On the surface, it looks like SPX bounced at the 10, 20 and 50-day moving averages yesterday — a normal and understandable occurrence. But, the bounce came at 2083.24, and the nearest SMA was at 2082. 
It seemed that USDJPY’s plunge would surely prevail. After all, it’s been a long, cold winter for bears and a rising yen is their best hope for a meaningful thaw.
Unfortunately for the bears, what the yen gaveth, CL taketh away. With yet another rally — this one only 2.7% in a few hours time — CL-fueled algos erased the morning’s red ink and left SPX green on the day.
Likewise, last night’s drop in USDJPY would look promising — if not for another overnight ramp job (2.6% this time) in CL that has taken it back above the white 1.272.
It’s yet another example of the “heads I win, tails you lose” scheme that’s setting stock prices lately. Drops in USDJPY that might have driven stocks lower only a few months ago are now offset by rises in CL — transmitted by the relatively lower US dollar that joins them at the hip.
The only real risks to the set up are the euro and the carry trade unwind. So far, the euro has been propped up well enough to keep the dollar on the defensive. That will change if it resumes its decline to our .9898 target.
The carry trade unwind is a potentially more serious problem for bulls should the yen’s tumble be over. But, judging from the past few months, keeping USDJPY going “sideways” seems to work nearly as well as keeping it on the rise. And, in the end, Abe and Kuroda will ease even more. They truly have no other choice.
What if the euro tumbles more, the yen strengthens and oil can’t be propped up anymore? Do bears have a chance? Odds are TPTB will simply fall back on VIX, treasury and index futures manipulation to achieve their rallies. How cool is that!?
Bottom line, our analog should continue to play out as expected. Sadly, I see nothing on the (artificial) horizon to upset it.
UPDATE: 12:00 PM
CL just nailed our intermediate target of 55.78. If it reverses here as it should, then USDJPY will have to pick up the slack in levering SPX higher.
At the moment, though, USDJPY is looking rather sickly. And, the euro ain’t helping much. Maybe we’ll get a dip after all?
continued for members…
USDJPY looks positively poised for a close below the SMA100.
And, EURUSD is acting kinda sketchy — hanging out between two channel midlines with no clear indication of its intentions for the next few days.
TNX continues to look ripe for a tumble, but hasn’t yet taken the plunge.
And, DX itself continues to act rather undecided — though it has clearly diverged from SPX this morning.
If I had to guess, I’d say this morning’s rally got a little overdone — mainly in the interest of establishing a higher high (which it did.) With CL tagging 55.78 during the session, the odds of a modest reversal for SPX just went up some.
I wouldn’t get too excited, though, unless EURUSD joined it in a sharp downturn and took out 1.0461.