SPX had no trouble reaching our initial downside target yesterday, thanks in large part to CL’s cooperation.  CL plumbed new lows, as expected, bringing the total decline (so far) since our top call at 50 to 11.5%.USDJPY was no slouch, reacting to the (withheld) news that Kuroda has (had?) no intention of unleashing a massive addition to its already ineffective QQE program.

continued for members…USDJPY fell below a clearly laid out channel bottom, only to recover half-heartedly into the close.  It’s still lingering there at the channel bottom, meaning it probably has more downside action in store today.Thus, I’ll go with this forecast for the time being: a pop up to tag the SMA5 200 at 2168ish, followed by a drop into the close to flesh out the larger channel I floated yesterday.  A classic pop and drop.

UPDATE:  9:37 AM

SPX didn’t quite reach the SMA5 200, so we could get a chance to ride back up there following this backtest of the falling red channel and SMA5 10.  Tight stops just in case.If it’s to work, we should see NKD take off any minute…And, of course, VIX should get in on the action. USDJPY isn’t really in position for a bounce.  But, of course, that never stopped it before.UPDATE:  10:46 AM

SPX just reached our upside target.  I’d revert to short here at 2168.83, though it could leak a bit higher to the purple TL at 2170.60ish.Note that CL just reached a significant Fib level — the white .886 from this earlier chart — and could see a nice bounce here (personally, I’d prefer a slightly lower low, say 43.57, that fleshes out the revised rising purple channel…but, that’s just me.)  In any case, a drop from here to 2156 in the next few hours is far from a gimme.  As always, watch your stops.FWIW, VIX is back to the bottom of its rising white channel.UPDATE:  11:07 AM

Just to muddy the waters, USDJPY just broke out.  This means TPTB might have a breakout of the purple TL in mind.  I’d step to the sidelines until it sorts itself out.  I had counted on USDJPY falling back to its SMA10 at 105.31 to carry SPX lower.  If it remains in breakout mode instead, the odds of a nice drop in stocks is greatly diminished. Arguing for still lower prices, however: ES and CL, which hasn’t reacted much yet after tagging 44.01.  I’d be more interested in shorting again if SPX drops through the SMA5 10.  I’d feel differently if CL joined USDJPY in rallying higher. UPDATE:  11:15 AM

CL is spiking higher, retaking the overnight lows.  This is obviously meant to deter a sell-off into the european close.  But, it’s not helping.  SPX is back below the SMA5 10, so I’d take a cautious shot at shorting here for 2156.50.  I’d get more aggressive with CL back below its SMA100 at 44.25 and SPX dropping through 2167. Note VIX’s support here.UPDATE:  11:38 AM

VIX tried to derail a drop, and still might.  But, CL and USDJPY are both arguing for lower prices.  I suspect they’ll win out, but CL might run out of room to decline — with the 43.57 target not far below — and USDJPY remains in a breakout.  Remain cautious, as mom and dad try to settle their differences. UPDATE:  11:48 AM

Not liking this, as CL just pushed to new lows and it had little effect on SPX.  Note that it is almost out of room.  USDJPY isn’t helping much one way or the other.  VIX is still working on a breakout.  I’d step aside here and wait for things to play out.  Clearly, the algos are not in agreement on next steps. UPDATE:  2:56 PM

Just tagged the .886, so we could get a reversal here.  I’d short with tight stops for 2167ish.UPDATE:  3:21 PM

The VIX-led meltup continues… stopped out and back to cash for the weekend.An argument can be made for the meltup to continue, for this “breakout” to tag our upside target at 2180.  But, I’d not go into the weekend with a long or short position.  Though the reasons are all there for a sell-off, it’s too easy for TPTB to push futures higher.  I’d rather have dry powder to use Monday morning.