DX reached our downside target of 95.667 overnight.  Note this is Fib and channel support, so we should see a significant rebound here.It meant a run up for EURUSD to test the last line of overhead resistance before open air…

…and a schizophrenic overnight session for USDJPY.Turns out at least a few investors still care about fundamentals, with ES currently off 15 points and the opening bell onlly 5 minutes away.  Last week’s targets remain in place.

UPDATE:  9:40 AM

In a replay of yesterday’s opening, it’s CL to the rescue, limiting the opening drop for SPX to only 7 points before the algo juice kicks in.  Only this time, there’s a limit to the good it can do.continued for members…Because higher CL means lower DX, it would upset the EURUSD and USDJPY applecarts.  So l expect CL will run into problems getting much higher than the red channel midline.

So, the onus shifts to USDJPY — which should rise with a rebounding dollar if SPX is to be supported.  But, as we speculated yesterday, that ignores EURUSD — which really does need the air let out.

All things considered, it should mean further weakness for stocks — unless TPTB resort to VIX or treasuries to prop ES up.  From Zerohedge:

After taking 2 days off last week, the mysterious but persistent US Treasury bond seller is back. Like clockwork as the US markert awakes, no matter what the trend overnight, Treasuries are offered in size and yields snap higher…

Around 8amET each day, bonds become magically offered…

A reminder re downside targets for SPX:

UPDATE:  11:05 AM

I stand corrected.  Apparently, TPTB are quite willing to go to excesses in order to put a floor on this morning’s SPX decline at 2102.63 (the 100 period SMA on the 60-min chart.)

USDJPY is being kept at bay, no doubt in order to prepare for the SMA200 tag.  But CL just topped the previous highs from mid-Feb……and EURUSD is closing in on the .618 that we gave up on long ago because the falling red channel wouldn’t accommodate it. And, DX has plunged far below the 1.272 Fib. SPX’s original decline may have bounced at 2102, but now it’s bumping up against (backtesting) the TL from October.  So, we should see overhead resistance here — especially in light of the above excesses.

I think the bounce is probably over, and we’ll see additional downside.  But, caution is definitely warranted — as, sometimes, the algos just won’t be denied.

Note that even though CL can temporarily save SPX from declining, each push above the Feb highs has been temporary, with further drops after the fact. UPDATE:  3:25 PM

About half an hour to go, and the necessary reversals are taking place.  DX is heading back to the 1.272/channel bottom for the close, with the intra-day dip to be written off.EURUSD is backing off from the .618 backtest.

And, CL has closed below the 58.47 Dec high.

USDJPY had to pick up the slack, and has put in a bounce where one wouldn’t have otherwise been.  Note the SMA100 has rolled over, and should continue to do so now that we’re 101 sessions post the Dec highs (though the SMA200 is coming up fast.)

Much of the repairs can be handled after the cash market closes, so I wouldn’t put too much stock in the fact that they’re not there yet.

As for SPX, it almost reached the SMA20 (2097.41 v 2093.38) and should have additional downside potential to 2090-2092.  But, it wouldn’t shock me to see USDJPY higher tomorrow in a bid to normalize things.The 60-min chart shows a backtest of the red dashed TL from last Oct, which would normally be somewhat bearish.

In sum, SPX would normally be expected to continue a little lower, but these are far from normal times.  Stay short only if you can hedge or watch your position overnight.