Lots to examine today.  Futures are up 3 points, but the bigger development is that DX and USDJPY have reached the upside targets we set for them several weeks ago.  We’ll start with DX, which after losing trend last week, came back and tagged the top of the falling white channel. USDJPY has reached almost as important a level of resistance — the midline of the channel that has guided its downside for over a year.

continued for members…With SPX just a few points away from its red .886 retracement at 2101.34, and without the help of USDJPY, it seems bulls are once again looking to CL for help.But CL has been going sideways.  So, it’s unclear whether or not SPX will take a run at Apr 20’s highs, or be satisfied with a deep retracement. UPDATE:  9:33 AM

SPX just tagged its .886, so traders might try a short here with tight stops.  My expectation remains that we’ll see a backtest of the yellow neckline, currently around 2078. Note that there’s support at several points along the way, including the white TL at 2098 and the SMA5 200 at 2093.

Also, reaching the red .618  without the rising purple channel breaking down would mean a fairly sharp plunge this morning.  If it waits till tomorrow, the rising purple channel (which is due to break down, anyway) could be finished.As always, we’ll keep a close eye on USDJPY and CL.  USDJPY has a clear path down to 110.22 or 109.89 (the red TL that has stopped numerous declines.)  Truth be told, it’s a much better shorting opportunity than SPX.But, CL is is a position to spike higher to prevent stocks from declining much.It’s the last day of the month — a month which has struggled to turn positive.  So, any serious downside could easily be delayed until tomorrow.  CL’s antics should tell us all we need to know.

UPDATE:  9:56 AM

We’re coming up on the consumer confidence release in a few minutes.  While everyone’s focused on the upcoming FOMC meeting, there’s plenty of economic data to watch for this week.  This morning’s has been generally positive — or, negative, if you’re hoping the Fed waits until July to raise rates.  There are more important data points coming up tomorrow.UPDATE: 10:07 AM

CL has found a minor line of resistance and is sitting just above it.  It’s technically a break out, but obviously not going anywhere just yet.  We see this all the time.  It’s a delaying tactic — meant to keep SPX from declining.  If CL suddenly spikes back above 50, then we know they’re serious about new highs.

USDJPY looks ready to break down now.SPX and ES are still going sideways. UPDATE:  10:48 AM

USDJPY is finally breaking down.Again, the target is the red CL seen below.  But, it needn’t happen all at once, nor even during NYSE trading hours.SPX broke down to the initial support at the purple midline.  Could get a bounce here.ES is below the white TL, but looks like it’s bouncing at the white .886.UPDATE:  11:04 AM

Big goings on in the EURUSD…the latest polls show the Brexit sentiment is growing.  Pretty spectacular drop in EURUSD, a good start toward our downside target from May 24.  Reaching the red channel bottom is probably more important than any particular price target.  But, if the pair overshoots the channel bottom (currently around 1.1053), then the white .382 at 1.1034 looks very attractive. I don’t really keep up with the politics of the Brexit, though I’m paying more attention now that my daughter has moved to London.  I took the time to watch a documentary [click here] over the weekend that I found interesting.  The producers have an obvious bias, but it makes a pretty good case for leaving the EU.

I love France, Italy, Netherlands, Germany, Austria, Switzerland, etc.  But, the EU’s finances are a disaster.  My gut feeling is that the UK would do well to stay as far away from the fallout as possible.  Brexit would be a big blow to the rest of the EU, and I wish the other countries no harm.  But, if I were a Brit, I know how I’d vote.

Note that the euro’s weakness has translated into dollar strength.  As we pointed out last week, there’s a good chance that DX will push through the falling white channel top in order to tag the white .618 Fib at 96.016 or the 100-day moving average at 96.08.This obviously could stave off the USDJPY decline that’s in progress.While dollar strength on yen weakness is usually a bullish thing, dollar strength on euro weakness is usually not.  It represents fear in the marketplace.  And, fear — especially in the weeks before a potential rate hike — isn’t bullish at all.

UPDATE:  12:08 PM

SPX has reached our next downside target, the SMA5 200.  Good chance of a bounce here.  So far, CL and USDJPY aren’t bouncing.  But, EURUSD is a bit. The SMA5 200 often provides a bounce; but, I’d only consider covering our short if CL pops back above the white TL and/or USDJPY bounces on the white channel line at 110.69.

Note that if SPX drops through it, there is Fib support at the red .786 at 2092.38 and the purple channel midline at 2090ish.  I show the purple channel bottom currently at around 2082, and of course, our neckline target at 2078.53.

