Yesterday, SPX tagged our next downside target [added on May 29] and even put in the overshoot we discussed.

From Friday’s post Bad Good News:

Assuming (as we do) that USDJPY runs out of steam at 125.72 and CL bounces back at 57.09 or so and TNX tops out at 24.38, SPX should have little trouble tagging our next downside target at 2082ish, with an overshoot a distinct possibility.

USDJPY is clinging to the rising TL from May 27, but is showing signs of weakness after reaching our upside target last Friday.

This puts the onus on CL, which is…ahem…rising to the challenge.

As long as CL and USDJPY mind their manners, I see no reason to change yesterday’s forecast.

continued for members…

While SPX closed below its SMA100 yesterday, there have been many such instances over the past few months.

Placement of the falling white channel is a little tricky, so the red .886 at 2075.54 would be a reasonable stop for anyone playing the bounce.

Bonds are selling off, with TNX currently topping Friday’s highs.  It’s an algo move that hasn’t been terribly effective in the past, but combined with CL might hold the line for SPX.

With the SMA200 now at 2046.18 — just a few points away from our 2050 downside target — I have no problem with the idea of a quick plunge.  Remember, we’re looking for a shock big enough to (1) get the BOJ off their duffs in order to boost USDJPY much higher, or (2) put the FOMC or ECB in a more accommodative mood.

With SPX now 60+ points off the Butterfly completion highs, we’ve only scratched the surface of what it might entail.  All we’re really talking about here is whether we get much of a bounce in between here and there.

SPX’s channels, SMAs, and harmonics would argue we won’t.  As it so often does, it will come down to whether there’s enough real selling pressure to offset the HFT/algo shops.

Stay tuned.

UPDATE:  1:37 PM

SPX has backtested the SMA100 — also the purple channel bottom (as drawn.)  Either the algo drivers need to pop here, or we’ll get a pullback here at 2085.60 and further drop to the 2050 area in the next week or so.

I mention “as drawn” because the purple channel bottom is drawn through the Oct 15 closing low, while the white is drawn through the absolute low for the day. I show it crossing 2050 at the same time as the SMA200 (around Jun 15-17.)

Note that neither works terribly well as a channel — with plenty of transgressions on either side of the .236, .500 and .786 lines.  But, they’re all we have; so, we’ll pretend.

Bottom line, 2085.60 would be a very logical place for the bounce to run out of steam — especially since it’s been driven by a 6.25% ramp job in CL over the past two days.  But, the market “riggedness” has frequently overriden logic and traditional chart “rules,” so please be cautious!

UPDATE:  3:37 PM

CL has retraced to the white .236.  Quite a run which, in traditional harmonics fashion, might spell the end of the bounce.  In the universe of algo-driven “markets,” much harder to say.  Just be aware that it’s a possibility.

Some fine-tuning of the downside case for SPX.  The white channel fits fairly well, and allows for a dip to 2039.66 (the purple .618) in a slight overshoot of the SMA200 — IF things get more rambunctious — and a subsequent dip to 2014 IF things get totally out of hand (think Greece situation blowing up in a big, public way.)