Friday saw SPX tag first one, and then the other, of our downside targets — completing one of our most successful weeks this year.We’re back to sizable pre-opening ramp jobs, with the eminis currently showing a 13-pt gain with about 10 minutes to go. The culprit is USJPY, which broke channel support on Friday, but magically levitated overnight and is safely back in the non-sensical red channel.

continued for members…

This recovery is significant, in that it is back above the neckline of the IH&S we were following last week, and takes the pair that much further away from the key 100 and 200-day moving averages.

Going around the horn:

VIX dropped back into the safe zone just prior to the close on Friday.

DX continues to behave predictably, remaining in the rising red channel (bullish for USDJPY.)  CL just tanked in the last hour, and is back inside the falling purple channel — a net recovery from its weekend jaunt.  The key for bulls will be to hold that channel moving forward — even if it is falling.Whether or not it does, the larger trend remains negative.  As we’ve discussed before, TPTB need cheaper oil if the yen is to undergo another round of devaluation to service the carry trade.

Last, SPX appears headed for the tight cluster of SMAs between 2096-2098.  We might see a good opportunity to short there.UPDATE:  9:35 AM

The key to whether or not it can punch through will be USDJPY and its unorthodox and suspect recovery.

UPDATE:  9:55 AM

SPX has topped the SMA100 and appears to have a few more room to go.  Considering dumping the short here, as CL is making a move… …and VIX is being quite active this morning.The only thing making me question it is USDJPY, which has gone absolutely nowhere since making the bullish move to kick off the ramp earlier.  It tagged the red midline and came to a dead stop, making us wonder whether the rally will fade as fast as it materialized.

I’ll give it a little more leash and see what happens at 10:00.

UPDATE:  10:15 AM

CL continues to climb, with little overhead resistance until 44.68… …and, USDJPY is hinting at climbing the underbelly of the red midline throughout the session — just enough to stay above the (now) support of the SMAs.I assume it’s pretty obvious to all what’s happening.  The question is whether or not TPTB will permit a reasonable pullback in observance of the SMAs.

Here’s a little better look at CL.  Note that the most important channel is the red one.  It has tested the red midline several times, and could very well pop up and tag the top again (white target.)  It also represents the top of the falling purple channel, and would break trend vis a vis the falling white channel — all in all, a very bullish move, and perhaps enough to push SPX to our 2134-2138 target without USDJPY’s help.

UPDATE:  10:38 AM

Probably spoke too soon on the short.  CL is backing off the purple midline and USDJPY is dipping below the neckline.  Should see some downside for SPX, but now there’s support at the SMA100 at 2097.61, the SMA50 at 2096.3 and the SMA10 at 2093.43.

SPX could bounce around for a while in the midst of all these moving averages, so I’d be inclined to stay on the sideline until there’s a clear signal one way or the other.  However, our analog still suggests a rally into Wednesday.  And, it seems to me that CL should be able to get it there with a little help from USDJPY.

For those longer-term investors who are holding on to our 2134-2138 upside target from last week, note that this morning’s move puts us halfway there from Friday’s lows.

UPDATE:  12:48 PM

SPX just reached the SMA20 at 2102.23.  This is the last moving average resistance, though there is TL and Fib resistance up ahead.

If USDJPY backs off the neckline some more and probes the lower 1/4 of the small red channel, we could see some downside here.However, CL continues to creep higher and appears headed for the larger white channel midline if not the top of the red/purple channels.UPDATE:  1:25 PM

USDJPY is finally dumping in sympathy to the DX…  …largely because EURUSD ran out of room to pick up the slack.CL is holding its ground…

…and, SPX remains firmly under the control of the algos at this point.

If we get USDJPY and CL both selling off at the same time, maybe we’ll see a backtest of the SMA100 before the EOD.  If not, it’ll likely happen overnight, so the momentum can keep going during trading hours.

UPDATE:  2:45 PM

The algos are finally showing some signs of fading momentum.  Watching to see if the tiny red channel breaks down.  Would take profits and go to cash here at 2103.60 (unless you can hedge overnight in anticipation of still higher prices.)CL reached the white midline, and also topped and backtested the purple midline.  In all, it was a 3.8% move off last night’s lows to today’s highs — enough to drive SPX 1.25% higher (so far.)

Because CL needed a breather (and, it closed) USDJPY suddenly came back to life — popping back above the yellow neckline.UPDATE:  3:52 PM

Still no movement despite a 38-point algo-fueled ramp off of Friday’s lows. Short overnight only if you can hedge.  Even then, lots of support in the SMAs.  Wednesday’s looking good for new highs. An A=C move to 2134 implies 2096ish. To the red .886 at 2124.92 implies 2086.