Futures responded to this morning’s jobs numbers by promptly selling off…

Look for ES to complete the little H&S Pattern targeting 2052.  Whether it’ll be allowed to play out is another matter altogether.  USDJPY ramping is in full swing…

…with the pair approaching our upside target of 121.12 — the .886 retrace of the drop from the December highs.But, CL is falling off the wagon once again — seemingly on its way to tag 47.66.

Needless to say, the jobs picture is problematic for the FOMC.  Having balked at reducing market support when unemployment fell below 6.5% and then 6.0%, can they rationalize ZIRP at 5.5%?

Whether or not we think they should, they no doubt will.  Simply put, the US cannot afford higher rates.  With $18 trillion in debt, a mere 1% increase in rates translates to an extra $180 billion in annual interest payments.  That would increase interest payments as a share of annual government expenditures from the current 6% to 11%.

If rates increased to a normalized 6%, annual interest payments would soar to nearly $1 trillion — about 26% of the nation’s budget.  It would exceed every category of spending, including military, social security and health care.

That’s if we were miraculously able to hold the line at only $18 trillion in debt.  And, it completely ignores the impact of off-balance sheet financing which most estimates put at another $50 trillion or so.

UPDATE:  1:00 PM

Heck of a day for our charts.  This one that we posted on Wednesday……turned out to be fairly predictive!

New targets coming up.

continued for members…

I’ve adjusted the purple channel to include the low just reached of 2072.93.  Note that it is just slightly higher than the (presumed) wave 1 high of 2072.40, which would keep everything looking bullish for the wavers out there.

This being Friday (and the “markets” being totally manipulated) that doesn’t mean we’ll stay north of 2072.40 prior to any bounce.  In fact, my leading case is a slight wave 1/wave 4 violation before a bounce up to backtest the SMA20 — currently at 2094ish.

It could be by just a few pennies — enough to stop out weak longs before a nice bounce.  But, ultimately, I think we’ll see backtest of the falling gray channel as we suggested Wednesday:

If the H&S should play out, it would target around 2060 — which is coincidentally (or not!) the SMA50 and might allow a backtest of the broken falling gray channel.

The white dot (2062-2066) would suffice, but an actual tag would be down around the purple dot at 2057.   If that should fail, then the red dot at the white .618/SMA100 intersection (2033ish) makes a great deal of sense.

Odds are it would entail two separate waves that could even stretch into Monday, but CL still has a ways to go to our 47.66 target (which better sets up 45.86 BTW)……

…and USDJPY has to get back down below 120.11 before turning into a pumpkin.

So, we’ll look for a bounce up to 2093, followed by a drop to 2057 before the dust settles.

If, on the other hand, the bulls pull a rabbit out of their hats and turn this thing around (in the past, 50:50′ these days, more like 70/30) then the purple channel clearly could take us up to 2138 as early as next Monday or Tuesday.

But, as we discussed last week, I expect TPTB will attempt a strong move through that critical Fib level in order to keep the party going.  And, I’m not sure that this is the right time/place.