SPX acted pretty much according to plan yesterday — getting most of the way to our 2093.55 target before CL and USDJPY panicked and bounced higher into the cash close.  From yesterday’s members’ section:

My hunch is that we’ll see SPX decline to our 2093.55 target — particularly if USDJPY declines to flesh out the rising white channel (118.75ish, depending on when) or lower.

It’s a continuation of the theme posted on Monday:

 If the past is any indication, SPX isn’t quite ready to make its next major move….l’m looking for SPX to move lower before moving higher, with the likely target being a test of the SMA20.

CL has continued higher, but ran into the channel midline that might hinder further upside.

While USDJPY — after backtesting the broken red TL — has continued lower.

Assuming we get some follow-through this morning, what next?

If 2093.55 fails, then the SMA20 at 2088.3 is the next level of support.  That would leave an interesting potential H&S Pattern in place, with the dashed white line representing the SMA20 as the neckline.

updated chart in a few…

UPDATE: 9:37 AM

I think the target will be wherever SPX happens to be when USDJPY reverses and heads higher.  Currently, 119.08 looks like the most obvious target.  It’s on the thin red TL up from 118.33 and would intersect with the purple .618 Fib.

Note that a full .886 retrace of the rally from last Friday would hit the red target at 118.75 we identified yesterday as appealing.  Given that SPX is selling off pretty nicely with a minor downturn overnight, we can only imagine how big an impact that might have.

UPDATE:  9:54 AM

SPX has reached 2090.55 so far.  At this point, the neckline is plenty flat enough.  And, it has nailed the larger purple channel’s .786 line and very close to the small purple channel’s .236 line.

[A drop by CL to 50.17 would help SPX reach our actual target; but, this is probably low enough to get a bounce — at least into the european close.  It’s worth keeping an eye on.]

If the H&S should play out, it would target around 2060 — which is coincidentally (or not!) the SMA50 and might allow a backtest of the broken falling gray channel.

continued for members...

That’s assuming TPTB would give up the rising purple channel.  It would also spoil 2073 (the yellow dot) as a wave 4 target.  So, I’ll stick with 2073 as the next major downside support, whether or not 2088.3 holds.

UPDATE:  10:25 AM

2087.62 — much better.  Worth playing a bounce with tight stops just in case.  The left shoulder is 11 points, so I’d shoot for 2100 or so (a simple backtest of that broken red TL would be 2097ish.)

CL would support a bounce here, whereas a drop through the red TL would suggest 2073.

UPDATE:  11:45 AM

Backtesting the broken red TL as discussed above…keep an eye on CL, which is also backtesting its broken TL.

If it fails to retake it (and, USDJPY doesn’t ramp) then the next stop should be 2073.28.  Short here at 2098?  With tight stops, sure…why not?  But I’d dump it at the first sign of USDJPY or CL ramping or VIX dumping.UPDATE:  3:00 PM

SPX punched through the TL on the back of CL, which didn’t just ramp…it spiked higher after TPTB realized how this morning’s dump was affecting stocks.  As we’ve discussed many times, oil is now one of their favorite tools to push stocks higher.

Check out the reaction when it dropped below that TL we discussed above.

SPX, which reached 2101.50 on the initial rally to top the falling TL, is now backtesting it.  And, all it took was a 5% spike in oil on the heels of the worst inventory spike since 2001.  Odds are it’ll settle after the close — leaving us to wonder what sort of follow through they have planned for tomorrow.