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With the massive NFP beat on Friday, bears thought they just might have a fighting chance.  The odds of a rate rise in December have clearly risen.

And, sure enough, there was a 22-pt drop off the pre-announcement highs in the futures.  But, the dollar — which had already broken out of its seven month consolidation — was further emboldened by the prospect of a massive 1/4% boost in short rates. And, TPTB were quick to seize on the USDJPY strength (+1.15%) it produced.  What happened after that was a testament to the degree of control they still exert over currency markets and, hence, the equity markets. The net result was a drop in SPX that was couldn’t even reach the next lower Fib level.  But, that was Friday.  Today’s another story.

continued for members…All swing targets remain unchanged, with 2138 still the upside bogey, and 2077 our initial downside target.  This being Monday instead of Friday, the bears might just have a shot at it.In addition to last week’s still as yet unfulfilled Bat Pattern, SPX has to worry about interest rates — and not just that they’re rising.  Today, it has to be concerned about a fall.  Note the dashed yellow line running diagonally through the chart.  This trend line that has marked the top for TNX ever since June of 2007.  Many important tops occurred when TNX reversed off of it.

The relationship was bent, if not broken, during mid-2013 until mid-2015 when TNX rose above the line.  We’re about to find out whether it remains broken.On the bulls’ side, CL reached a TL of potential support over the weekend.UPDATE:  9:51 AM

Just tagged the neckline of a potential H&S Pattern targeting 2050. While TPTB might be okay with 2077, they likely won’t be with 2050.  So, watch for a bounce here at 2085.  It would at least backtest the broken purple TL (2090ish) when the SMA10 reaches it in another 5-10 minutes.Here’s another look at it with my take on a falling channel for the drop since last Tuesday.SPX is nudging below the purple neckline, so it looks like the bounce isn’t going to happen just yet.

UPDATE:  10:13 AM

SPX within a few points, now.  Watch closely for signs of a bounce in here to backtest the neckline up at 2084.84 and let the 5-min SMA10 catch up.The reason: ES suggests the 2077 tag might not happen until 2pm EST.  USDJPY is playing ball, accommodating the drop for now……as is DX.UPDATE:  10:27 AM

SPX is a few points ahead of ES.  So, I expect at least a slight overshoot or a premature bounce followed by another squiggle lower.UPDATE: 10:32 AM

Just reached 2077.79, which is probably close enough, though ES continues to suggest a return to its .786 at 2069.16 after whatever bounce might occur here. A backtest of the neckline would mean 2085 – perhaps at the same time as the 5-min SMA20 reaches it.

In other words, this is a reasonable entry point for a long position, but keep your stops close just in case the bounce is short-lived.  As for the SMA200 at 2063.22, it’s possible they could go for it today — perhaps a protest against the idea of higher rates?

Needless to say, if SPX should push below 2077 and is accompanied by falling CL and/or USDJPY, there’s nothing to lose by playing along with reasonably tight stops.  USDJPY looks like it might easily fall further after a backtest of the yellow TL.  CL, on the other hand, seems to have found a meaningful bottom — though a push below it would certainly make a statement. UPDATE: 11:05 AM

ES coming back for its 2069.16 tag.  Could revert to short here at 2077.45, but there’s a pretty good chance it’ll bounce when ES does after two more points.UPDATE:  11:08 AM

ES just tagged 2069.50, and USDJPY is starting to bounce. I’d hold on to our long position unless ES suffers a sustained push below 2069.UPADTE:  11:13 AM

ES just pushed slightly below 2069.16 and SPX below the bottom of the falling red channel.  I’d revert to short here, but keep an eye on USDJPY and CL for signs of a saving spike higher. SPX’s SMA200, based on Friday’s close, is at 2063.22.  ES’s, based on current prices, is at 2057.37.  Translated: if this gets going, there should be synchronous SMA200 tags.

UPDATE:  11:27 AM

Good progress so far — even though it still feels very much under control. UPDATE:  11:33 AM

This is the sort of thing we have to worry about – a sudden, unfounded reversal in USDJPY.  Chances are it’s just trying to slow SPX’s decline.  But, you just never know. UPDATE:  12:21 PM

Quick update.  It appears that SPX will backtest the broken red channel at the SMA20 here in the next few minutes (2073.90ish) – perhaps as USDJPY backtests the yellow TL.  Just be aware that many such setups over the past two months have turned into algo driven recoveries that lasted most or all of the session — with the final target reached on a gap down the following morning.

One other note…it’s raining in Carmel today, which isn’t unusual.  What is unusual is the thunder, lightning and hail.  If we lose power, which we often do in storms, I’ll be offline for a while as I switch over to a battery powered laptop and a cell-powered internet connection.

If power goes out on the entire Monterey Peninsula, and cell towers are kaput, it’ll mean a drive to the nearest Starbucks that has power.  So, if SPX suddenly starts doing something we’ve discussed — say, reverses at the red channel bottom — and I don’t comment on it, assume that that’s what happened.

UPDATE:  1:15 PM

Back to short here at 2071.82  if USDJPY supports the renewed push below the red channel bottom. UPDATE:  1:44 PM

No follow through on either, but SPX could get another shot here if it reverses off the 5-min SMA50.  Again, no dice unless USDJPY takes out the previous lows. UPDATE:  2:13 PM

SPX just backtested the .786 at 2077.45, just as USDJPY is about to test horizontal resistance and the 5-min SMA50.  This is another opportunity for a reversal, though — again — not without USDJPY/CL on board.UPDATE:  2:45 PM

ES and SPX just dipped below their intraday TL’s.  But, no support from USDJPY or CL yet.  Maybe some downside coming up?  I’d switch to a short position here with very tight stops if they can push through.  It would help if USDJPY could break down even a little.  Right now it’s acting very neutral — just like last Friday.UPDATE:  3:00 PM

Seeing another dip below the TL here, but this time with some downside by CL and after tagging the 5-min SMA10. Still no help from USDJPY.

UPDATE:  3:16 PM

This could be the start of it.  I’ll try a short position here at 2073.97.Tight stops are advised, as USDJPY and CL aren’t exactly plunging.  And, it seems like a gap down tomorrow morning would be a more likely way to reach 2063. UPDATE:  3:26 PM

Ditching the short position — just a head fake.If you’re able to hedge or monitor your position overnight, I’d be comfortable with a short position at the close.  Otherwise, best to cash out and enjoy today’s gains.

GLTA.