Yesterday, SPX ran all the way down to tag our lowest target, producing some great numbers (3%+) on the day.  But, the close presented a challenge that I finally addressed with the following:

FWIW, USDJPY appears likely to tag the bottom of its triangle tomorrow or overnight.  Would not be at all surprised if it does so overnight in order to allow NKD to reach 17092, followed by a bounce before tomorrow’s opening that traps today’s overeager bears.

It’s exactly what happened last night.  As we noted in the Update on the Nikkei 225 late last night, NKD tagged the next lower target that we’ve been tracking for the past several weeks.

This was accomplished by USDJPY tagging the bottom of its triangle yet again.And, now we’re facing a small gap up that has bears who held short overnight a little nervous.  Should they be?

continued for members…

The most important targets for SPX are the red, dashed neckline to the upside and 1856.46 to the downside. And, I only mention the possibility of more downside because NKD has still not tagged the .618 itself (16917.)  It appears more likely tomorrow than today, but you never know. USDJPY’s push up to 120.11 overnight was rebuffed, and it’s backed off since then.  A breakdown to the white channel or even the .500 Fib at 118.92 could easily produce the additional momentum.

UPDATE:  9:33 AM

ES and USDJPY are both pointed downward here.  If they break below current levels, I’d take a short position in SPX to get going.  If they find support, then the neckline at 1906ish is the more likely first stop.UPDATE:  9:40 AM

Below that, the next support is the previous bottom at 1867.08, and then the .886 that didn’t quite get tagged on Aug 24 at 1856.  I should mention that the falling purple channel placement is subject to interpretation.  So, if SPX suddenly starts spiking higher and it isn’t quite to where I’ve drawn the bottom, we’ll go with what SPX is doing.

UPDATE:  9:52 AM

SPX might be looking to stay in line with yesterday’s two lows (the alt red channel.)  Tight trailing stops just in case it’s a head fake.  I don’t expect this to be a major bounce, but with consumer confidence coming up in a few minutes, you never know.If it disappoints, then the SMA50 at 1887 might be all we get.  If the market likes it, the channel midline is around 1900 and the neckline around 1907.45.

UPDATE:  9:58 AM

I’d set stops right here at 1887.34 just in case.UPDATE:  10:03 AM

Since neither the purple or red channels would allow a tag of 1867 until later today, there’s a good possibility that SPX will run up and tag the SMA100 or channel midline first (1898-1900.)

UPDATE:  10:12 AM

UPDATE:  10:22 AM

ES just reached the top of the falling white channel, and SPX isn’t quite to the SMA100.  There’s the danger of a shortfall and reversal here unless ES or USDJPY can break out.

Time for USDJPY to test 120.11 again?

UPDATE:  10:28 AM

USDJPY just broke out and tagged 120.11, allowing SPX to tag the SMA100.  It should stay elevated long enough for SPX to tag the midline or the neckline. UPDATE:  10:30 AM

Never mind.  Back to long.

UPDATE:  10:44 AM

Should have given it a couple more minutes and stayed with the short position.  That’s what I get for taking a 5-min bathroom break!

But, I think it’s just drifting lower to allow the SMA10 to catch up with it.  Ditto for USDJPY and ES.  Algo time?If it breaks below the SMA10, I’d want to be short for the SMA20/50 at 1888.25 or even the .886 at 1884.61.  This looks like a B wave on the way to 1907 to me, but the 1899.48 high did a nice job of validating the purple channel midline, so we’ll just have to see.

UPDATE:  10:53 AM

USDJPY still has to get back above the red channel line and will run into the 120.11 again if it does.  What would help produce a neckline tag is USDJPY>120.11.  There’s the other side of the triangle to consider…And, ES would look better with a backtest of the red .618 — though perhaps after getting support from the rising SMA200 (red) currently at 1874.92.In other words, I’d be prepared to short if we see any weakness when SPX tags the yellow SMA100 — now at 1894.96.

UPDATE:  11:06 AM

A good target would be when ES reaches 1875.48, probably around SPX 1884.61.  If they want to take it to 1856 right now, all they have to do is let USDJPY drop below the TL from 119.24 and then drift below 119.24.UPDATE:  11:23 AM

ES just reached its target, and SPX is probably pretty close.  Back to long as soon as USDJPY tags the TL and/or the SMA100.  But, it could take a while, as the intersection of the two doesn’t occur till 12:00.UPDATE:  11:36 AM

At this point, I’d focus on 1907 but with tight stops – especially around the yellow SMA100 that’s swooping in again.  I have to run a quick errand, should be back in an hour or so.

UPDATE:  12:07 PM

USDJPY is breaking down below the TL. 

UPDATE:  12:14 PM

I fully expect to be short again within the next 15 minutes.  But, I’m still very open to SPX breaking out of the white channel and backtesting the neckline.

Note the falling red SMA200 which should reach 1907 around the close.  It would be easily doable if SPX is able to punch through all the other falling moving averages fast approaching.USDJPY, on the other hand, is suggesting that it’s heading for the pennant bottom again — 119.34 near the close.UPDATE:  12:30 PM

USDJPY looks like it could go a little higher and tag that TL where the SMA20 crosses in a few minutes.  If so, SPX could reach 1887 or so.

UPDATE:  1:13 PM

SPX has been shoehorned back into the red channel… …by ES, which even reversed a little early in order to provide the assist.USDJPY is obviously being propped up — a bad sign for bears. Either they’re going to break the white channel and ramp it up to 1907 or we’re just seeing a delaying tactic.   I’d want to be long here if USDJPY breaks above its 5-min SMA200 at 119.73.

UPDATE: 1:19 PM

…as USDJPY just jumped the SMA200.UPDATE:  1:52 PM

SPX running into headwinds from ES and USDJPY.  Should reverse here, though.  UPDATE:  2:52 PM

UPDATE:  3:07 PM

USDJPY just propped up again……even as SPX dips below this morning’s lows.  Should be dropping fast here, but back to long unless USDJPY breaks down below the TL.   Welcome to China.UPDATE:  3:19 PM

That’s more like it.  But, watch out for USDJPY’s .618 — another opportunity for manipulation.Updated with downside targets…There’s plenty of time to test 1867.08, but 1856.46 in today’s session is iffy.

UPDATE:  3:26 PM

ES testing the white midline again — be cautious, as last time it provided a big bump.  And, just below it is the red .786 — more support that could provide a bump.  Narrowly missed it this morning.SPX should have reached 1856 hours ago.  Algos and HFTs on full display here.

UPDATE:  3:31 PM

UPDATE:  3:33 PM

Last chance to turn around and restore some validity to the “market”  I’ll try a short position, but not holding out much hope.  Tight stops advised.

UPDATE:  3:36 PM

Completely arbitrary.  No channel or Fib justification.  Just because someone panicked and decided to save SPX from a lower low.  Some “market” we have here…Now, after all that, watch it run up and tag 1880.4 and still close slightly below 1867.08.  More likely…a safe close and tagging one of those downside targets on a gap down in the morning when retail can’t take advantage.