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FOMC days (minutes are due out at 2PM) are often characterized by markets bouncing back and forth within a tight triangle until the big event occurs.  At that point, they bounce wildly higher or lower — careening off support and resistance only minutes apart before finally settling on a direction and the algos kick in.

I see no reason why today should be any different.  And, the upside and downside targets are pretty clear.

USDJPY dipped to the bottom of the Pennant Pattern again last night.  While it’s pretty easy to keep this game going for a while, the trick is in the timing.  By holding off on the bottom tag until after the close, TPTB were able to minimize the impact on stocks.

continued for members…

Futures suffered a little overnight, and are still off by about 7 points.  But, the trend is clearly positive in the short term and speaks to the concerted efforts to break out of the falling white channel.Look for SPX to backtest the .786 Fib at 1988.98, where it will find channel midline support as well.

If it can hold the midline, then the white .886 at 2003.88 is the next upside target.

From its positioning, CL stands ready to help the bulls.UPDATE:  9:38 AM

The signal will be when ES breaks out of the triangle it was in overnight.If it can’t, then the analog is still in force and the next leg is down.

USDJPY is backfilling – just put in support at the falling purple channel .786 line and 5-min SMA200.UPDATE:  10:00 AM

ES possibly breaking out of triangle… waiting for confirmation from USDJPY.As well as the bulls have teed this one up for a breakout, NKD hasn’t really positioned itself.  The nearest support is the white midline and moving averages down at 17930ish.And, maybe it’ll get its chance.  When SPX and ES reach their .886 Fibs at 2003.88 and 1994.56 respectively, there should be a reaction.

With any “luck,” it’ll correspond with the reaction to the Fed’s minutes, due to be released at 2pm this afternoon.  No reason to think it’ll be more bullish than was the reaction to last week’s NFP.

UPDATE:  10:22 AM

SPX obviously not ready for a break out.  Backtesting the purple channel’s .786 line again.  And, ES is back in the little triangle. USDJPY has backtested the TL and the SMA200 (a second time.)  Not lending much credence to break out scenario.UPDATE:  10:35 AM

USDJPY is trying to put a lid on things, or possibly setting itself up for a move lower in the near future.I assume it’s aiming for the 5-min SMA100 or 200, but not really clear at this time.

Consider the games being played with ES, whose breakout was promptly cancelled once and appears to be heading for the second time.I’ll take the opportunity to work on posting some of the updated secondary charts.  I’ll be back later.

UPDATE:  12:07 PM

While I don’t think USDJPY is ready to break out just yet (it’s had plenty of opportunities)… …CL is going nuts again.UPDATE:  12:51 PM

UPDATE:  1:36 PM

SPX is back to the gray midline as USDJPY is backtesting the SMA100 and 200.  Could be a good shorting opportunity here, but just as likely to break out.  Minutes only 20 min away.

Note that a return to the red, dotted line with the yellow dot would represent a completed H&S neckline.  Not sure where, but I like the idea of this line being tagged today.  Closing price: just as likely to be 2003.88 as it is 1963.96 or even 1928.81.

UPDATE:  2:03 PM

SPX stopped short of the .886 and reversed. USDJPY heading for our downside target.  DX finding TL support.  We should get a reversal here as long as USDJPY slumps, but watch out for SPX support at the gray channel line.  Note that ES reached its .886, which is significant overhead resistance. UPDATE:  2:07 PM

Buying opportunity at the gray channel line, with tight stops.UPDATE:  2:15 PM

USDJPY has put in a nice bottom at our target, and SPX is back up to the red TL.  I’d take profits on the long position at 2000, though algos could well get it up to or over 2003.88. At this point, our analog says prices will begin to decline soon.  So, I’d look at any move by USDJPY below the Pennant bottom as a selling signal.

UPDATE:  2:39 PM

SPX has pushed through the .886, with the algos seemingly in control.  At anywhere north of 2005.53, the red  1.618 at 2013 is in focus.  For anyone playing it, I’d keep pretty tight stops on it.  Personally, I’m happy with the returns from earlier today and would prefer to stay on the sidelines while the algos do their thing.USDJPY has reached the white .786 and is in reactive mode right now — meaning it’s only rising when SPX seems to be running out of gas or reversing. 120.11 only 11 cents away.

The whole thing is artificial, so why indulge?  I’d much rather play the downside if/when real investors read the minutes and decide it’s not a bullish environment.  But. it would be pretty unusual for that to play out today.Note: at 2013.44-2014.75, SPX will have reacted as much as it should have from the completed Bat Pattern down at 1820.

UPDATE:  3:25 PM

There’s the 2015 tag.  If you’re playing along, there’s a 50%+ shot at a reversal here or, alternatively, a tag of < 2020.86 on tomorrow’s opening.  I’d short here and see where it closes, but only hold short overnight if I could hedge. 

USDJPY is backtesting the broken purple channel, and could therefore easily prevent any downside before the close.

FWIW, daily VIX just rebounded off its SMA200.  This doesn’t happen very often, and has marked some pretty good sell-offs.