Yesterday was one of those days when everything just fell into place.  SPX fell 2.5%, nailing the upper end of our target range — which enabled us to gain 3.2%.  I’d almost forgotten how fun it is to trade when TPTB let the markets run.  It’s also amazing how quickly even mainstream investors have turned bearish, despite the obvious and very strong support just around the corner from yesterday’s lows.  Have central banks, IBs and hedgies really lost control of this heavily manipulated machine…or, is it just possible that they have a plan?

continued for members…While 1887.87 was the upper end of our range, 1882 was the lower end.  It was included because that’s where the actual neckline of the huge H&S Pattern crosses.  Even then, it’s not carved in stone.  H&S Patterns often complete and then some before TPTB snap it back into place back above the neckline.

So, the ultimate downside for this move, if it hasn’t registered already, could well come intraday at the white .886 at 1856.46 or even test the 1820.66 lows themselves (last October’s lows.)The futures are currently up 11 points, but they haven’t broken out of the falling white channel.  So, a post-opening drop back to the overnight lows would easily get us to 1883.  Beyond that, I’ll be watching USDJPY and CL for clues.  Both are in a position quite similar to yesterday — on the brink of breaking out, with CL already having broken a TL (purple) from Jan 4. BTW, the question also came up yesterday about the charts I posted on Monday — they looked different from some I posted on Dec 20.  Here’s why.

The December daily chart was drawn in arithmetic, or non-log, while the latest was in log — my preferred mode of charting.  In this case, they both say the same thing: we’re at an important precipice.

I would wait for SPX to gap open, and then open a short position — watching for confirmation from CL, USDJPY and ES.  Our initial target is 1883, and if that doesn’t hold, 1856.

UPDATE:  9:31 AM

I’d short here at 1897.51.Note that NKD is also worth watching.  It made a triple bottom yesterday, and is about to break down — providing the “go signal” for the drop. UPDATE: 10:03 AM

I think this is probably pretty close.  I’d go long here at 1879.48 with tight stops in case they’re aiming for 1856.46.  Based on USDJPY and ES, I’d say there’s a very good chance of that happening.  We’ll see how SPX reacts as it reaches the SMAs. UPDATE:  10:13 AM

Not exactly a big bounce yet.  As mentioned above, USDJPY looks unfinished, with several options available for additional downside. UPDATE:  10:25 AM

This looks like a good place for a reversal if it is going lower.  USDJPY and NKD have backtested their broken TLs and then some.  Back to short here at 1900.95, with very tight stops.  If it blows through, the next upside target is 1920.55 followed by 1940.63.UPDATE:  10:28 AM

Never mind.  Back to long here at 1902.2 on CL and USDJPY punching through resistance.  Next target is 1920.56.UPDATE:  10:39 AM

ES just hit important resistance and SPX the .786 channel line.  I’d take profits here at 1914.71 and revert to short with very tight stops in case it has a little left up to the SMAs.  The SMA5 100 (yellow) is currently at 1917.33. UPDATE:  10:44 AM

USDJPY just confirmed the likely reversal here at the SMA5 100.  Even if we’re not going lower, we should get a drop down to the SMA5 10 — now at 1901 and rising fast. UPDATE:  10:49 AM

Going to cash here at 1915.35, as USDJPY and CL are hinting at higher, but we need a breather.  Maybe at  the SMA5 200, or maybe just making the SMA5 100 official — not really sure.  UPDATE:  10:59 AM

I should have given it a minute more.   Now, CL and USDJPY are dropping, but it’s unclear whether we’ll get more downside or are just waiting for the SMAs to catch up.  The .886 is now 55 points below, so getting more unlikely unless we see some weakness real soon. UPDATE:  11:03 AM

Looks like we have at least 10 more points downside, so back to short here at 1909.53.  I’d keep the stops tight, as I could be misreading the ES chart — which I believe is calling for a channel top backtest at least.UPDATE:  11:14 AM

Back to cash here at 1913.22 as USDJPY and CL just sprung back to life.  I wouldn’t want to be short if it suddenly spurts up to 1920.UPDATE:  11:18AM

Never mind — total head fake. Gotta love the HFTs.  Back to short at 1910.31 for SMA5 20 now at 1902.  Better yet, ES’s backtest of its broken channel at 1892.50ish. It would be a helluva thing if SPX fell to the .886 at 1856 from here and recovered to 1880 by the close — almost 100 points round trip from here.

UPDATE:  12:00 PM

SPX looks like it’ll push through the SMA100 and perhaps even tag the SMA200 on resurgent USDJPY and NKD.  If it does, I’d reluctantly go back to cash and await the downturn — hopefully at about 12:09.UPDATE:  12:32 PM

Not making any headway, and 1920 is looking more and more likely.  I’ll revert to cash here and wait it out.It’s a bogus move from a chart standpoint, but it’s obvious TPTB aren’t going to allow any more downside — at least at the moment. TNX even just pushed back above the TL from Tuesday’s post.And, VIX is threatening to break down.UPDATE:  1:09 PM

Just reached the SMA5 200, which is where we’d expect a downturn if there’s going to be one.  Note that the SMA50  is at the rising white channel bottom, meaning there could be a drop to it without breaking trend.   If we get any signs of a reversal from USDJPY — which is approaching a small scale .886 — I’d try a short here.Note that VIX is back on the bearish side of the ledger.UPDATE:  1:27 PM

I’d try a short position here at 1924.03 just for grins.  Target is 1908ish.  If I’m wrong, it should at least drop to 1919.UPDATE:  1:47 PM

That might be all we get.  I’d close the short and go to cash until the algos shut down.UPDATE:  3:32 PM

Looks like the meltup is finally catching its breath.  I’d short here for at 1926.14 for 1919ish — the SMA5 200 and falling white channel top backtest.  If I’m wrong, it’ll likely stop at the channel bottom at 1923ish.CL and USDJPY have been slipping all day, so this is purely a product of the algos taking their heavy feet  off the gas.UPDATE:  3:54 PM

That’s probably as good as we’re going to get.  I’d close it here at 1919.38 and go to cash.

Will it keep ramping overnight?  Probably.  As to whether or not 1856 is still on the table — I rather doubt it, at least for tomorrow (OPEX.)  Can’t see any value in staying in the casino overnight, though, as this bounce could still peter out.