When SPX drops 1% in spite of a 3.5% spike in crude oil, TPTB get nervous.  After all, the CL algo has been the best thing to come along since the USDJPY started sputtering last year [see: How to Engineer a Rally.]That’s why, this morning, we’re seeing not only another 1.6% CL ramp, but a 1% USDJPY ramp as well.  Two ramps for the price of one!

continued for members…The big picture in each:

I see no reason why CL can’t go on up to the white .618 over the next few days.  There’s a channel midline in the way, but these haven’t proven to offer much resistance over the past three months.

Similarly, USDJPY has a .618 just above that should justify a rebound off the bottom of the rising purple channel.SPX’s goal today: breaking out of the falling white channel, probably to the SMA20 (yes, again.)Here’s a close up in 5-min.  We could get some resistance here at the SMA5 200, but it’s more likely we’ll see a day like Tuesday, when retracements were very hard to come by.  Also, FWIW, ES’s channel top is equivalent to SPX 2080 – above the SPX channel top and the SMA20.

UPDATE:  9:43 AM

SPX has backtested the red trend lines, and has the go-ahead from CL, but USDJPY is still tumbling as it kep doing yesterday.  Should get a bounce here, but we can’t call the drop finished with USDJPY still slipping toward the SMA20 at 108.78. As much as the premarket looked like Tuesday, this action reminds me more of yesterday — when things were all set to go to the moon, but USDJPY kept a damper on.

It would be a much better set up for a long position if USDJPY were to go down and bounce off 108.78, CL off its SMA5 200 at 46.27, and SPX off the red TL when the SMA5 10 crosses it at 2068.65.  Are you listening BoJ?

UPDATE:  9:57 AM

Looks like we’re going to get a deeper drop, perhaps all the way to the yellow neckline (2062.83) we targeted yesterday.  USDJPY is getting closer, but not quite there.  UPDATE:  10:25 AM

USDJPY reached our downside target, so here’s the chance for a rebound.  I’d take a long position here, even though SPX didn’t quite reach the neckline. CL is getting a nice bounce off the red .236 channel line.  Like USDJPY, it’ll need to retake the SMA5 10 and also its SMA5 200.ES is likewise a little short of its bounce spot, so we’re probably a little early.UPDATE:  10:45 AM

Just pushed below the neckline, so I’d watch your stops in here.  ES pushed below the white TL, but just tagged its neckline.  So, that might have been the extra drop that was needed before a bounce could take place.  If USDJPY can push above that SMA20, then we should get a sizeable bounce in stocks.   If it reverses lower toward the .618, then SPX could break down. UPDATE:  11:00 AM

ES is breaking down here at the neckline.  Back to short. USDJPY is holding the .618, but CL is diving toward the bottom of the red channel at the purple .707.  Potential support there.UPDATE:  11:12 AM

SPX just reached the white .618 and ES its .886 and white midline.  Should get a bounce here.  Back to long with very tight stops, as CL and USDJPY haven’t reached great support yet.  Could slip lower to the white midline. UPDATE:  11:17 AM

CL reached red channel bottom, but isn’t bouncing much.  So, ES and SPX are still slipping.  I’d give it a little slack, as the white midline is just below at 2054.74 and USDJPY is holding at the .618. UPDATE: 11:23 AM

Watch your stops closely, as SPX and ES are definitely not bouncing yet — because CL is still threatening lower.  It’s red channel is a reasonably well-defined one, but the bounce would be stronger if it backtested the broken white channel down at 45.20 or so.The red channel line rising through the bottom of the chart is the channel from Feb 11 lows.  In other words, it’s quite important to the bulls.  If SPX can’t pop back above it as occurred last Friday, then there’s potentially much more downside to come.  The bounce would be more convincing if it occurred at a major SMA like the SMA50 at 2052.04.Likewise, USDJPY’s bounce at the .618 was nice, but it would mean more coming at the white channel midline at 108.56ish.  Bottom line: stay frosty.UPDATE:  11:50 AM

SPX is backtesting the red channel line, and CL is faltering!?!  Not a good sign for a bounce.  Even USDJPY’s bounce looks like it’s faltering at the SMA20 and SMA5 200.  Back to cash here if CL plunges beneath the channel bottom again and USDJPY can’t retake 108.825.

