Our advice yesterday was to ignore Draghi and focus instead on oil. It was headed for an important support level which would determine whether or not stocks could bounce.
Oil did, in fact, reach our 50.63 target, at which point it tried, but failed, to rally.
Fortunately for bulls (or market makers positioning for OPEX), VIX came to the rescue – repeatedly tumbling just enough to prevent the backtest I had anticipated. It was just Wednesday [see: True Colors] that we discussed how effective it’s been, lately, at propping up stocks.
This morning, investors are correct to focus on Kuroda’s comments which are, in a word, absurd. Saying that the BoJ is open to 3-4% inflation is like me saying I’m open to adding a 360 to my slam dunk.
USDJPY has given up on the ramp it started yesterday. Along with CL and VIX, it is positioned to allow our next downside target to be hit — probably in the opening hour. From yesterday’s Ignore Draghi, Watch Oil:
If ES’ channel breaks, SPX should at least get a backtest of the broken white channel at 2130ish.
Of course, by delaying the decline for a day, SPX’s backtest could be even lower. We remain short from 2143.
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