USDJPY has popped 2.7% since Friday’s lows on the back of BoJ pronouncements that “of course, [they] could intervene in the currency markets.”

This, of course, is code for “of course, we can manipulate equity markets.”  And, so, despite continuing weakness in CL, we see S&P 500 futures popping overnight.  Can it last?  Of course not.  With oil at $44, a weakening yen imposes a heavy burden on Japanese businesses and consumers alike.

But, bottom line, their equity book is obviously much more important than their economy.  That means we’ll continue to see plenty of intervention, especially if all it takes is talk — and, especially when SPX has completed bearish patterns such as last week’s H&S.

continued for members…Look for SPX to test the SMA10 (2069.03)  this morning.  If it pops through, then we have to consider the .786 channel line at 2071 and, eventually, the channel top.  It’s currently at 2081, but it’s falling steeply enough that it’s down to the SMA20 at 2078 by midday tomorrow.

Much will depend on whether USDJPY can hold these levels.  It’s already showing signs of falling out of the rising purple channel.And, CL should continue to settle lower on the turmoil in the Saudi management and the negative comments out of Russia overnight.  But, it’s ramping now in advance of the API inventory report due out at 4:30 ET.  In other words — after the “market” closes.UPDATE:  9:36 AM

That should do it for the initial push.  Shorting here.UPDATE:  9:46 AM

Stopped out.  Going to cash until the ramp is over.I expected CL to reverse at the white channel midline, but it keeps slipping higher. UPDATE:  9:50 AM

SPX could reverse here at the channel top and catch down to the SMA5 10 at 2069.  Worth a shot at shorting with tight stops.So far, CL is setting up as a repeat of Friday – popping above resistance and forcing SPX to do the same.  Otherwise, we’d have seen some reaction by SPX at its falling white channel line.

UPDATE:  10:02 AM

SPX has dug its heels in at current prices, waiting for the SMA5 10 to arrive and offer support.  My best guess is at the SMA10 at 2069.03, but a nice head fake would be the purple channel midline at 2067 with the arrival of the SMA20.CL is backing off its earlier highs, but USDJPY is ramping now.  We might get 5 points out of the short if we’re lucky – depending on when they allow it to settle lower. If they can hold the rally together throughout the session, then the SMA20 at 2078.32 and the white channel top at, say, 2080 (around 1:15 PM) are definitely achievable.  I don’t see them trying to break out of the rising white channel (it’s plenty steep as it is) but, merely push higher within it.

UPDATE:  10:18 AM

Still pushing higher on a renewed levitation by CL.  Watch your stops.Note that VIX gapped down to a level that might offer support.But, NKD is popping again.  I’m feeling increasingly vulnerable here, so will probably dump the short if it doesn’t start down pretty soon.

UPDATE:  10:32 AM

I’m bailing on the short here, as CL is bouncing at the red TL just enough to drive SPX higher.  It’s already on a hair trigger, and it wouldn’t take much to send it 3-5 points higher.

UPDATE:  11:58 AM

With SPX at the SMA20, CL suddenly dipped below the white TL.  It has already backtested it and is dropping further.  SPX has 1 1/2 points to go to reach the white channel top, but I’d feel safe shorting here. Note that VIX has completed a deep, .886 retracement of its rise from 13.3. UPDATE:  1:06 PM

More of the same.  SPX would like to reverse here, but CL and USDJPY are being used to prop it up.  At this point, it can be considered to have tagged the falling white channel.  So, it’s either a breakout or breakdown from here forward. Note USDJPY’s breakout of the rising white channel — a common device which is used to prove just how “incredibly bullish” things are.  Of course, at this point, one has to start thinking about the purple .618,The falling white channel again…I have to be away for 30-45 minutes, so watch your stops.  Ideally, we’d see SPX fall back to the purple midline (currently 2072 and rising.)  But, the way things are going, they might try to hold it at these levels all day.

UPDATE:  2:36 PM

Giving up on the short, as CL just popped up through its SMA10 and seems likely to stay there.  That’s three strikes for me, today, so I’ll likely spend the rest of the day in cash.