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In a now all-too-familiar setup, CL has cratered, USDJPY has spiked, and the futures are playing things very close to the vest.  This would be a confusing technical picture if we hadn’t seen it a dozen times in the past few weeks.

continued for members…

CL is back down to the TL connecting its recent lows.  Will it make it back to the purple channel bottom in time for today’s close?  I understand they’re trying to create a new, less-steep channel using these bottoms, but the top would be a bit of a mess.  Odds are it’ll eventually tilt a little further and pick up the white channel bottom from August (40.68ish) or even the one from 1998 (40.2) as its own.The LT picture:Depending on what the BoJ does with QQE, we could even see all of them break down and the purple .886 come into view.USDJPY is ignoring charting convention all-together in an effort to prop/force stocks up.  I see no constraints on it pushing past the 123.77 level once the time comes.  But, for now, we’ll look for a reversal at the smaller scale .786 at 123.42 or .886 at 123.57.

Yesterday, SPX came within 10 points or so of completing an IH&S.  So, the upside target is pretty obviously the neckline.  The question is “when.”  If the past is any indication, TPTB are in a holding pattern.Note that it stopped just short of the .886 yesterday — meaning there’s flexibility in either direction.  But, a run up to 2105.41 would only produce 4 points, and the downside is similarly limited.While I always try to have an opinion on direction, this is one of those rare instances when the signals are just too jumbled.  I imagine we’ll get some backtesting of the shorter-term moving averages.  But, the nearest 60-min ones are only 7 points below current prices, and the 5-min are even closer.

The big question on everyone’s mind is what, exactly, the Fed will do with interest rates.  For the first time in a while, it just might matter.  One could make the (valid) argument that higher rates are bad for the economy (except, perhaps, for properly-positioned banks.)  But, the economy and the “market” decoupled long ago.

The real issue is that higher rates could well boost the dollar, which would no doubt boost the USDJPY — which of course, is the driving force behind the yen carry trade.  So, in a sense, higher rates could very well boost stocks.

UPDATE:  10:07 AM

SPX has reached the .886 from the 2134-1867 decline — as well as a potential limiting TL from yesterday.  At any point, it could turn and drop to the .786 at 2095.7.  I hate to leave money on the table, but I’m not sure the payoff would be worth it at this point — especially since it could just keep riding the 5-min SMA10 (thin, red line) up to the more relevant .886 at 2105.41. UPDATE:  11:25 AM

Coming up on the .786 as the SMA100 just reached it.  Look for CL to force a tag and, then, a likely rebound.  I’ll be looking to take a long position.UPDATE:P  11:34 AM

SPX just reached 2095.76, which is close enough in my book.  I’ll take a long position here with a target of 2105.41.As always, keep an eye on USDJPY, which is pondering a run at the .886 at 123.57…..and CL, which is testing those lower channel lines we discussed earlier.CL’s need to test a lower support level could cause SPX to dip below 2095.  If so, the next support isn’t until the SMA200 at 2091.50.

UP DATE:  11:55 AM

I suspect the limiting factor will be ES, which is very close to tagging a little TL of support connecting recent bottoms.Note, also, that USDJPY is still edging higher.UPDATE:  12:30 PM

Well, that was interesting.  CL is heading straight for the 1998 channel we discussed earlier this morning……so USDJPY immediately spiked higher – beyond the .886 and the top of the little red channel.  ES dipped below its white TL for a split second, and SPX almost tagged the SMA200.  It’s back above the 2095.7 Fib, and will stay there if CL rebounds at 40.20 or so. UPDATE:  1:02 PM

Yellen reiterated a rate rise is coming, so I imagine stocks will throw a little tantrum here.  Interestingly, USDJPY has retreated back below the .886.  I’d bail on our long position and consider picking it back up if/when it rebounds above 2095.7.

We’re probably safe at these levels, but it feels like there could be a sudden downdraft of 5-10 points any second.  And, I don’t like that feeling one bit!UPDATE:  1:14 PM

CL just tagged our channel bottom: 40.15 versus our 40.2 target.  I’ll go back to long if/when it rebounds and SPX retakes 2095.70. UPDATE:  1:25 PM

SPX is about to push above 2095.70 on a USDJPY rebound off the .786 at 123.42.  CL isn’t rebounding yet.  So, playing along is fine — just means there is greater risk of it fizzling at either the SMA100 at 2096.38 or the purple midline at 2098ish.  In other words, keep stops tight. UPDATE:  1:44 PM

CL has firmed up, but USDJPY is drooping.  I’d bail on the long position yet again, and wait to see whether the SMA200 holds. UPDATE:  2:17 PM

SPX keeps on slipping — not very quickly, but steadily.  At this point, it’s crossed over the white channel midline — which should be adequate support.  There’s an opportunity to go long here – though, it will definitely constitute catching a falling knife.  Tight stops are advised.I’d bail on it with any sustained push below the .886 at 2083.58.

UPDATE:  2:33 PM

There’s the .886.  We’ll see if it gets a bounce here before bailing… USDJPY is rebounding.CL might even be breaking out.UPDATE:  2:41 PM

USDJPY isn’t bouncing after all — slipping to new lows on the day.  So, SPX is likely to fall further – perhaps test the SMA20 down at 2080.62 or the .618 at 2079 – our target from yesterday.  I’d like not to wait and see, so it’s back to cash. CL, for its part, is perched atop the falling wedge – perhaps ready to pop.  If it does, I’ll jump back on the long side.

UPDATE:  2:46 PM

Here’s the last shot of the day.  Long here at the potential support from the .618/SMA20.UPDATE:  3:35 PM

CL just broke down through the white TL of support, so I’ll assume the rebound is over.  Back to cash here, and we’ll see how things shake out for the rest of the day. There’s a decent chance it’s a head fake, so I’m ready to jump back in if it regains the TL.

UPDATE:  3:55 PM

Will CL and SPX rebound from here?  I think so.  But, the folks who run the “market” love to catch traders on the wrong side of things, so it would probably happen as a gap higher in the morning.

Having said that, it’s too dangerous to hold long overnight unless you can hedge or watch it like a hawk.  There are lots of big investors who won’t be happy about higher rates — even 1/4% — and are making their feelings known.

GLTA.