Another day, another Fed official jawboning the dollar higher.  Gee, you’d think they’re trying to get it to break out or something…

The US dollar has been heavily manipulated over the past year.  We’ve covered the “why.” As an importing nation, the US needs the things it buys to remain relatively cheap or the “we need higher inflation” meme falls flat on its face.

Without it, there’d be no excuse for the continuation/expansion of easy money policy that’s propping up the “markets.”

As to how…well, when you have unlimited funds at your disposal and can legally play the currency game any time you like, it’s not exactly rocket science.

And, they’ve long since given up on the pretense of an investor-driven market.  You don’t get chart patterns like these — with frequent breakouts from well-established channels — just because.

You get them when investors panic, choking off the prospect of continued new highs, forcing central bankers to do what they do best — propping up prices.

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The series of “breakouts” in DX…

It’s meant a breakout in USDJPY, despite the BoJ having done nothing other than its own jawboning.

The only question mark remains oil, which still hasn’t deigned to tag its SMA100.  There must be a reason — perhaps an overdue dip at some point.

The analog appears to remain on track, with the target of 2200 likely today.  It’ll be helped immeasurably if DX can actually break out of the falling white channel.

UPDATE:  9:39 AM

SPX shot up through the SMA20 and 10 easily enough yesterday.  The possibility remains that we’ll get a backtest of one or both this morning.  The SM20 is now at 2178.21.  Otherwise, this initial lack of enthusiasm out of the gate would be a little troubling to the upside case.  Remember, we have a potentially important Consumer Confidence reading coming out at 10am this morning.

UPDATE:  10:08 AM

This is likely a head fake, but SPX just dropped through the SMA20 on CL weakness.  I’d step aside until it rebounds back above the SMA20 — though it’ll likely bounce at the SMA5 200.  Note that ES’ SMA20 is at 2175.36, which was just tagged.  Again, this is likely nothing.  Swing traders would probably be okay riding it out, but I’d be nervous on a drop through the SMA5 200.

Consumer confidence came in at 101.1, a 4-pt beat.  But, it’s CL that’s causing problems at the moment.

The purple channel bottom is around 46.20, and the SMA100 is at 45.93.  So, it’s only about halfway to where it’ll find support.  Why didn’t they have this happen last night?  Who knows.  But, it’s knocking stocks off their upward trajectory at the moment.

Here’s a better look.  Pretty simple:  if CL bounces at the TL, then SPX should get a nice rebound.  If it drops through, then there’s more downside ahead.  DX is breaking out a bit, but not enough to offset this.

The kinda weird thing is that ES has already backtested its falling white channel.  Any more downside and it’ll do more than backtest — which is a bearish signal.  Maybe going for the yellow TL again?  It would correspond with SPX’s falling red channel midline around 2173.

If CL doesn’t at least slow its pace, we’re probably looking at the purple channel bottom again — around SPX 2166.

Here’s the other problem they’re running into.  USDJPY has stalled at the scene of two previous highs — also the SMA50.  Unless it pushes through, CL’s dip will continue to dominate stocks.

Sure, it’s breaking out of the purple channel.  But, as I wrote when I first charted it, the purple channel was pretty lame to begin with.  The red channel is infinitely more meaningful.

UPDATE:  12:18 PM AM

CL reached the purple channel bottom and nearly reached the red TL.  It came up well short of the SMA100, which is only rising at .07/day.

I think this has been a test: can USDJPY take the reins if necessary?  We seen DX and USDJPY breaking out — though not in a huge fashion just yet.  It was enough to keep SPX (so far) from tumbling back to Friday’s lows. 

But, in the end, it was CL’s bottoming out and VIX’s dip back below the upper yellow TL which provided a floor for SPX at the red midline.  It’s technically support; but, since it’s a falling channel, it’s certainly not bullish.

If SPX can hold above the SMA5 200 at 2176.27, they should be able to get it back on track.  I’d return to long here, but with very tight stops.  I’m not at all convinced that CL is done.

update: 1:12 PM

Not optimistic about the way this is heading.  SPX is back below its SMA5 200, a negative signal almost all the time.  If it drops any further, I’d seriously consider shorting.  The only reason I don’t short now is CL, which will probably hold on until after the close (if it’s going to tag 46) and VIX, which is in a position to plunge any second.

UPDATE:  1:30 PM

Can’t ignore it any longer.  SPX is faltering, and nothing is happening to prevent it.  I’d revert to cash here, and wouldn’t go long again unless it pushes back through the SMA5 200 — preferably after CL has tagged better support and clearly rising.

I know this sounds nutty, and I hesitate to even write it…but, CL could have tagged its SMA100 and rebounded any of these last few nights when futures are so easily propped up.  It could have done so before the “market” opened this morning, and been right back where it is within 10 minutes.  But, it didn’t.  It’s doing the long, slow, painfully obvious drip, drip, drip lower.  It’s as though they want SPX to drop, or — and, here’s the tin foil hat part — force the yen lower (and, hence DX and USDJPY higher.)

I dunno.  A very strange day, on very little volume.

UPDATE:  2:06 PM

SPX is dropping through the red midline.  This is a bearish signal, and suggests 2166 or 2160.  I’d try a short position here, though I don’t have much confidence in it going anywhere.  Tight stops are advised.

Note that VIX just pushed up through its SMA5 200.

UPDATE:  2:41 PM

SPX has made little progress to the downside, and is now bumping back up above the SMA10 to test the broken red midline.  CL hasn’t reached it actual support, and is showing more volatility as it bounces around a bit.  The more interesting chart is VIX, which just tested the yellow TL that terminated many of its previous spikes.  As such, I’d revert back to cash here, but consider going long if it pushes through the midline.

The bigger picture in CL……and, the close up.

UPDATE:  2:53 PM

SPX is pushing back through the red midline, so I’d try a long position here.  Still plenty of risk, so watch your stops.

UPDATE:  3:51 PM

It’s a start, with the top of the falling gray channel looking like its the SMA20 at 2178.21.  A full backtest of the broken red channel would be the SMA10 at 2179.81, which would leave it flat on the day.  I’d be inclined to hold long overnight if able to stomach the gap risk.

And, there is a real risk — easily down to 2160-2165.  Tomorrow’s an EIA inventory day — which could be why CL has had such a hard time today.  But, CL is essentially at major support.  And, tomorrow’s also the last day of the month — we rarely see a big sell off.