If the Fed’s feeling a little sheepish about raising rates and touching off another equity meltdown last month, today’s statement should be oriented toward soothing the “markets.”

The futures, which were off almost 1% overnight, are currently showing a 5-pt drop. Even oil, which fell apart (after the close, of course) yesterday, has regained much of its losses and has managed to maintain its upward trajectory.So, what could go wrong?

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If the statement isn’t sufficiently soothing, and USDJPY fails to continue rising, that could derail things.  But, it doesn’t seem likely.  I think the Fed is very much aware of how much damage the wrong tone could do.Today, I’m looking for a dip to reaffirm the white channel midline at 1897ish, followed by a Fed-inspired spike.  SPX is working on a new IH&S pattern, with a neckline at 1912ish and a target up around the SMA100 (also the gray .618) around 2000.

Needless to say, the purple and white channels are both still viable.  So, time will tell whether SPX will continue to rebound as sharply.

  UPDATE:  9:35 AM

That should about do it for the initial test of the purple channel.  I’d go long here at 1895.23.  Our initial objective is to regain the white channel midline around 1899, followed by the purple neckline around 1912.USDJPY and CL are both pushing above resistance. USDJPY is even working on a little IH&S for good measure.New home sales are coming up at 10:00.  Watch your stops.

UPDATE:  10:00 AM

The market doesn’t like the new home sales beat. I suppose it makes more accommodative Fedspeak problematic. I’m stepping aside here at 1896.40 on a likely drop through the purple channel bottom.  If SPX rebounds off the SMA10 at 1892.84, I’d pick up a long position on the way back up.  If it drops through 1892, then it’s likely aiming for the rising white channel midline at 1885ish.

UPDATE:  10:09 AM

CL has found support at the white channel .236 line — but, hasn’t yet broken out.  USDJPY, on the other hand, is back above the red neckline and 5-min SMAs.   SPX should continue to weaken until they both rebound.  Remember, the white channel midline at 1885 signals that the white rather than purple channel will guide whatever upside we see going forward.  It would be less bullish, but would still be bullish.If it drops through the white midline, then the bullish case starts to really suffer.

UPDATE:  10:17 AM

ES just reached its daily SMA10, so we could get a nice bounce here.  I’ll try a long position here at 1888.40.  I’m not terribly confident about this move, as USDJPY and CL haven’t yet made a move.  It could be limited to the SMA10, now overhead resistance at 1892.40, or the broken white midline up around 1895.50.UPDATE:  10:36 AM

SPX just pushed through the SMA10 and is closing in on the SMA5 20 at 1896ish.  Will probably exit there unless USDJPY and CL can break out.UPDATE:  10:39 AM

Selling the long position here at the 1896.20 target.  I think we’re likely to head back down to this morning’s lows — maybe even a little lower — in order to tag the rising white channel midline at, say, 1887.  Keep an eye on the SMA10 at 1892.84 — now potential support again. 

If it breaks, when we have to watch ES’ SMA10.  If they mean for it to hold, then SPX’s decline to the white channel midline could take hours.And, keep an eye on CL, which has tested a .618 Fib and the red TL shown below.And, USDJPY has perfectly tagged the .236 channel line of the huge channel going back to Oct 2014.UPDATE:  11:30 AM

SPX has backtested the purple channel bottom on USDJPY and CL strength.  Thought it might have been just the euro closing pop, but not retreating. Closing the short position here at 1900.65 and reverting to cash.If it pushes back into the purple channel, then the entire foray down to 1887 can be considered a meaningless, intraday blip.

UPDATE:  11:45 AM

Totally missed this move.  Kept waiting for some kind of pullback for a good entry, but it’s been a straight shot on a USDJPY spike.  Might have a chance to short at the neckline.UPDATE:  11:46 AM

I’ll try shorting here at the neckline at 1912.92 — which is what I would have done anyway had SPX popped up here earlier.  The meltup to this point, of course, makes a big decline less likely.  So, watch out for a push through to the white ..382 at 1915.23.  I’d keep stops very tight. Note that CL has again reached the red channel midline that started the Jan 24 decline from SPX 1908 to 1875.And, ES has topped its Jan 24 highs, which was probably the point of this stop-hunting exercise.  The purple grid pointing to potential downside targets is negated.If SPX can hold 1908.35, then its next upside target is the red .886 at 1920.56. It will have popped through the purple neckline and would expected to try and hold it into the close.  If not, then it should drop to support at the rising red SMA5 10, now at 1904.7ish, or the just-broken red TL at 1902ish.

UPDATE:  12:02 PM

Bailing on the short here at 1912.86, as we’re probably heading up to 1915.23 but potentially higher to the red .886 at 1920.56.My concern is that USDJPY is tracking toward 119.16, which could easily drag SPX up to the red .886 at 1920.56.UPDATE:  12:08 PM

We should get that drop to the SMA5 10 at 1908.35 now.  I’ll try a short position here at 1913.84 on the off chance that it targets the SMA5 20 instead.  It’s down at 1901, and is coming up on the purple channel bottom.  Tight stops.UPDATE:  12:14 PM

There’s the .382.  Back to cash here as USDJPY continues to push higher.  This is why I usually advise not to trade on Fed announcement days — moves that are completely uncharacteristic or normal chart and Fib patterns.  Typically, these moves occur after the announcement — not before.  I thought we’d have the usual triangle/sideways whipsawing leading up the announcement. UPDATE:  12:29 PM

With such a big meltup prior to the announcement, I’m led to believe that either a very accommodative announcement was leaked, or the announcement won’t be so dovish and TPTB wanted to bag all the upside they could in advance of 2PM.

