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One of the central conceits of Lost, a hit, mind-bending TV show from the last decade, was a protocol in which a sequence of numbers had to be typed into a computer every 108 minutes in order to avoid global catastrophe.  When the protocol (a.k.a. pushing the button) was not followed, an alarm would sound, giving the button’s keepers one final chance to avert disaster.

Goosing the USDJPY is the financial world’s version of pushing the button [why? learn more about the yen carry trade.]  When stocks are slipping, or merely need to be pushed up past overhead resistance, a quick spike in USDJPY is usually enough to obtain the desired result.

So, it’s troubling to the bullish case when the USDJPY merely goes sideways for nearly a year.  It’s even more troubling when the Nikkei 225 alarm goes off, warning of impending disaster.  Not only has NKD lost the support of the rising red channel, it has backtested that channel and plunged below its key moving averages.

The culprit, of course, is the BoJ — which has been derelict in its duty of pushing the yen lower (the USDJPY higher) for almost a year.  Since it leveled out last December, stocks have not only peaked, but put in some of the most dramatic declines seen since 2011.

Last night, the BoJ disappointed yet again when it announced its latest enhancement to QQE. As Kuroda himself said afterwards, “today’s decision wasn’t additional easing.”

continued for members…

Look for yesterday’s last-minute decline to continue, with the immediate target of the .382 Fib at 2035 and secondary target of the SMA100 at 2028.96.

UPDATE:  9:44 AM

A better reversal target would be the red .618 at 2025.14 (and, the white channel bottom.)   I don’t want to jump the gun on a long position.CL has bounce strongly off the bottom of the rising purple channel, which will provide some bounce.  But, it’s USDJPY that has to carry the load here.UPDATE:  9:57 AM

SPX is dancing all around its SMA100……as is ES (also at the bottom of a rising channel.)

And, USDJPY has definitely not broken out. I suspect SPX will hang around and tag the .618, and possibly a little beyond it.  If the white channel bottom doesn’t hold, they we’re probably looking at a retest of the 1993.26 bottom.

UPDATE:  10:10 AM

SPX has reached the .618/channel bottom, but can’t seem to make up its mind.  Neither can I.  I’ll stay on the sidelines until there’s a clearer sign.  But, my gut tells me there’s more downside. USDJPY is still slipping, but could turn at any time. UPDATE:  10:32 AM

SPX pushing to new lows on USDJPY and CL weakness.  I’d resume a short position here with the expectation of 2011, 2002 or 1993.UPDATE:  10:35 AM

Immediately as I saved that last update, CL started spiking.  I’m suddenly less enamored of being short.  Please watch your stops carefully.

I just noticed that, every day this week, SPX made new lows around the european close (Mon: 11:39, Tue: 11:49, Wed: 11:29, Thu: 11:21).  If the pattern holds, it would explain why USDJPY hasn’t yet made any move to retake the SMA100/200 and CL is content to prop up SPX without causing it to rebound.

UPDATE:  10:59 AM

SPX is slipping higher as USDJPY tests the SMA100 again.  It appears as though we’ll see it pop up and tag the descending SMA20 at the channel bottom.

The safe move is to dump the short position here at 2023.58 and ride it back down if it revisits these levels.  But, I’m fairly confident it’ll make new lows in the next 30-45 minutes.We’ll keep an eye on USDJPY, which would easily signal its intentions by dipping below that red TL.UPDATE:  11:06 AM

SPX just tagged its 5-min SMA20 as USDJPY is reversing.  I’d be back to short here at 2026.10 — though I can’t rule out a backtest of the SMA100 at 2028.96.UPDATE:  11:28 AM

A good sign for our short position, which is otherwise developing veeeerrrry slowly.UPDATE:  12:13 PM

SPX is being propped up here.  CL is slipping, but USDJPY suddenly rebounded.  Back to cash.  Would happily reopen a short position if CL and/or USDJPY can both decline.

UPDATE:  12:17 PM

CL just pushed below trend, but USDJPY is still rising.  I’d try a short position here, but not sure it’ll go anywhere.USDJPY now getting in on the action.UPDATE:  12:32 PM

SPX probably has downside potential all the way to our targets, but USDJPY is threatening to break out and even CL seems to have bottomed.  I’m going to close the short position here and be done with it.

For the record, I think SPX will continue to sell off, but perhaps slowly.  At this rate, it could take another three hours for the next 4 points.  On the other hand, it could fall apart quickly as it did at the close yesterday.

By my calculations, we’re up over 16% on the month — which is good enough for now.

  UPDATE:  3:38 PM

An entire day driven by USDJPY, CL and VIX.  So glad the “market” isn’t rigged (sarc.)There’s time for SPX to make one last dramatic move.  A break through the 5-min SMA50 (purple) probably means 2028.  Otherwise, 1993.