If the “market” is driven higher by blatant manipulation, in clear defiance of the fundamental laws of economics, does it still count as a rally?

Yesterday, the FOMC delivered a near carbon copy of its Sep 17 missive — the one that precipitated a 148-pt ( 7.3%) decline in SPX. Sure enough, SPX fell immediately after the press release. But, this time, central bankers were better prepared.

They started by pushing CL up and out of a well-defined falling channel. It would go on to rise 8.5% in less than 24 hours, and is up 9.2% as we go to press.Also within minutes, USDJPY was ramped (out of its well-defined falling channel) up to and over its  200-day moving average.Needless to say, SPX reversed its initial 21-pt sell-off and spent the rest of the day playing Follow the Algos.  It finished well above its .786 Fib — the first one since the September lows that showed any promised of providing at least a modest retracement.

But, consider the chart below — which shows USDJPY’s 5 previous tags of the dashed, red trend line.  ES – the thin purple line – didn’t react all that kindly in the past.  Is there any reason to expect it will this time?

continued for members…

The initial downside this morning should backtest the .786.  Beyond that, we’ll have to see if USDJPY permits any more.

With the futures climbing steadily with this morning’s USDJPY ramp to a 7-pt deficit (after being down by 11 earlier) there’s a very good possibility that USDJPY will linger around the SMA200 for the rest of the week — especially with the BoJ delivering its QQE update tomorrow.

Perhaps the purple channel below is what TPTB have in mind. It would certainly buy a little time, meaning they could forestall a decline until after the weekend.The wildcard is that DX clearly broke trend yesterday.EURUSD already had.USDJPY is loitering around the SMA200 the way it has the 120.11 Fib in the past.  A breakout by DX might signify further yen strength to come, or it might just be a sign of anoter wave lower by EURUSD.  With BoJ announcing tomorrow, we should find out soon.

UPDATE:  10:44 AM

Lots of propping up going on this morning…UPDATE:  10:56 AM

Another painfully slow, algo driven day.  SPX appears to be tracing out the purple channel shown below, while CL just reached SMA support and USDJPY is back above the SMA200.   You’d think a simple backtest involving 11 points wouldn’t be that big a deal… The only way SPX is going to tag 2077 is if CL and/or USDJPY starts dropping.

UPDATE:  11:08 AM

USDJPY is bouncing and CL is reversing.  I’m done with the short position on any sustained push past the SMA100 at 2086.UPDATE:  11:30 AM

Out at 2086.  Even if CL/USDJPY suddenly reverse lower, SPX will likely be propped up at the SMA200 – now at 2084.  Hard to get excited about those prospects.  If the SMA200 catches up, and SPX pushes below it on a CL or USDJPY reversal, I’d be game for a shot at 2077.  But, at this rate, I woudn’t be surprised if it waits until overnight.UPDATE:  12:33 PM

Are you a glutton for punishment?  CL is hinting at a decline. So, here’s another shot at a downturn.Watch for the tag of the lower white TL, though.  It might correspond with SPX reaching the channel midline again — which is only 3-4 points below.  We won’t know, however, until it happens.

UPDATE:  12:47 PM

So far, no good.  SPX is already caught up in USDJPY being above the red channel midline, and isn’t being affected at all by CL’s theatrics.  Unless USDJPY climbs down off its high horse, or CL does something really dramatic, SPX isn’t inclined to go anywhere. There is a chance that USDJPY will react here at the expanded purple pennant top, which is also the white .886 retracement of yesterday’s highs.  It would really help get things going.UPDATE:  1:04 PM

No dice.  CL is ramping again, so I’m back to cash for now.

UPDATE:  1:34 PM

I’ll take another shot here on the break below the channel midline.  Shorting at 2087.48.UPDATE: 2:22 PM

And, back to cash.  CL has now established a pennant/triangle that could break either way.  I’d rather update some other charts than get jerked around by CL’s minute-to-minute fluctuations.  UPDATE:  3:21 PM

Last chance for a trip to 2077 — or, will it be a breakout to 2014?  USDJPY and CL are both hinting at a breakdown.  It’s probably be a head fake, but  I’ll try a short here at 2089.72. Tight stops are advised.  Should be easy, given the narrow trading range all day.

UPDATE:  3:37 PM

No joy.  Back to cash for the night.