Yesterday marked an epic battle between algos driven by CL and those driven by USDJPY.  CL won.  As USDJPY melted down to lows not seen since Halloween 2014, SPX refused to budge — not until CL announced it wouldn’t bounce any higher.

We won’t mourn the impending death of the yen carry trade, as we’ve seen too many resurrections over the past year to assume it’s truly toast.  Besides, this latest turn of events gives it the freedom it needs to reach the next lower target on our list.

But, we’ll focus more on CL, and how reversals like yesterday’s can impact intraday swings.  Hint: there will be more, and they will be even wilder.

continued for members…

This latest CL breakout benefitted from retaking the SMA100 — which allowed it to break even higher than the past six.  If it holds, well, stocks should hold as well.  But, any significant backtest means SPX is likely to shed about 10 points.It has certainly given USDJPY cover to test the red channel bottom.  109.80 and 109.60 are squarely on the table.

And, here’s the SPX chart, showing downside potential to 2032-2035 should CL decide to back off.As we discussed yesterday, I see DX testing 94.249 today, which should allow ES to test 2025, SPX test 2035, EURUSD to test 114.58 or even 115.28, and USDJPY to test 109.80 or 109.60.A close-up of SPX: A reminder, crude inventories are due out at 10:30 ET and FOMC minutes at 2:00 ET.FWIW, it seems like CL almost always ramps much higher in advance of the inventory report, which is almost always worse than the ramp would indicate.  When it’s worse, it seems like CL almost always holds it value until after stocks close, at which time it then plummets to whatever new low.

UPDATE:  10:22 AM

USDJPY trying to force SPX higher here.  SPX is mostly shrugging. Though it did take DX back above the white TL.

UPDATE:  10:39 AM

It was a better than expected inventory report [see HERE], which created a lot of volatility for a few minutes, but hasn’t resulted in much higher prices for CL.  SPX bounced higher, but not yet back above the morning’s highs.  We might get a good opportunity to short coming up at the SMA5 100 at 2049.85.  CL is approaching an important TL at 37.36. UPDATE:  10:45 AM

I’ll try shorting here at the red channel .786 line where it’s intersected by the falling white channel line.  Tight stops suggested, as we would need a reversal by CL.UPDATE:  11:06 AM

SPX pushing through the red channel top.  I’d dump the short here and look at re-shorting at the SMA5 200 at 2059ish.Though, I’m really tempted to just hold on, as DX has likely topped out and CL is just propping it up without really going anywhere.  And, USDJPY still has further to go to the downside. UPDATE:  11:41 AM

DX and USDJPY are breaking down, but CL keeping SPX from doing the same. UPDATE:  11:50 AM

Just got the rest of the DX and USDJPY move.  They should bounce here, which probably means CL will back off.  Stocks not reacting yet, but they should reverse with CL drop.  I’d short here with tight stops. UPDATE:  12:43 PM

CL still has a little ways to go up to the white TL and SMA10.   So, it’s not surprising to see SPX hanging in there.  Closing the short here and will reevaluate after the minutes.  UPDATE:  1:00 PM

I’m going to step away and do some bigger picture charting until the minutes come out.  If SPX drops through the SMA5 200 at 2058, I’d short.  There’s a good chance it at least backtests the SMA10 at 2052.23 as the SMA5 50 emerges.  Otherwise, it’s likely to just ride the SMA5 10/20 on up — melt up style.  And, I don’t have the patience to watch that unfold. Also, for frequent traders/daily readers, I want to give you advance notice that I’ll be out of the office next Thursday and Friday Apr 15-16.

UPDATE:  1:27 PM

Quick look at some interesting targets above and below. 90% of the time, they prop up the market post minutes release, meaning a meltup to 2077 or 2081.  But, if investors react negatively to the minutes or Fed speak after the fact, then we could finally backtest the SMA20 at 2035 or even the SMA200 at 2010-2015.A close-up:UPDATE:  1:57 PM

USDJPY is testing the white .786 again.  Note that the white grid is placed with Point X at the Oct 2014 lows.  If we switch it, instead, to the overall 2014 lows, we get a completely different picture — with the nearest Fib being the .707 at 108.207.  I’m not expecting this, but just as a FYI. DX is still holding alright.At this point, SPX is trending lower.  Stay tuned…

UPDATE:  2:00 PM

CL and SPX slipping.  Back to short here, targeting 2052.75.  Tight stops, as it could be limited to a backtest of the falling red channel. UPDATE:  2:17 PM

Depending on how you draw it, the falling red channel has been backtested.  CL is spiking, so I’ll assume that’s as low as it goes and switch to cash.  I would say long, but for the fact that CL has all the overhead at 37.9ish.UPDATE:  2:23 PM

CL just hit our the upside target.  Shorting here. If it breaks through the red channel top, then the SMA10 at 2052.23 would be next support, followed by white TL at 2048.40 and then the SMA20 at 2-35.36. UPDATE:  3:00 PM

That’s about as much rope as I care to give it.  Back to cash here as VIX is tanking.  CL and USDJPY aren’t stuck, so this is a BS move.  But, it is what it is: the Fed’s way of assuring investors that when they talk/act/exist, it’s bullish. It would be bad form to have a H&S Pattern play out on Fed minutes day.A better look at VIX, now at potential support.  UPDATE:  3:22 PM

Potential turning point here, as we’re back to the red TL.  I’ll try a short position just for grins, though I don’t have very high hopes.Would I hold short overnight?  If you can hedge and/or watch it closely, yes.  I think 2052 is a very good possibility.  I might feel differently if SPX shot up through the red TL.  But, given that CL is likely to fall from here, I think shorting probably makes sense.