That master of incredulity stretching himself, Haruhiko Kuroda, insists that Japan will reach 2% CPI sometime in the next five years.

That was all the yen carry trade algos needed to hear.  USJDPY reached our initial upside target with ease, and is threatening to keep going.

The futures, which have really struggled to climb on top of the SMA10, took the opportunity to pile on 15 quick point, which is likely to shrink to 7 by the time the opening bell rings.

I highlighted the after-hours trading to make it perfectly clear where most of the upside has come from lately, and this latest “breakout” in particular.  With the help of USDJPY, CL and VIX, it’s just not that difficult to ramp the futures higher.

The real test comes when the volume ratchets up, and the meager few carbon-based investors remaining have an opportunity to assess things.  Lately, they have called BS on the overnight ramp jobs — but have been unable to follow through.

It almost came together yesterday, but VIX’s 10% plunge from its overnight highs and CL’s reversal from its breakdown (the red trendline below) combined with USDJPY’s spike to salvage the H&S necklines yet another day.Will today be the day?

continued for members…

The DXY seems to breaking out, but I suspect it’s just an intraday headfake.  Either that, or GC is about to break down.Likewise, TNX’s push above 3%. Note that the yield curve is backtesting its original bottom. The two critical charts to watch today: AAPL and VIX. AAPL is flirting with its SMA200……while VIX has established a little flag pattern that could break either way.  Between the two of them, we should know whether today is the day.BTW, I mentioned in the FAANGS post yesterday that GOOGL didn’t show any particular problems from a charting standpoint.  In taking a fresh look this morning, I see some issues with its RSI, MACD, and long term TLs.  It seems likely to reach its SMA200 today, and has a very good chance of dropping through it to the longest-term TL at around 1000.UPDATE:  11:50 AM

I continue to look at the COMP SMA200 scenario as driving markets for the moment.  The SMA200 has been climbing around 10 points per day, and will arrive at the .786 sometime in the next week or two.  FWIW, I consider it ripe for the picking right now.

The current 4.2% margin would translate into about 111 points for SPX, putting it at 2560.  I continue, however, to favor a larger drop that would result in a lower low — with 2460 being a perfectly logical, unmanipulated target.

Having said that, COMP is falling about 4X the rate of SPX today.  So, if TBPTB (the bullish powers that be) get their way, SPX will drop only 2.2% to its own SMA200 at 2608ish and call it a day.

Actually, that’s not quite accurate.  If they really get their way, SPX/ES will keep bouncing back to their necklines and the IH&S won’t break down.  We’ll see…Obviously, we’ll want to keep a close eye on SPX/ES as they approach their SMA200s, and COMP as it approaches its.  There are several loose ends with this scenario — with the biggest being what happens with DXY and TNX.

DXY is starting to take on the appearance of a rising channel which intersects with the top of the big, falling white channel at around 91.75 on May 14ish.

This is more of a move than ZN suggests, but would potentially fit with a breakdown of GC’s rising white channel in order to permit a SMA200 tag — currently 1302.20. It would obviously help USDJPY reach a full backtest of its broken white channel.  But, again, it’s not a great fit in terms of timing and key resistance.  It would also be problematic in terms of interest rates. So, I have my doubts.

UPDATE:  12:45 PM

COMP is closing in on its SMA200, has about 3% to go…SPX/ES about 1.5%.  All it would take is for VIX to pop out of this rising channel…  A few casulties…Note that AAPL has reached its initial support.UPDATE: 2:00 PM

ES is approaching the bottom of its rising white channel.  I haven’t seen this as all that important since it doesn’t look as solid on SPX and because COMP is still 2% away.

It looks likely that VIX will reach the channel top about the same time that SPX/ES reach their SMA200s.Note that RB and CL are still sitting at support – RB at trend line and CL at its SMA10 and the SMA60 200.  If SPX/ES are meant to bounce at their SMA200s, then CL and RB should be part of that.  If not, look for both to fall through their support.  Of course, as we approach the close, we have to start wondering about head fakes and overnight positions…I’m going to jump on a conference call, will be back before 3:30.

UPDATE:  3:40 PM

ES, SPX and DJI are bouncing a little, currently 1%ish above their SMA200s. While COMP is still 2.4% away.

VIX is positioning itself for another run at the channel top, circa 20.35.  By popping above it, it can generate more downside. By backtesting the little white channel, it’s suggesting a close above the SMA200s, with the rest of the downside tomorrow.It’s unlikely that ES, SPX and DJI won’t tag their SMA200s at all.  We could get a plunge through to the 2.4% target in sync with COMP, or we we could get the rest of it tomorrow.  Personally, I prefer a close at or below the SMA200s, as it would be the toughest to decipher.  But, the bulls will probably try to close above them.

Either way, I don’t believe we’re done with downside.  But, I have to mention that staying short carries the risk of a head fake and overnight ramp job. It could even be postponed for 2-3 days.  It’s happened hundreds of times over the past few years.   So, those staying short — you have been warned.

AMZN and FB  – about 2.4% away from TL support.  GOOGL only about 1.5%.

CL and RB – holding at support.  Could make a big difference tomorrow morning in helping COMP reach its goal or in helping ES/SPX avoid a similar fate.