If the former, then SPX should sail right through 1920 and test the top of the white channel around 1934 either today or tomorrow.

If the latter, we could get a pattern like the one below.  If SPX declines to meet the rising SMA5 20 at 1908.35, I’d be looking to take a long position there for the rise to 1920.56 at 2PM.UPDATE:  1:00 PM

There’s the .786, I’d take a long position here at 1908.41.  Holding this backtested rising white channel .786 line would be a big help for bulls.

UPDATE:  1:17 PM

Watch your stops here, as USDJPY is rolling over and CL is back below the midline.  UPDATE:  1:20 PM

Maybe I’m overreacting, but I don’t feel comfortable holding long with all indicators pointing to additional downside. Back to cash here — though I expect a bounce at the purple channel bottom. UPDATE:  1:48 PM

Nice tag on the purple channel bottom.  Just need CL and USDJPY to break out.  Back to long in anticipation.  Very tight stops are recommended. UPDATE:  2:01 PM

Back to cash here on USDJPY’s weakness. UPDATE:  2:20 PM

Might get a chance to short at the SMA5 10/50 intersection at 1904.80ish coming up. UPDATE:  2:24 PM

That’s probably close enough.  I’d go short here with tight stops.The possible spoiler: CL, which is nudging up against the red TL and back above the white channel midline. USDJPY is potentially heading for the intersection of the SMA5 200 with the red neckline at around 118.43. UPDATE:  2:42 PM

I’ll take profits on the short here at 1890.98, even though it might have a little further to go.  If USDJPY does decline to 118.43, it has quite a bit further to go.UPDATE:  2:57 PM

Thought we’d get a bounce here at the red channel midline, but USDJPY is looking really weak right now.  Could try a short position, but the purple channel line is just below at 1885.20.  I’d wait for it to bounce back through — if it’s going to.UPDATE:  2:59 PM

Here’s a decent entry spot for a short position on USDJPY’s drop.  Stops right here in case SPX suddenly rebounds at the .886 at 1880.81.  Target is just below Monday’s low at 1875 – stop hunt.  The next lower support is the IH&S neckline at 1867 at the close.Watch your stops, though, as we could get a backtest up to the white channel midline at any time.

UPDATE:  3:22 PM

They need to buy some time.  I’d close the short here at 1874.03 and reopen it after a likely backtest at the falling SMA5 10 – now at 1885.That’ll eat up 15-20 minutes, and allow one final thrust lower into the close.  Note that USDJPY could have tagged the neckline, but is holding off.  It should also backtest — possibly the SMA5 100 at 118.64ish.If it’s going to rebound into the close, it should make its lows at 3:34 and bounce back to 1890-1893.  Otherwise, it should close at or near 1867.

UPDATE:  3:33 PM

There’s the SMA5 10 tag.  Shorting here at 1882.01 with tight stops for 1867 target.  Note that 1867 is also the .236 line of the rising white channel we discussed early this morning (the alternate to the purple channel.) So, closing at or near it this afternoon would maintain the upward trend.UPDATE:  3:38 PM

Jumped too soon.   USDJPY is just now reaching its SMA5 100.UPDATE:  3:46 PM

Covering the short here and back to cash, as it’s apparently going to test the purple channel line or the falling SMA5 20 now at 1887ish.  I’d gladly go back to short on any drop back through these levels.USDJPY is now beyond the SMA5 100 — maybe an overshoot, but maybe trying to save the close.  Hard to tell, but I suspect an overshoot.  Only thing is, we’re running out of time if there’s another leg down coming.UPDATE:  3:52 PM

One last shot at a short position here at 1882.24.  USDJPY is slipping again.UPDATE:  3:59 PM

Too late.  USDJPY will wait until after the close.  Back to cash for the night.EOD:   The initial push wasn’t quite as high as expected, and it dropped more than I expected it to.  Otherwise, today’s post-Fed decision action was pretty similar to what I posted at 12:29.

The before…

…and, the after.The 60-min chart shows the rising white channel is almost certainly the better fit.

The upshot is that the purple channel is almost certainly kaput, leaving the white one as the more likely rally path (if we see the rally continue.)

It’s pretty clear from the 60-min chart that, so far, the rebound since Jan 20 hasn’t had the same intensity as the decline from Dec 29.  This, alone, is a clue of sorts.  We also saw SPX dip lower today than the backtest lows yesterday.

In fact, it came awful darned close to backtesting the exact same neckline as on Monday.  Plus, the purple IH&S which completed two hours into the session was very quickly unwound (not necessarily negated, but close.)

Now, this could be a nice little headfake.  We’ve seen an endless procession of them over the past several weeks.

USDJPY did complete its own IH&S today, managing to remain in the rising purple channel even after the tumble from its intraday highs.  It just now backtested the neckline it had nearly tagged in the closing hour.  Had it done so earlier, SPX would almost certainly have reached our 1867 target for that second neckline tag.

If it remains in the rising purple channel, it could reach the critical .618 at 120.11 as early as tomorrow.  And, there’s a nice little red TL that connects the two recent highs with 120 at midday Friday — the day the BoJ announces what changes, if any, they’ll make to QQE.  Combined with the rising purple channel bottom, it would make for a nifty little rising wedge.USDJPY recently bounced at the red channel bottom because it had to.  Any further drop would have been disastrous for stocks.  We can speculate all we want, but we’ll have to wait until Friday to know for sure what Kuroda will do and which way stocks will go.