And, just like that, the ability of The Powers That Be to control the markets is once again called into question.

Classic Rock fans might wish to enjoy a little Guess Who whilst reading this morning’s post and picturing Angela Merkel’s expression upon seeing the markets awash in red this weekend.

With Greece seemingly irretrievably broken, the euro took a huge dump over the weekend.  The SNB swooped in and propped it up, less the carnage be worse than it already was.  The daily chart looks fairly benign…

…but, the hourly chart shows just how dramatic Sunday’s plunge (and, the subsequent prop job) was.  Still — only a gap close, and nothing more.  And, there’s plenty more downside potential to our 1.07 target.

Friday saw SPX reach the SMA100 as we anticipated [Friday’s post]:

And, today should see our next downside targets come into play, especially since USDJPY and CL have both clearly broken trend.  USDJPY has broken below the red channel midline……and, CL has officially dumped the purple channel and is shacking up with the white channel we proposed on June 19.  From Time to Pivot:

However, I believe the CL’s purple channel is about to fail.  I expect the entire advance to pivot to the less aggressive slope illustrated by the rising white channel in the chart below. If so, the next stop should be a tag of the white midline (red dot.)

Maybe it’s just us.  But, doesn’t it feel like “The Powers that Be” have inched a step or two closer to “The Powers That Were?”

Not to worry, today’s move — and the subsequent drops we’ll see in the coming week — are all in keeping with our analog from this past March [see: A New Analog Mar 27, 2015].  We’ll explain.

continued for members…A reminder: the targets we presented on Friday, with an additional interim one added at 2082 thanks to the SNB’s intervention.  We could see a very substantial bounce here.

More after the open.

UPDATE: 9:33 AM

That didn’t take long.  Look for a bounce here in order to keep the purple channel bottom alive.  Leading candidates include the grey midline at 2090 and the SMA100 at 2096ish.

Back to the analog…  remember, we have been expecting a SMA200 tag.  I preferred it occur when the SMA200 was at 2050, as it intersected with the pale blue .886 at 2050.52, but anywhere in the 2050-2060 range would work.

The key is that the SMA200 be tested, and probably even broken by at least a little.  It has to be enough of a threat to the financial markets that the Bank of Japan freak out (the technical term) and start dumping on the yen again.

With the USDJPY’s SMA100 now above 120.11 (currently 120.80) and the SMA200 up to 117.91, our forecast of a SMA100 tag in the next week and SMA200 around July 29 is looking quite likely.

The SMA100 will provide a good bounce and buy some time.  As we pointed out last week, the SMA100 line is now essentially the same as the white channel midline.  And, the SMA200 bounce will serve as the hard floor that the BOJ dare not test.

Assuming the BOJ takes the bait and devalues the yen further, the carry trade unwinds that have already started should be halted — or, at least slowed enough that normal day-to-day currency and futures manipulation will be enough to get SPX back to positive territory.

Could anything go wrong?  Absolutely.  The whole thing could collapse in their pompous faces.  Markets can and do get out of control, as occurred in 2011, 2008, 2002, etc.  But, the whole purpose of the analog was to plan ahead for just such an event as this, and bears have been so flushed out of the market that I suspect this prop job will succeed.

UPDATE:  10:39 AM

SPX reached 2082.34 — just above the red .786 at 2082.22 — bounced to 2090.90, and returned to tag the red .786 with an intraday low of 2082.06.  Note that the bounce to 2090 represented a backtest of the falling gray channel midline, so SPX needn’t get all the way up to the SMA100 (our secondary bounce target from earlier.)

I think it will, though, as it would also represent a backtest of the bottom of the rising white channel from 2009.

Note that I’ve also added a white target that would permit a deeper retrace without breaking the previous lows, and reinforce the validity of the falling gray channel via a tag at its .236 line.

UPDATE:  2:00 PM

Just tagged the white target.  A bounce from here would likely backtest the broken purple channel bottom at 2082ish.  But, the headlines from Greece are getting nastier by the minute.  So, I’d be very cautious about assuming a bounce at any particular point, as logical as it might seem.

The latest blurb that Greece will default to the IMF tomorrow won’t help matters.

UPDATE:  3:45 PM

SPX has reached our 2050-2060 target range, with a tag at 2057.51 of the purple TL that connects the March 2009 low and the Oct 15, 2015 low.

Note that this also facilitates a drop equal to that in early March and satisfies the white channel added for illustrative purposes this morning.  I’d still like to see the SMA200 tagged, but we might have to wait until tomorrow morning.

 

A reversal here at the pale blue .786 would definitely help justify the drop to 2014 we discussed a couple of weeks ago (yellow dot.)  In short, look for a bounce either late today or — more likely — early tomorrow.  But, 2050 remains firmly on the table.