Yesterday’s rally went beyond our target for SPX, topping out at 2064 before closing at 2059.  From yesterday’s pre-opening post:

This morning’s surge looks likely to reach the SMA20 and/or SMA50 (in yellow) with the next major upside resistance the purple channel midline where it intersects the purple .618 and SMA10 at 2057ish.

The close-up:

As expected, USDJPY led the way.  The early morning sell-off was quickly recovered and a modest rally was maintained throughout the trading session — just enough to keep the algo reaction going.

I suspect the sell-off in the last hour has been all about legitimizing the rising purple channel within the larger white channel.  But, the red channel is a factor to contend with until USDJPY breaks out — if it’s going to.

But, it came undone overnight, briefly dipping below the rising white channel bound and giving additional credence to the falling red channel.  The key white .618 at 120.11 remains unscathed.

Futures followed along most of the night, off 7-8 just prior to the employment report, which provided a quick boost back to green — but, is since fading.

continued for members…

If the small gains can hold, SPX should have no trouble tagging the purple .786 at 2071.91.  Otherwise (and, my preferred case) we should get a backtest of the SMA10 at 2055.  And, if that doesn’t hold (again, my preferred case) a backtest of the SMA20/50 at 2046ish looks more likely.

UPDATE: 10:00 AM

Our 2046 target and the most interesting looking channel are seemingly at odds.  Perhaps a bounce at the SMAs and sideways for a while — ping ponging with the SMA10?  We’ll see.  One strong scenario would be a dip to the target we mentioned yesterday: the gap at 2029.61.  It’s roughly the purple .382 and would be a nice head fake.

I’m updating my USDJPY target to either the small white  .786 or .886 Fib level, which would facilitate a drop in SPX.

However, the .886 at 118.59 has provided decent support in the past.  So, a lower decline might come after hours.

UPDATE:  11:50 AM

USDJPY just bounced off our .786 target.

And, CL is bouncing after completing a small Bat Pattern.

Which means a bounce for SPX here before it closes the gap.

SPX should move to our lower target, but probably won’t as long as USDJPY is propped up.

UPDATE:  3:15 PM

As we were saying…

USDJPY was clearly propped up after reaching our initial target.

Ditto for CL.

As we get very tired of saying, SPX is at USDJPY’s mercy.  As we posited in the 10:00 update:

Our 2046 target and the most interesting looking channel are seemingly at odds.  Perhaps a bounce at the SMAs and sideways for a while — ping ponging with the SMA10?

That’s right.  USDJPY popped up above the .886, and that was all SPX needed to break out of the little triangle and pop up to the SMA10, which it just tagged.

It’ll push through if VIX and USDJPY get cranking here in the last half hour.  I wouldn’t chase it, though, as the head fake quotient is quite high at this point.  Better to cash out here at 2053 and relax this weekend, enjoy the family, let someone else guess at what the next page of the script calls for.

Last thought for the day… clearly the market hasn’t made up its mind about USDJPY.  Or it has, and TPTB are vetoing it with the billions at their disposal.  I believe their intent is to keep the game alive until the ECB can take the reins on the carry trade.  They’ll futz around with the yen as much as need be to prevent any serious downturns, and we’ll see much more of charts like the one below.

It’s a sad state of affairs.  But it is what it is.

I’ll redraw the little channels on SPX for now, but wouldn’t put too much stock in them until we see the next move or two.

Have a great weekend, everyone!