UPDATE:  11:57 PM

USDJPY is reversing, and CL isn’t helping much.  Back to short for the SMA50.UPDATE:  12:05 PM

ES is getting a bounce at a deeper .618.  Back to cash.Here’s the ES .618.  I don’t know how much of a bounce it’ll get unless USDJPY and CL break out.  But, I’ve been wrong several times this morning, and I’d rather be safe than sorry.  And, clearly, there’s horizontal support for ES at this level.FWIW, I show AAPL bouncing here at 89.47.  If it drops through, there’s support at 85.39.UPDATE:  12:24 PM

USDJPY and CL are breaking out.  Chance for SPX to bounce.  Back to long with tight stops.  There’s a lot of damage to be undone.  Watch the falling SMA5 20 around 2056.80 and the red channel bottom — now resistance — at 2058.50ish.  It’s all going to depend on USDJPY and CL, which are off to a good start but have a long ways to go. UPDATE:  12:37 PM

Might have been premature, as USDJPY is backtesting the SMA5 200.  Back to cash here unless SPX can hold the midline. UPDATE:  12:54 PM

Backtesting the red channel bottom.  Bulls need a pop, here.  If it can push through, then the SMA5 50 at 2061.78 and the neckline at 2063.24 await. UPDATE:  1:04 PM

Forgot to mention that ES’ neckline is lower than SPX’s.  Just tagged it, which could present problems for SPX. UPDATE:  1:33 PM

USDJPY is slipping below support, so I’d close the long position here.UPDATE:  1:45 PM

They held it at the white channel bottom and USDJPY and CL are back on track, so I’m back to long. Still have the problem of ES’s neckline, but if CL breaks above 46.44 or USDJPY above 109.2 it would take care of that.  Watch for the SMA5 50 at around 2060.10.

UPDATE:  2:02 PM

Neckline ahoy.  Back to cash here.  Not saying it won’t push through — I think it will — but I don’t care to participate in a 4-5 point drop if it reverses first.  If it pushes through, I’m back to long.CL and USDJPY are both in a position to backtest and push higher. UPDATE:  2:06 PM

Pushing through, back to long for 2065-2066. More accurately, wherever SPX is when ES reaches 2062.11.  The top of SPX’s falling white channel and SMA10 are both at 2065.23.  But, if I were in the control room, I’d make sure CL and USDJPY spike higher at that point.UPDATE:  2:15 PM

ES just tagged its purple midline, so I’d step aside here and see if it still has more upside.  Back to cash.  I believe we’ll probably get a backtest of the white channel down at the SMA10. Another chart to watch: VIX — which will likely backtest the white channel top and SMA20 at 14.41.UPDATE:  2:46 PM

SMA5 10 caught up.  Going long here for the SMA5 200 at 2071.38. UPDATE:  3:06 PM

SPX could get support here as ES backtests the purple midline.  If not, it’s likely heading down to 2065.25 for SMA5 20 to come along.  Going to cash if it doesn’t catch support here.  Best guess is they’re shooting for the channel top by the EOD. UPDATE:  3:08 PM

Should be a good bounce from CL here at the SMA5 100 at 46.40 and USDJPY at 109.03ish.  Still not clear where SPX/ES is going to turn, but appears to be waiting for SMA5 20 to come along. UPDATE:  3:18 PM

Looks like it’s headed down to the SMA5 20.  Short here, or ride it out.UPDATE:  3:28 PM

Looking for a bounce here at the SMA5 20 — possibly into the close at the white channel top: 2074.25.  Watch your stops, though, as CL is bouncing but USDJPY has no reason to just yet.Keep on eye on VIX and its SMA5 200.UPDATE:  3:43 PM

ES is slipping back below the SMA10 and VIX above the SMA5 200, so we might not get the bounce into the close I was expecting.  Not sure there’s enough time, as USDJPY and CL are just now dipping to our targets.  Back to cash here. If it closes in the vicinity of the neckline again — or even below it — then this damages the potential of a rally — even though we’re back above the red channel bottom.  I’d be cautious about holding long or short overnight.

I have a lot of charting to do tonight!