DX nailed our backtest target yesterday……prompting a sharp rebound for CL……which, in turn, is erasing most of the futures’ overnight losses.  And, with that, we get some very strong hints as to what to expect over the next week or so.

continued for members…USDJPY has spent 116 sessions — 5 1/2 months — dancing around the .618 at 120.11.  It has been quite simple to prop up SPX simply by dashing up to 120.11 and hanging around for a couple of days.While there’s a possibility it’ll break free over the next few days or weeks, it still hasn’t broken above the March highs – only yesterday reaching a .786 retrace.

Likewise, DX’s rising purple channel (above) has clearly broken down and, now, been backtested.

Taken in combination, these developments suggest that USDJPY won’t break out anytime soon, but will settle back down to or below 120.11 after this holiday thrust.  Instead, we’re likely to see CL lead stocks higher.

While its dip to the purple .886 wasn’t particularly deep, it was enough to satisfy the Butterfly Pattern’s normal reaction to a tag at the 1.272 Fib.  And, granted, the revised rising purple channel isn’t all that precise looking.

But, after all, this thing is being constructed on the fly in reaction to stocks’ and the yen’s daily vagaries.  It has been entirely manipulated in order to feed the algos which have kept stocks on the rise.

A spike higher in the next few days (ideally, Tuesday May 26) to the white .618/purple 1.618 at 68.42 should provide ample fuel for SPX to leapfrog 2138 — if that’s what the blueprint calls for.  It would accommodate DX’s drop to the white .382 at 92.322 (and, also, EURUSD’s rise to 1.18 if need be.)

If all this is accurate, we’ll continue to see SPX bumping along up to and ultimately through 2138 — probably over the holiday weekend.  It would see some retracement along the way, but not enough to matter.  Because — at any time it’s necessary — USDJPY could be returned to service to help things along.

I’m going to spend a few hours updating some of the other indices and currencies to see if they support this theory.  I’ll check back in later.