With SPX having recovered almost two-thirds and FTSE all of its Brexit losses (from their inflated pre-Brexit ramp job heights) by the end of the 2nd quarter, The Powers That Be can pat each other on the back.  The crisis has been averted, the “markets” are safe, and life is worth living again.  Mission accomplished.

After the quarter officially ends, maybe USDJPY will go back to wallowing around on its way lower.  After tagging our downside target last night (a few hours late) it has managed to maintain the positive channel, and should manage to do so for a few more hours.CL, which had gained a stunning 9.1% in order to rescue stocks, is down 2.8% since yesterday’s top call.  Congrats to all who were foolhardy enough to heed the call.SPX hit its .618 Fib yesterday, a sharp 4.3% spike off Monday’s lows but landing at a spot that should produce a reversal.

This has been a very difficult month, with chart and Fib patterns trashed at every opportunity by the folks who are really running the show: your friends and mine, the central bankers.

continued for members…As far as today’s outlook, ES offers a pretty clean channel to work with.  The channel bottom is at either the SMA60 200 at 2054.81 or the SMA10 at 2058.78, depending on the timing.  I favor the lower level, as it would produce an actual A-B-C corrective wave (but, they haven’t asked me.)  This would correspond to about about 2062 in SPX, and will probably be timed to intersect with the rising SMA5 100, likely around 10:30ish.  The higher level is the SMA10 at 2066.49 closer to 11am.UPDATE:  11:02 AM

Pardon the delay in posting.  I just had a very interesting conversation with a client about USDJPY.  I’ve had the same conversation several times this week.  The client was dismayed at the volatility of the pair, which is how these conversations usually start.

Let me lay it out for everyone, as I think this is key for traders to understand.  USDJPY is nothing but a tool.  Sure, it sometimes reflects fundamental goings on in the world.  But, mostly, it’s a tool that TPTB use to push stocks in the direction they want.

That would be hard enough to deal with, but consider that there are a lot of Powers that Be — sometimes with conflicting ideas of what stocks should be doing.  This morning, anyone could see that the rising red channel would be more legitimate with a backtest of the SMA10 at 2066.49.

With such a minimal backtest, which would have involved a 4-pt drop from yesterday’s close, the channel could have been fleshed out and the entire rally would have gained legitimacy.

But, whoever is bidding up CL wasn’t on board with that idea.  Maybe they had caught wind of the BOE’s plan to increase QE over the summer.   CL started inching higher at 9:55, making it impossible for SPX to decline.When whoever is controlling USDJPY saw what was going on, they responded with a massive dump that took USDJPY briefly below the rising purple channel bottom.The news sent GBP reeling, of course, and EURGBP soared towards our 84.11 upside target.  This normally would have sent stocks lower, as the two are inversely correlated.  But, the fact that it was QE and not folks dumping the pound hand over fist, meant stocks were going to rise further.So, maybe those controlling CL will get the message and let it back off some more.  But, it depends on who they are.  We tend to think of the BOJ as the one who manipulates USDJPY the most.  They are the ones most directly affected.

But, there are plenty of others with the wallets and the willpower to push things around.  The BOE is a strong candidate.  They’ve managed to get the FTSE back to pre-Brexit levels, but why not new highs in order to prove that it’s not a negative at all?

In the end, it doesn’t much matter.  The key is to recognize what a move in CL does to stocks, and then examine USDJPY to see whether it’s on board with the move.

As I told a few consulting clients yesterday, a 30-pt move in SPX was more than adequate.  Anything more, and even the permabulls on CNBC would have smirked.  There was no reason for USDJPY to sail any higher overnight.  I offered this forecast as a trading idea at 7:10pm ET, and they were rewarded with a 40 pip move in a little over 7 hours.The idea was that USDJPY needed to reset in order to be ready to provide support for today’s ramp.  The drop terminating at 2am ET enabled ES to backtest its SMA10, at which point USDJPY bounced in order to make sure ES stopped at just a backtest.

And, we’ve seen what it’s doing today in an effort to maintain some semblance of legitimacy in the “markets.”

Thanks for bearing with me as I rambled on about this, but I think it’s critical for traders and investors to understand what’s happening in the markets, and why swing trading has become almost impossible.  I’ll now return to the subject of the big picture.

But, one last comment… an hour ago I remarked that with USDJPY having reached the bottom of its rising purple channel, it would fall to CL to rein in stocks.  The updated CL chart:

Bonus chart for the night: