Yesterday was one of those “will she or won’t she” days, with SPX dancing around the SMA50 all day long before finally nearly tagging our upside target at the white .886 (2054.74 vs 2055.08.)

We expected a sell-off to the white .618/SMA10 combo at 2032 at that point.  From the 3:37 update in yesterday’s members’ section:

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.

It got down to 2036.72 before a last minute blip higher in USDJPY provided a lift.  And, as we suspected, they ramped it up overnight.  E-minis are currently showing a 14 point gain that seems to be waning as the opening bell approaches.

Note that, for all its threats to break out, USDJPY continues to follow the purple channel top lower.  That hasn’t stopped it from providing timely boosts when needed.  But, the effect will be limited until a breakout occurs — if it does.

A troubling development for bulls: VIX.

continued for members…The TL off the recent lows that we pointed out yesterday provided a nice bounce.  If the channel midlines don’t hold, then the bullish case could be in trouble.  Between the euro bank downgrades and increased troubles in Greece, the overnight ramp job might not stick. DX has found support at the midline of the larger white channel, and seems to be holding on for now.  The last few moves have been inversely correlated with SPX.

My best guess at this point is either a tag of 2055 or a deep retrace of yesterday’s highs, followed by a deeper decline to tag 2032.  But, I stand ready to change my tune if they can push it up through 2055.  Given the volatility and manipulation of the last two days, I wouldn’t be surprised to see SPX slightly exceed 2064 in order to stop out the bears before reversing.

Bonus chart: CL’s nicely-formed channel higher was succeeded by a nicely-formed falling channel.  I could be wrong, but the wave count looks like one more leg lower is coming.  Regardless, I’d keep an eye on that red channel, as breakouts & reversals have clearly mattered to SPX lately.

More later.

UPDATE:  9:56 AM

There’s the .886 tag.  CL broke out of the red channel but is reversing; and, USDJPY is poking up above the purple channel top.  VIX is back down to the red TL.  We’ll see if there’s any follow-through.

For the record, this latest move puts SPX north of the proposed falling purple channel.  The line in the sand is around 2050 — which is the .618 of the drop from 2093 to 1980.  The bulls would dearly love to hold this line…

UPDATE:  3:23 PM

Nothing new to report — more of the same.  USDJPY has continued to prop up SPX, spurting higher any time it falters.  At 2060, it’s one good bump away from new highs.

But, VIX hasn’t given up the TL yet, so a retreat here isn’t out of the question.  Don’t be surprised to see it monkey-hammered when the time comes.