For about six weeks now, it’s been a combination of continually rising crude light and strategically timed USDJPY ramps.  Last night, USDJPY took the reins as CL let a little air out (following a clumsy and obvious prop job, see: Why the Market Didn’t Correct Today.)

With USDJPY breaking out of the rising red channel it’s been in since last week, is it time for another USDJPY failed rally to nowhere?

continued for members…

USDJPY might take another shot at rejoining the purple channel, but might have settled into a new pattern of sideways with strategically timed ramp jobs to offset any CL weakness.CL has broken down from the little pennant pattern it was constructing… …but has potential support at the top of the channel it broke out of last Thursday.ES has broken TL support, but has channel midline support and SMA10 support at 2028 and 2023 respectively — if CL allows that big a decline.  Even now, it is backtesting the broken red TL.I’d wait for that backtest to complete before taking an opening position — which would be short if the backtest holds rather than making a V-shaped recovery as yesterday.UPDATE:  9:30 AM

ES reversed its backtest as the market opened, meaning there’s no need to wait.  Shorting here for 2039 initially. It could be short-lived, as CL has already started ramping and is back above the pennant bottom and the SMA5 10.UPDATE:  9:43 AM

ES just backtested the red TL connecting yesterday’s early highs.  This could be the end of the road for the downside, though CL is suggesting more declines — maybe to get SPX to at least the .707?   I’d cover the short here, and only reopen it if ES can break that TL. Note that USDJPY has backtested its breakout.UPDATE:  9:49 AM

CL going for more — maybe the purple channel top? USDJPY is pushing slightly back into the red channel.  Back to short here.  But, remember the amount of head-faking that went on yesterday morning, and watch your stops.UPDATE:  10:11 AM

With the crude inventory report 20 minutes away, CL is testing support at the top of the broken purple channel — causing SPX to bounce up and test its falling SMA5 10 and ES to get another, stronger bounce off the red TL.    To hold short is to assume that the numbers will be bearish.  The safe bet is to move to the sidelines and wait for the report. There’s another 8-9 points to the nearest support for ES, and 12-13 to the nearest SMA support.  So, I think there should be ample opportunity if CL starts plunging.  But, in the meantime, SPX is catching support from the rebounding SMA5 10 as it has almost every day for the past six weeks and could pop up to 2050 without warning.Just be aware that if CL plunges, USDJPY will probably be rallying strongly in order to offset it.  No reason not to short if CL dives, but a reminder to watch USDJPY as well.  The nearest decent support is 39.80, followed by 39.55 and then 39.10.  After that, it’s all the way down at 38.49 and then 37.38.

UPDATE:  10:33 AM

Going short here as the initial bounce appears to be fading.  The inventory build was much larger than expected: 9.36M.  Report available HERE. UPDATE:  10:44 AM

The drop was apparently contained, as CL is pushing back above the lower red TL.  I’d revert to cash here. UPDATE:  10:59 AM

USDJPY back below channel top, CL still threatening to break below the red TL.  Bottom line, they’re working on sending it lower, so I’ll play along.  Back to short with tight stops on the SMA5 20 reversal.  Again, it could be limited to the purple TL (2040.55) or the .707 at 2039.61, so stay frosty. UPDATE:  11:22 AM

SPX has reached the purple TL – horizontal support.  Given how difficult it’s been to get here, I’m inclined to cover the short and go to cash. Given that CL is now below the red TL, this is likely premature.  But, ES is bouncing back above the red TL, and USDJPY is clinging to the channel top.  So, it might take a while to get any further downside, if any.UPDATE:  11:30 AM

Slipping lower, back to short at the euro close.  But, watch out for 2039.61 bounce.  CL and USDJPY both heading lower, but have support not too far away.  SPX’s targets, recall, are the red channel line at 2035, the purple 1.618 at 2031.93, and the purple channel midline at 2029ish.  The nearest SMA support is the SMA10 at 2025.54 — in close proximity to the white .707 at 2026.71.I’d be a lot less skittish if ES could establish a 5-min candle that doesn’t connect to that red TL and USDJPY would break down through its purple TL.   Otherwise, a bounce up to SPX’s SMA5 100 or 200 around 2039 is a constant threat.UPDATE:  12:18 PM

CL seems like it ought to reverse here, but SPX is slipping away from us — maybe heading up to the SMA5 50 at 2044.84 or all the way to the SMA100/200 around 2048.77.  Back to cash until CL breaks down.Even USDJPY is reversing.It’s not that the setup is bullish AT ALL.  It’s just that traders have been burned so many times lately, everyone’s extremely gun shy about shorting.  To make matters worse, it’s very obvious that CL is being micromanaged this morning.

UPDATE:  12:33 PM

A possible turning point here at the SMA5 50, with CL pushing lower and USDJPY backtesting the channel top.  Back to short with tight stops. UPDATE:  12:44 PM

Too little downside from USDJPY or CL to keep SPX dropping.  In fact, both keep threatening to break out.  Back to cash here, though I assume there is a large, fast plunge ahead in the not too distant future.  I’d try shorting again if SPX drops below the rising SMA5 10 as CL and USDJPY are both dropping.UPDATE:  12:55 PM

One more try. Back to short.UPDATE:  1:14 PM

They’re just not going to let CL decline right now.  Back to cash — probably for the day. UPDATE:  1:25 PM

USDJPY breaking down.  Back to short – hoping it’s not just another head fake… Promising move so far by USDJPY…Just need to get ES down through the dashed purple TL now…UPDATE:  2:00 PM

Enough of this nonsense.  Done for the day.UPDATE:  2:27 PM

SPX just broke trend as CL finally moving lower.  Back to short for whatever it’ll give us — probably 2037ish..  Tight stops are advised for obvious reasons.UPDATE:  2:50 PM

SPX just reached the channel line as USDJPY reached red channel midline and ES its midline.  Back to cash here. UPDATE:  2:56 PM

CL has further to go, which would likely take SPX down to one of our lower targets.  I’d go back to short here with very tight stops due to the other support mentioned above.  ES’ SMA10 is just below at 2023.2.UPDATE:  3:01 PM

Now looking like CL will get a bounce.  Back to cash and done.  If CL hits its SMA10 and starts bouncing, I’d be looking to go long again.How in the world do you forecast exactly when it breaks down?  Note the SMA10 just below.