Our downside targets remain unchanged from Monday and yesterday.

Despite vigorous CL and USDJPY ramp jobs, futures are currently off about 13 points, and the falling white channel is pointed right at our next target.continued for members…

The main question is whether we’ll get there today, or they’ll manage to stretch it out until later in the week.

The H&S neckline could provide support at 2054ish, but SPX should push through to the white channel bottom, currently around 2049.  The yellow .707 is at 2039.61 and the rising SMA50 is just below at 2037.94.One good guide might be ES, whose SMA50 is at 2035.26 — about 2041 in SPX terms.  Note that SPX’s .886 is at 2042.61 — a nice deep retracement of the rally from 2033 to 2111.  Note that the .886 is where I’ve placed the next downside target, albeit on Friday.

UPDATE:  9:44 AM

SPX just reached 2048.75, which is about where the white channel bottom lies.  Previous tests of the bottom haven’t been that uniform, so it’s hard to know for sure.  So, I’d be ready to cover any moment, especially if USDJPY or CL signal that a bounce has begun.UPDATE:  9:46 AM

FWIW, ES has reached TL support and is bouncing.  I’d go long here, but with very tight stops.  A drop by ES to 2034.81 in the next few minutes would make perfect sense if it were allowed. If it does bounce, then I’d look for a tag of the falling SMA5 10 at the yellow neckline — about 2055 – 2056.

UPDATE:  10.00 AM

There’s the neckline.  I’d revert to short here, but note that USDJPY is trying to break out of the megaphone pattern and CL is on a tear.  Tight stops are strongly suggested, as they really don’t want this H&S Pattern to play out. UPDATED: 10:25 AM

SPX pushed through the neckline and is dropping back just enough to get the support of the now-rising SMA5 10.  I’d revert to cash here and wait for the next leg down.  UPDATE:  10:36 AM

CL is slumping after another negative inventory report — which will probably be ignored.  So far, SPX is being propped up fairly well.  We’ll watch for signs of a breakdown, which I didn’t expect until later in the day or even tomorrow.  This could change things if they don’t get CL back over the SMA10. UPDATE:  10:43 AM

Trying a short here with very tight stops. Careful, as USDJPY has SMA support if it chooses to use it.  CL looks like it could go lower still – but, of course, it’s anyone’s guess where they’ll decide to support it.UPDATE:  11:03 AM

USDJPY and CL both ramping.  I’d revert to cash if SPX pushes up through the falling SMA5 10.UPDATE:  11:06 AM

Too risky for my taste, sitting here waiting for the USDJPY/NDX pop or VIX plunge.  Back to cash.  The deciding factor is ES, which backtested the falling white channel midline.  While it could go on down for another tag of the white TL, is might also be heading back up to the channel top. 

After redrawing SPX’s falling white channel, it looks like the bottom could be 2046.82.  So, there’s more potential downside – even in the very short run.  But, will TPTB allow it to play out? UPDATE:  11:22 AM

VIX is breaking out slightly, and CL resumed dropping.  Most importantly, ES and NKD broke TL support.  I’ll take a shot at shorting again — though there’s a 50:50 chance it’s a headfake. UPDATE:  11:46 AM

VIX just got clubbed back below 16.53 and NKD is back above its TL.  Back to cash here.If I had to guess, I’d say we’re heading back up to the neckline (2055.41) again at around 12:09.  The SMA5 50 will be dropping through there shortly. But, I’d love to be wrong on this…  Signs would include CL dropping through the .886, USDJPY through the purple midline, ES back through the white TL, VIX back above the red TL, and NKD back through the white TL.

I have to take a brief break.  If SPX drops through the SMA5 10, I’d short — especially if any of the above conditions are present.  Otherwise, might be worth playing a bounce.

UPDATE:  12:40 PM

Didn’t quite make it up to the neckline, and already it’s slipping.  VIX is popping and USDJPY is reversing.  I’d take another crack at shorting here.  Just keep a close eye on SPX and the white SMA5 20. UPDATE:  2:50 PM

Just reading the comments below…I know this zigzagging makes people crazy.  That’s the entire purpose of chop — to get traders jumping in and out while market makers soak up the wasted put and call premiums!

The big picture shows a very cautious effort to complete a tag on the bottom of the rising red channel from Feb 11.  They could have easily allowed it a couple of weeks ago, and it would have backtested the SMA200.  It actually would have strengthened the bull case.

But, someone (aka BoJ) panicked and bid up USDJPY/CL in order to prevent any kind of collapse.  No surprise, there.  Stupidity, but not surprise.

I can’t promise you that holding short will pay off with a tag of the SMA50.  Tomorrow, it’ll be around 2040, and SPX will be able to dip down and tag it and the red channel bottom without violating the purple channel midline (the channel it broke down from in Jan-Feb) or dipping back into the gray channel that it broke out of (with great difficulty) on april 12.

It could happen any time between now and then, and it could even wait until Friday or Monday.  But, the point is to backtest and, thereby, firmly establish support in order to legitimize another push higher.

It’s another 10 points or so.  So, it’s perhaps not worth it for many to take the risk of holding short overnight.  But, the last two nights have paid off for those who could, and so it’s my job to point out my expectations (along with the usual warning.)

By all means, don’t feel like you have to expose yourself to risk you’re not comfortable taking!  There will be other gains from other setups that don’t involve near as much risk.

With that said, I’d hold short overnight if you can hedge or keep a close eye on things.  Remember, just because it’s manipulated as hell doesn’t mean it can’t be played.  It’s just a matter of figuring out what game they’re playing, and trying to position accordingly.

UPDATE:  3:21 PM

If you don’t intend to hold overnight, you might want to establish some stops here.  While it could dip down to the .886 of the SMA50 in the closing minutes, it’s more likely to zip up to the yellow neckline in time for the close.  Technically, this would imply that the H&S Pattern hasn’t completed (need a close below the neckline.)  Needless to say, there are unfilled gaps up above, so there’s plenty of risk for those staying short overnight.