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.

continued for members…Look for USDJPY to rebound from the yellow channel bottom and CL to do its part to limit the fallout to SPX — already 10 points off its overnight lows.SPX should try to hold the purple TL (2085ish) off Monday and Wednesday’s lows.  If it can’t then our SMA20 target at 2075.24 is in play.

UPDATE:  9:42 AM

Looks like they’re intending to halt it at an even more convenient TL — so, 2086.09 versus 2085.  Back to cash here, though I’d readily reopen it with any drop through the SMA5 200 at 2088.86 or, alternatively, if SPX/ES reverse at the top of their falling white channels (2091 for SPX.) I suspect, however, that CL  and USDJPY will suddenly get a burst of energy as that moment approaches. For the BoJ, which owns plenty of US stocks, too, it’s all about preserving the NKD.  Right now, that translates into keeping it above the midline of the falling purple channel.UPDATE:  9:54 AM

SPX and ES just reached the top of the white channels as well as their SMA10s.  If it’s going to reverse, this is the spot.  Nimble traders could short here with tight stops, but, the safer play would be to wait for a drop through the SMA5 200 — a more sure sign that there are lower lows to come.Central bankers all over the world are throwing a lot of freshly printed money at propping this thing up, and I’d be surprised if they don’t intend to close it back above the white channel today.  A gap close at 2094.4 is almost a certainty.

At this point, I’m going to go back to bed.  I have a 102 fever and my quite empty stomach is doing flip flops after a night spent praying to the porcelain god.  Conclusion: sometimes there’s a reason why there’s only one egg salad sandwich left on an otherwise empty shelf at Starbucks…

I’ll hopefully be able to check in later as things develop.  GLTA.

UPDATE:  10:10 AM

Logging out and noticed that SPX just closed its gap.  It could reverse her, but I think they’ll pull out all the stops in order to demonstrate how this latest action by BoJ is not a mistake, that only the traders who shorted the “market” last night were mistaken. All they have to do is keep USDJPY slowly rising through the rest of the session.  The only question is whether the cost is worth it, or they feel they could make their point just as aptly at the SMA20.  Odds are they’ll try to hold these levels today, and only allow the SMA20 tag after it is up above Monday’s lows (2077.52) in a few days.  Keep an eye on what happens when (1) SPX tries to backtest the white channel and red channel midline at 2090.60ish or SMA10 at 2091.87, and, (2) if USDJPY can hold the SMA5 20, or at least the SMA5 50 currently around 108.305.

UPDATE:  3:26 PM

Just got woken up by an alarm set on TOS.  Looks like SPX tagged the SMA20.  I’d take profits here on the short that you hopefully executed when it dropped through the SMA5 200.  The yellow .786 is still a possibility, but it could also wait until tomorrow.If it drops through the white channel bottom around 2072, then it’s probably headed for 2063.48-2065.25 and is worth re-shorting.

UPDATE:  3:52 PM

Looks like it’s pushing through to lower.  I’d short again here for 2063-2065 at the close.  But, I wouldn’t stay short overnight.Note that ES has Fib support at 2063.06, which is about SPX 2068.

UPDATE:  3:59 PM

Looks like they’re going to call it a day (or, truncated 5th) here.  Back to cash, unless you can hedge or watch it closely overnight.  The .786 at 2065.25 is a very good bet.UPDATE:  EOD

Updated chart with additional downside targets if it slips below the .786…I’m heading back to bed.  Thanks for the well-wishes…hope to be back in the saddle tomorrow.