There are 3 important charts to consider, today:

DX has reached the top of its falling channel.USDJPY is testing its 200-day moving average at the top of its new, expanded triangle.And, ES just tagged the .786 Fib, the bottom of the broken purple channel, and the .236 line of the rising white channel from 2009.   For now, at least, it has broken out of the falling white channel.  The trick will be remaining above it and maintaining momentum.

Given the stakes, it’s not hard to see why the world’s central banks are united in their efforts to direct our attention from disappointing revenues, overleveraged states and the fact that the “market’s” performance has been mostly driven by currency manipulation (the yen carry trade) and direct intervention in equities.

We looked yesterday at how it works [see: What Really Drives Stock Prices.] The question today is “will it work?”

continued for members…It should certainly be enough to get SPX up to its SMA200 today.  If they manage it correctly, it’ll be enough to test the .786 at 2077.45.

But, given the limits to the currency movements, it shouldn’t be enough to keep prices elevated — unless the BoJ plans on expanding QQE next Friday.From Deutsche Bank’s Jim Reid:

Confirming that central banks are far more eager to talk than to actually do anything, were comments overnight from that “other” country which is expected to boost QE, Japan, where Etsuro Honda, adviser to Japanese PM Shinzo Abe, said that “immediate additional easing by Bank of Japan is not necessary”, Kyodo reports, citing an interview.  Honda says if BOJ carried out additional easing it could be to increase annual JGB purchases to 100t yen from 80t yen; says “next additional easing would be last one.” Of note was his claim that economic measures to aid low income workers was needed due to weak individual consumption; and that fiscal measures are more effective than monetary easing.

Like yesterday, the situation is ripe for a pop and drop – especially if USDJPY can’t pop through the SMA200 at 120.947.

UPDATE:  9:40 AM

I’d cut the long position loose here at 2071.52 and see if we can’t get a backtest of the SMA200 at 2059.91.Keep a close eye on CL, which has dipped below the falling purple wedge apex.  It declined past support yesterday (white arrow), then used a push back above it to goose the algos.UPDATE:  10:05 AM

SPX pushed up to tag the .786 and is falling back…   … even as USDJPY acts like it’s breaking out.DX is at the channel top… …and EURUSD has exceeded its channel bottom.  In other words, the carry trade is currently out of gas unless there’s to be a breakout.

Even VIX suggests a pullback here.CL, however, is rumbling back to life.  It’s what I would use to force prices higher or, at least, prevent a drop to 2059.91.  But, given that the falling channel tops are in the rear-view, perhaps they’ll allow a backtest here.

UPDATE:  10:33 AM

CL is pulling a repeat of yesterday’s stick save — meaning that they aren’t going to allow a decline, at least not yet.  Back to cash here. UPDATE:  10:55 AM

Looks like a decent shorting setup here.  I’ll take a crack at a 10-pt drop if we get a 10/20 SMA cross like yesterday’s.VIX closed the gap.  Does it have more to go? UPDATE:  11:00 AM

Trying a short position here targeting 2060ish to coincide with SMA50’s arrival.  Tight stops advised.NOTE: I have to run out for an unexpected appointment.  I’d hold short for 2060 (or whenever CL or USDJPY starts spiking higher) with tight trailing stops.  At that point, I’d be looking to get long again provided the drop is limited to a backtest of the SMA200.  The time frame should be about 11:30 EST if not sooner.  I should be back by 1pm or so.

UPDATE:  2:33 PM

Back in the saddle, looking at a bunch of charts that are way too similar to yesterday — with a meltup into the day’s highs at about the same time.  For anyone who missed the climb up the bottom of the red channel, it’s definitely time to get out. They’ll algo this thing all the way into the close unless they decide to trap some bulls after topping this morning’s highs.

All of the other indices suggest a reversal here, so anyone who loves to live dangerously — feel free to retain the short.   DX is very likely to close back below the channel top (97.10.)USDJPY will do the same after the cash market closes.  CL will no doubt crater shortly after.

And, NKD just tagged its SMA200.

With all these indicators pointing southward, holding short would seem the obvious thing to do.  But, we saw from last night how easy it now is for TPTB to ramp up stocks overnight — let alone a weekend.

If USDJPY dips below its 5-min SMA10, I’d take a shot at a decline into the close.  Otherwise, cash is a very smart place to be.

UPDATE:  2:54 PM

ES just tagged its .886.  And, USDJPY is sliding ever so slightly below its SMA20.

So, I’d try a short position here at 2078.93 just for grins.  With most traders asleep or off for the weekend already, this would be a nifty place to let some air out.Keep an eye on VIX for signs of this bump reversing.UPDATE:  3:46 PM

Looks like they’re not going to allow even a little off the top. Sorry, folks, but we’re right back where we were at this time yesterday.  What can I say, other than the markets are rigged, insanity reigns.

An article just popped up on Zerohedge suggesting that the ECB might also start buying stocks (like the BoJ and SNB already admit to doing and the Fed is accused of doing.)

I’m not a big fan of holding any position overnight or over a weekend.  Having said that, all the signs say we’ll get a retracement here.  Stay short only if you can hedge or handle the risk of another pop on Monday up to the .886 (SPX 2104, +27 points.)  This sucker has to retrace some of its gains sometime.