Wednesday’s short call at 2112.60 really paid off yesterday, as SPX dipped as low as 2075.53 before the algos came and rescued it. The futures have bounced around a bit this morning; but, the rather predictable low that was posted after the employment data hasn’t solved one basic problem that kept us short yesterday.
continued for members..
Note that TNX still hasn’t closed its gap. 
So we’re still looking for the .786 tag we obsessed over yesterday.
The preferred downside case is still a tag at the purple .786 at 2074.37, with a slight overshoot to the SMA200 at 2072.58 more likely. Initial support should come at the white channel bottom around 2076.30.
CL continues to melt down. I’ve expanded the purple channel (in white) to include last night’s romp to the red .236.
And, USDJPY’s ES-saving bounce post-employment report this morning is still sorting itself out, but hasn’t changed much net net.
UPDATE: 9:31 AM
TNX closed the gap. So, now it’s all about whether or not SPX wishes to tag the SMA200 again.
UPDATE: 9:36 AM
Note that, even with the futures off a little before this morning’s open, VIX was still knocked down below yesterday’s support — just in case. 
Remember this chart from yesterday afternoon. 
UPDATE: 9:44 AM
UPDATE: 9:57 AM
Right back where we started and climbing higher. Perhaps the channel bottom support is going to hold for now. But, I’d be inclined to give it a point or two of wiggle room here and see if USDJPY doesn’t come back down below the red channel midline.
BTW, the SMA200 as of yesterday’s close is 2072.56. As of right now, including today’s action thus far, it’s at 2073.25. It’s not really kosher, but sometimes TPTB tag what will be that day’s mark instead of the former day’s (based on closing prices.) Just something to be aware of…
UPDATE: 10:32 AM
USDJPY indicates there might be a tad more downside. Note the dotted yellow line is the precise neckline of the IH&S, and the dashed white line is the more traditional horizontal placement. A tag might help SPX a little lower, while a drop below it would definitely help.
UPDATE: 10:41 AM
…as USDJPY just dipped below the white neckline. Seems more likely to tag the lower white target at 124.16ish.
The algos will probably freak when USDJPY dips below the last low. Imagine that…a lower low!
Note that the lower target would still represent channel support. I’ll get real excited if it breaks below that.
UPDATE: 11:!5 AM
SPX just tagged the SMA200. 
Would be fine going long here at 2072.30, but the .886 at 2069.30 is still out there and USDJPY hasn’t yet reached the white target.
Pretty sure USDJPY will spike sharply higher when SPX has reached where they want it to reverse, and so far USDJPY is acting nonchalant.
UPDATE: 11:22 AM
UDSJPY still indicates it wants prices at least a little lower…
UPDATE: 11:34 AM
There’s the .886 exactly. ES’ .886 is at 2062.51, so we’ll watch to see if both tick higher after it registers.
Moment of truth for USDJPY:
It’s easier to see on the 60-min chart. If it’s to drop to the SMA100 or SMA200 within the next week or so, this support has to fall. Note that the rising white channel is already in trouble; but, for now, the red midline is providing good support.
For anyone who’s keeping track of these things, USDJPY is now only 1.75% away from where the SMA100 should be next Friday, and only 2.6% away from the SMA200 target.
CL has some good upside potential here if it decides to exercise it.
UPDATE: 1:26 PM
ES finally reached its .886 at 2062.50, meaning SPX dipped below 2069. A sustained push through here would be problematic for the bull case, so manage your stops wisely.
Need to see a rebound by USDJPY pronto, preferably back to above the white channel bottom (white dot) by the close. Of course, going into the weekend the potential for head fakes is quite high.
A return to 2077 would leave SPX in limbo: backtest with another leg down, or breakout of the falling wedge? CL could be the difference maker here.
The fact that USDJPY hasn’t skyrocketed higher suggests this support won’t hold. If so, can CL make up for its bearish influence? Maybe a trip back to the purple midline…but, even then, not so sure.
VIX broke out above the white TL, but has the SMA200 and the white channel midline to contend with.
Without a doubt, this will be a weekend you want to either be in cash or be hedged.
UPDATE: 2:22 PM
USDJPY and CL are both looking quite bearish. SPX is either going to break down, or they’re doing a very good job of selling it as a possibility. Probably best to step aside here and see how it plays out unless we get a bounce very soon.
UPDATE: 3:29 PM