UPDATE:  12:28 PM

CL is back above the white TL and threatening to break out.  It’s managed to work SPX back up to the falling SMA5 10 and a backtest of the gray TL.  Do or die time for this dip.  I’m holding short, for now, as SPX hasn’t even reached the .786 at 2092.38 yet. UPDATE:  1:20 PM

I’d cover here, as USDJPY is popping back above the white channel line with SPX above the SMA5 20.  Might go back to short in a jiffy if USDJPY reverses, as CL is dropping. This could be a minor bounce up to backtest the SMA5 100 at 2097ish, or it could be a V-shaped recovery.  Pretty much depends on CL and USDJPY. Note that ES has broken back above the white TL.UPDATE:  1:30 PM

That might be all the bounce we get.  CL is heading south again, and USDJPY seems to have run out of steam.  I’d revert to short here at the purple channel .786 line and SMA5 100, but with tight stops just in case. Note that CL is now in the position of driving stocks lower.  All it has to do is drop through the white TL at 49.56 (also the purple TL), and traders should start freaking out.Little better look at it here…  Note that our downside target at 48.98 is the intersection of the 10-day moving average and the red TL that CL hasn’t tagged since May 9.  There’s always more potential downside with CL, given how far it’s come since our Feb 11 bottom call.  But, the drops are few and far between.  So, we take it very seriously when it facilitates a drop like this.BTW, it appears SPX will reach our next downside target — the purple midline at 2090 — about the same time ES reaches its white .786 at 2087.43.  Could see another bounce there.

UPDATE:  2:11 PM

SPX has reached our next downside target from this morning: the falling purple channel midline.  I show SPX’s purple channel bottom about 5 points lower at 2083.65, and the yellow target at 2078ish.ES has also reached its .786 — the minimal reversal target after having reached its .886. FWIW, its neckline backtest would come way down at 2072.

Keep a close eye on USDJPY and CL, as they’ll signal any potential reversal here.  At this moment, they aren’t signalling much of anything except additional downside.  But, that could change any second. USDJPY has potential support at 110.45.UPDATE:  2:21 PM

Not sure what just triggered it, but ES is popping.  Back to cash here until I sort it out.  Ideally, the bounce would be limited to the SMA5 10 as it crosses the rising purple channel .236 line at 2092ish.UPDATE:  2:25 PM

Just noticed NKD reacted at its .886.  Could be why ES was bouncing.  Back to short, as CL and USDJPY are still falling.  CL, in particular, is clearly on a mission.  And, note that EURUSD’s bounce faltered, and it’s again approaching trend line support.  I’ve adjusted SPX’s falling purple channel to reflect this bounce at the midline.  It means lowering the top to the .886 where SPX should have reversed this morning — which is a very legit adjustment.UPDATE:  2:33 PM

CL just reached our downside target at 48.98.  I should remember not to label downside targets in red, as the red candles get lost in them.   Now, if TPTB wish to get SPX on down to 2078, they’ll push CL below the red TL.  Stay tuned.

UPDATE:  2:49 PM

CL has dropped through 48.98, but note the band of horizontal support around 48.60-48.69.   And, note that USDJPY is nearing its next downside target at 110.45. While I love the idea of SPX nailing our 2078 target all in one day, we could easily get another bump at the channel bottom, followed by the rest tomorrow.

UPDATE:  3:00 PM

OOPS!

UPDATE:  3:16 PM

NKD is at it again.  Now that we’re in the final hour, I worry about a melt-up.  Back to cash, or be prepared to ride it out up to 2092.93.  This makes a lot more sense, as the purple channel midline bounce should reach the .786 line.I picked 2092.83 because it permits a C=A move, but the SMA5 200 up at 2094.26 could just as easily be the target.

UPDATE:  3:22 PM

Extension target reached.  It should reverse here if it’s going to reach the channel bottom today.  Back to short for anyone who got stopped out minutes ago.UPDATE:  3:32 PM

It’s pushing through the SMA5 50.  Back to cash until it reverses.  Last time it did this a little while ago, it was a head fake.  I suspect this is, too.  But, hard to tell with NKD.  And, USDJPY just popped through its SMA5 10/20.CL still hanging out below its SMA10, but above the support zone.  Very coy, and hard to read at this point.  Though it looks like it’s holding a bearish push in reserve for the close.EURUSD is back above the TL, but not looking that enthusiastic. UPDATE:  3:42 PM

Earlier, the SMA5 100 offered a good turning point.  The red extension reaches 2077.34 at the 1.272 if SPX reverses here.  Back to short with tight stops.  Note that this only works if NKD reverses at the white midline and USDJPY at the SMA5 50.  Need help from CL too, now. UPDATE:  3:53 PM

Giving up with this meltup.  Back to cash — for the day unless we get a savage plunge in the next few minutes. These are the worst kind of meltups, IMO, as they scare the crap out of anyone thinking about holding short overnight and slam a bunch of traders into long positions.

UPDATE:  3:58 PM

It might be that SPX soars on the opening in the morning, but I feel fairly confident that we’ll get the channel bottom tag, if not the neckline.  Having said that, a short position overnight only makes sense for those who can hedge and/or keep a close eye on things.  Last chance for it to reverse.  Shorting here with the above provisos.