting a target.And, VIX, which completed a little Butterfly this morning, has very little support if it decides to close the gap.UPDATE:  10:42 AM

Massive spike in VIX just now.  It lasted all of 8 seconds.UPDATE:  11:52 AM

ES has formed 5/6 of a H&S targeting its 1.618 at 1846.78.  It would correlate relatively closely to SPX 1856 — it they just stopped propping it up.  I suspect it’s more of a timing issue than anything else.It’s entirely possible we’ll get a bounce at the 1.272 at 1863 first, as this is being very carefully controlled., primarily by USDJPY.

UPDATE:  12:26 PM

SPX just tagged the white 1.272.  I’d take profits here at 1862.60 and see if we get a bounce.UPDATE:  12:31 PM

Looks like it’s not waiting.  I’d go ahead and revert to short here at 1863.43.UPDATE:  12:42 PM

I think that’s probably close enough.  I’ll close the short here at 1858.83.

UPDATE:  1:21 PM

And, that’s all the bounce I’m sure about.  Odds are there’s more — up tot he neckline at 1881 anyway — but, there’s at least a 50:50 chance of it heading back down and actually tagging or closing at 1856.46 or lower.  So, I’m going to cash here at 1872.16.It’s been a long and fruitful week.  I show us up 2.73% on the day, which makes for 19.52% on the month.  Ridonculous, as my teenage daughter would say.  I’ve been up since 3AM, so I’m going to knock off for the day and try to get some energy back for more overdue charts: oil and gold.  Hopefully tonight.

For those who are thirsty for more, USDJPY and CL are still pointing lower.  As long as USDJPY remains in that falling red channel and CL the falling white channel and NKD below the white SMA5 20, there ought to be an actual tag of 1856.46 or lower.  But, keep an eye on VIX just in case they go for a last minute monkey-hammering to get back to the H&S neckline at 1880 or so. Until later…cheers!