Following disappointing efforts by counterparts at the ECB and BoJ, it’s Yellen & Co’s turn to attempt to reinvigorate the stock market economy.

Will they or won’t they raise rates again?  Most say they won’t.  A few brave souls say they will.  The “market” seems confused.  The key is the current position of USDJPY, CL and SPX/ES.

continued for members…

CL rebounded off the SMA100 overnight and is poised to break out. USDJPY is climbing steadily, maintaining its position above the critical purple channel bottom and continuing to trace out a triangle.ES is poised to backtest its SMA100 at 1992.93…… as is SPX at 1997.91.As I often suggest, trading on FOMC day is fraught with danger.  I don’t expect to make any trade recommendations today until possibly after the Fed announcement and press conference — and, then only if a trend is obvious.  Otherwise, there are simply too many sketchy things going on.

Case in point…the 2% spike in CL (better rising wedge this way) in the past 30 minutes that took ES from 1997 to 2004. It allowed SPX to open in the green and maintain the rising red channel.If I had to guess, I’d say SPX sells off today and tests the SMA100 at 1997.91 or even the purple .618 at 1990.38.  But, it wouldn’t surprise me to see CL and USDJPY ramped higher to force a leap back above the SMA200s for SPX and ES.  It’s dangerous to allow much of a decline here.

UPDATE:  10:51 AM

SPX has reached the SMA200 and should reverse here.  It’s worth taking a short position with very tight stops as a short-term trade.

 

UPDATE:  1:39 PM

That’s it for the easy money.  Closing the short here and will wait to see what happens after the announcement.

For anyone who’s dying to roll the dice, 1997.91 and 1990.38 remain the best downside candidates.  A move through the purple channel top would be a decent buy signal with 2024.57+ the objective and 2031-2033 the eventual target.

 

UPDATE:  2:03 PM

Got the spike up to just over 2024.57, even as USDJPY tanked.  CL spiked a bit.   This is also the top of the red channel, so the dollar weakness limit the rally to no higher than this point.  I think it would be worth taking a short position in here with tight stops — if only for a backtest of the SMA200.

UPDATE:  2:15 PM

If SPX’s SMA5 200 doesn’t hold, then the SMA 100 has a chance of getting tagged.  But, CL is taking off, so I’d take profits here and sit on the sidelines unless it pushes through.I’d also want to get short again if USDJPY drops through the red TL, particularly if it dropped through 112.626.Recall that this is the bottom of the triangle.UPDATE:  2:41 PM

CL is winning the battle of which algo is more powerful.  SPX is edging higher even as USDJPY toys with 112.62.  Yellen’s comments are very dovish. UPDATE:  2:52 PM

USDJPY is pushing lower, and CL seems to have topped out for now.  Note that it has reached the lower end of our target range from Feb 18.

SPX should decline here, though there’s the risk it’ll bounce when it intersects with the rising SMA5 10 at round 2024.

Watch USDJPY to see if it suddenly bounces back above 112.62 when SPX gains that support.  If so, it might present an opportunity to go long with strong support. UPDATE:  3:43 PM

SPX reached the bottom of our upside target range from this morning.  USDJPY is taking advantage of the opportunity to decline without affecting stocks.  And, CL is conveniently perched just above the midline of the channel dating back to the all-time highs.

I think there’s a pretty good chance of a reversal starting between here and 2033.78.  But, it’s less likely to happen today than it is tomorrow morning. UPDATE:  3:55 PM

The reversal is gaining a little strength.  I’d short into the close.UPDATE:  EOD

At the close…And, a chart to noodle on: VIX v ES.  Note, in particular, how the tags on the red TL have been followed by bounces that produced sell-offs in ES.  Some were modest, while others were substantial.

At this point, a backtest of the SMA100 — now at 1997.87 — still makes a great deal of sense (though potentially on Monday rather than later this week.)Just a reminder, I will be traveling the next two days.  I’ll probably not be able to post tomorrow until very late in the day.  If you’re holding short, I’d recommend taking profits if you have the opportunity at 2000ish.  If it rallies, instead, I’d not chase it as there’s resistance at 2033.  If it leapfrogs 2033, a long position with tight trailing stops should be a safe bet.