CL rallied hard yesterday…

…providing a relief rally for SPX… …that was only belatedly aided by USDJPY.Our original call was for SPX to move higher if USDJPY pushed through the purple channel:

At this rate, [SPX’s] SMA10 looks to be tested on the opening.  If USDJPY can break out of the purple channel, there should be additional upside.

USDJPY broke out only briefly before falling back (the white arrows.)  But, equities kept soaring to keep up with oil.  The last two hours of the session were boosted beyond our 2036 sell signal when USDJPY rejoined the party.

SPX gave lip service to the SMA50 with an 8-pt drop, then blew through the .786 before closing just shy of the .886 at 2055.

Daily forecast coming up.

continued for members…

The futures are currently off about 8 points, meaning we should get more than a backtest of the SMA50.  The next Fib support is the .618 at 2032.64 — which is also where the SMA10 happens to reside. We’ll watch to see what happens if it mounts a backtest of the SMA50.

Another metric I’m watching is the 10-yr, which broke out of a little falling wedge late yesterday.  I suspect we’ll see a backtest (at least) at which point SPX will stabilize and get another shot at 2055.

Another interesting chart is VIX, which got a bounce off a lower fan line yesterday.  While I think it’ll eventually test that red, dashed TL off the recent lows, it appears to have a bounce left beforehand.

UPDATE:  11:40 AM

The SMA50 backtest was a bust.

SPX has leaked higher on a push by USDJPY and reversal by VIX and is likely to go ahead and tag the .886 now.

CL is bottoming at the white .786 at 49.98.

UPDATE:  2:35 PM

SPX hasn’t committed one way or the other — criss-crossing the SMA50 all day long.  It seems the purple channel top is creating some indecision.  It’s enough resistance to keep SPX form spurting higher, but USDJPY and VIX manipulation has kept SPX from declining.

A reminder of the big picture. The falling purple channel looks pretty darned good. But, of course, we said that about just about every falling channel of the past two years — few of which played out.  If the past is any indication, it’ll hold just shy of the channel resistance, then burst through on an overnight ramp job based on some big event and/or bullish data release.

The reality is that we just won’t know which one until it happens.  But, these are the times that try bears’ souls.  Although I can give you a dozen good reasons why market should tank here, I know full well that it’s not a matter of what should happen — but, what TPTB want to happen.

Case in point: CL.  IT led stocks up easily enough yesterday.  Why hasn’t a 60% retracement led stocks down even a little?

Look no further than USDJPY.  A simple TL on the 60-min chart is all it takes.

Bottom line, no idea whether SPX will tag 2055 or 2032 first.  It’s a crap shoot.  The cynic in me says they’ll close it just below the .886, then shoot up through it overnight or over the coming weekend after they’ve sucked in a bunch of bears.  Though, if they don’t, they’ll probably shoot up through the .886 just before the close, suck in a bunch of bulls, then punch SPX in the face overnight.

Either way, it might be a great time to go play a round of golf, grab a nap, or take the wife to lunch.

UPDATE: 3:37 PM

Just came to within .34 of the .886.  It’s worth shorting here for the move to 2032, but only with tight stops in case they ramp it up overnight.  As before, keep an eye on the SMA50 at 2044.