With CL pennies from reaching our price objective [see: Update on Oil, Mar 17] this morning……USDJPY should have a chance to reset.  It has already begun, with the first (tiny) slip beneath the gray channel bottom since Feb 26.

Whether it completes a backtest of the .618 Fib at 120.11 will be determined by how well equities respond to oil’s bounce or lack thereof.

A strong response would allow USDJPY to decline during market hours; a weak or lackluster response would require it to wait until tonight or, as we discussed yesterday, a reaction to the Fed’s statement tomorrow.

UPDATE:  9:40 AM

The bounce has begun, even though CL came up a few cents shy of 42.51. Stops are advised, as a premature bounce sometimes means one last leg down.

The optimal timing for USDJPY to reach 120.11 and CL to reach 46 would be around midnight tonight (EDT.)  But, we’ll have to wait and see what TPTB have in mind, and how the “market” responds.Bulls should try to hold the line for SPX at the SMA10 of 2070.58.

UPDATE:  10:15 AM

The SMA10 is hanging on.  Note this is also the .786 channel line of the large rising white channel.  It was backtested on Mar 12, but broken in yesterday’s ramp job.

Forecast coming up.

continued for members...

Note the gray channel I’ve added in the mix.  I don’t expect this to hold, but we might find it a useful reference point in terms of the scenario that’s being suggested.  The bottom overlays the TL from mid-October, and I’ve placed the top such that the midline captures several past reversals.

Assuming SPX can get past the SMA20, the midline also intersects with the broken purple channel bottom for a backtest Thursday morning at the red .786 (or next Tuesday the 24th at the .886 at 2110.48.)

The downside case (yes, there still is one) remains the white .618 at 2033.  The move up from 2039 to 2080 did avoid completing the H&S Pattern.  But, it also might have constructed a 4th wave of a 5-wave 61.8% retracement from 2124.

Remember how we commented about VIX being a good indicator of what they really have in mind?  And, how the small red channel’s breakdown yesterday might be a head fake?  Check it out this morning:

All of the above is pure conjecture, and will  of course depend on whether oil really did hit bottom this morning and what the FOMC tells us tomorrow.

Personally, I don’t expect a rate increase or a promise of a rate increase — for reasons that we’ve discussed many times.  The US can’t afford one any more than it can afford a higher dollar.

UPDATE:  2:25 PM

All I can say is “wow!”   The TPTB are so terrified that the “market” won’t be able to hold its own that they had to once again ramp USDJPY up out of the obvious direction it was heading.

Or, perhaps the brief breakdown through the gray channel bottom was just a head-fake.  I don’t know.  All I know is they succeeded in pushing SPX back above the SMA10.

In light of this development, it’s worth noting that SPX is 7 points away from completing an IH&S (at 2080.80) that targets 2124.14.  If that’s the next stop, the rising white channel below would reach the yellow dot tomorrow morning and the red dot Friday morning.  The purple dot looks more like Monday morning.

VIX’s earlier promising signal has petered out, falling back out of the rising red channel at this time…

…as CL dips below the TL off this morning’s lows.  With an hour to go, will we have a repeat of yesterday’s ramp job transitioning into an after-hours reset?  Or, maybe a breakdown in the final hour to actually tag 42.51?  Stay tuned.

UPDATE:  3:15 PM

Here’s a better look at the SPX chart showing the 2124 IH&S target.  Note that it would just about tag the rising white channel top at the purple 1.272. 

This was the target back on Feb 25.  It looked awfully darn certain until the euro decided to collapse.  The white arrow below corresponds with SPX’s 2119.59 top.

UPDATE:  5:40 PM

Lovely…