Depending on your affinity for conspiracy theories, the BoJ has either failed to keep a lid on the value of the yen, or has allowed it to appreciate to the point where it now compensates for the 60% increase in the cost of oil since Feb 11.  Regular readers know where I stand.

Regardless, USDJPY’s flat red channel from Nov 2014 broke down long ago.  The falling white channel from December 2014 has broken down. And, the rising purple channel from 2011 is now officially dead.

It hasn’t mattered all that much to the “market” yet, as CL has taken over as the most important driver of day to day equity ramps.But, at some point, the other 3-4 trillion in equity investments that rode the yen carry trade up from 2011, money that might not be tied in to the CL carry trade — or, might have some well-placed reservations about its long-term viability — are going to wonder if USDJPY is well and truly dead.

Not to worry.  I believe the BoJ has a plan.  And, since all their other plans are working out so well, what could go wrong?

continued for members…

Presenting, the new and improved (and, much more convenient given the circumstances) rising red channel.It has the added benefit, with just a little more slip down to 107.56, of allowing USDJPY to tag an important Fib level and a channel bottom.  And, it’s not a bad fit, all things considered.

The key is for SPX to hold trend.  This morning, that means the SMA10 at 2053.91 for a backtest of the broken red channel or, if that fails, the falling white channel top at 2049.40, the H&S neckline at 2043.57 or SMA20 at 2039.73.UPDATE:  9:34 AM

SPX has reached the SMA5 100 and 200, if not quite the SMA10.  I’d go to cash here, as CL is bouncing.  Odds are it’ll finish bouncing and come back down, but we’ve also seen lately how such a bounce can produce 10+ points.  I’ll wait and see how vigorous CL’s bounce is. UPDATE:  9:54 AM

Note that ES still hasn’t reached its SMA10, so SPX will probably have to slip down to 2050-2052 in order to make this happen.  Shorting again here. It might take a bit, as CL and USDJPY are pushing lower without much effect.  It is possible that ES traders aren’t excited about shorting/selling given the prospect of a big bounce two points below?

UPDATE:  10:28 AM

SPX just backtested the falling white channel top again.  But, CL is still slipping.  I’ll hold short until it firms up. UPDATE:  10:31 AM

Just reached the .786 on SPX and CL and ES.  Could get a reversal here.  Back to long with very tight stops.SPX obviously overshot the channel top earlier in the week and still managed a 25-pt bounce.  So this could be the bottom for this morning.  Only hesitation is USDJPY, which could slip a little further to 107.56.  It might tie in with a drop to the neckline at 2043 or SMA20 at 2040.

FWIW, this doesn’t feel like a bottom yet.

UPDATE:  10:38 AM

CL is holding back from pushing up into the falling white channel.  I think there’s another leg down here, would go back to short here. UPDATE:  11:28 AM

That’s the neckline, or at least close enough.  CL is bouncing very close to its .886, so I’ll assume SPX will bounce and at least let the SMA5 20 catch down to it.  Back to long with very tight stops.  If 2039 is in the cards, it would benefit them to delay it until the close.  That means some bounces.UPDATE:  12:17 PM

Looks like the bounce is falling apart.  Back to short here as CL and USDJPY are reversing.UPDATE:  12:27 PM

There’s the neckline.  Gotta go long here.  Though nothing is bouncing, and USDJPY seems like it’s going to reverse here at the top of the falling white channel and SMA5 50.  If CL drops through the little .886 at 36.76, would be a good indicator of lower prices to come.  If USDJPY pops through 108.08, a nice bullish indicator. UPDATE:  12:35 PM

Breaking down again.  Back to short with tight stops – definitely could be a head fake, as USDJPY is popping above the SMA5 50 and white channel top.  ES SMA20 is 2031.33, and SPX is 2039.73.

UPDATE:  12:57  PM

USDJPY keep slipping higher, which makes me wonder if/when the 2039 tag might occur.  I’ll move to the sidelines and wait for something to happen.That channel top was the easiest, quickest place for USDJPY to reverse.  Next up would be the yellow .707 and SMA5 100 at 108.21.  If SPX breaks out, it could see 2050 before running into any real overhead resistance.

UPDATE:  1:18 PM

That could be the top of the bounce, as CL just reversed at the white channel bottom, but more likely it’s just going to let the SMA5 10 catch up and then go up to tag the daily SMA10 at 2053.91.  USDJPY is still working higher. UPDATE:  1:50 PM

SPX worked its way down to the neckline again.  I think it’ll drop through this time.UPDATE:  2:07 PM

SPX and ES are both slipping through their SMA20, the channel midline and significant fib for SPX as well.  Still looking for a reversal from CL and/or USDJPY.  UPDATE:  2:11 PM

CL is starting to move, so this could be a (somewhat belated) bottom.  Back to long with tight stops.UPDATE:  2:15 PM

Back to short, as the bounce isn’t enough. Updated downside targets:

2035.82 – gray 1.272
2033.74 – purple .786 (gartley)
2028.48 – purple .886 (bat)
2015.26 – SMA200
2010.72 – yellow .618 and H&S target

UPDATE: 2:28 PM

CL spiking – back to long here.  Looking for 2038.65 or 2043. UPDATE:  2:32 PM

Back to short here, but with tight stops in case they’re shooting for the neckline instead.

UPDATE:  2:57 PM

Probable target…UPDATE:  3:01 PM

Getting a bounce here, as it’s a nice Gartley Pattern target.  CL is even moving higher.  But, without much enthusiasm.   ES’ .786 is at 2024.93 – not quite there – so the bounce could be limited.  Watch your stops. UPDATE:  3:05 PM

Gaining momentum as USDJPY heads for SMA5 200 at 108.49.  I suspect USDJPY will turn at the SMA5 200, and CL at the white channel midline around 37.43, which would take SPX up to around 2040ish.  If it breaks through there, then the neckline at 2043.57.

UPDATE:  3:15 PM

On the off chance that the falling white channel holds, this is the reversal spot.  Back to short with some very tight stops.This is actually a pretty important TL for CL.But, obviously, CL could stop here while USDJPY keeps ramping. That would allow SPX to climb aboard the SMA5 10 and ramp into the close to 2043.57 or above.  We’ll see…UPDATE:  3:24 PM

SPX slipping back up, and CL threatening to push through the yellow TL.  Back to cash here.I suspect this is a head fake, so will watch for CL to reverse below 37.50.

UPDATE:  3:35 PM

There’s the backtest.  Moment of truth for SPX.  CL and USDJPY still have a little ways to go to tag their SMA5 200s, so watch your stops here on this short.There could be a lot of selling pressure at the close, but TPTB will probably try to hold it at the SMA20.

2028.48 would be an ideal close (ES 2019.)UPDATE:  3:46 PM

Between USDJPY, CL and VIX, they’re doing a pretty good job propping it up.  Back to cash for the close, unless it reverses off the SMA5 50 at 2042.80ish.If they want to be proper about it, they can always tag 2028.48 on the open.  Or, they could blow it off all together.  I don’t feel strongly enough about it either way to recommend risking a position overnight.

UPDATE:  3:50 PM

Will take one more crack at it here.  Some traders might not see the support at the red midline and decide to bail at the close. Back to short, though I’ll be surprised if it plays out today rather than tomorrow.And, while we’re talking about patterns…yes, it’s bearish that SPX might close below the neckline.  It would theoretically confirm the H&S Pattern.  But, don’t bet the farm on it playing out, as most of them have been blown up over the past few years by TPTB.

UPDATE:  3:57 PM

Done for the day.