When we quietly placed a target of 2000 on the big picture charts in mid-February [see: Cornered Bankers Resort to Ramping], 200 SPX points ago, it raised a few eyebrows.  How in the world, given all the troubles facing global economies, could the market rally 10% in such a short time?

It actually reached 2000 a few days before projected.  And, the answer to the “how” question then, as now, was CL and USDJPY.  As we pointed out in The USDJPY Finally Relents, USDJPY and CL were both testing critical, long-term support.  Had they not bounced, stocks would have dropped precipitously.  But, they did.

And, now we face the question of whether SPX will reverse strongly or merely take a breather here.  With Kuroda announcing any BoJ policy changes tomorrow and Yellen doing the same on Wednesday, “markets” remain in the hands of the central planners.  Wouldn’t it be nice if they’d just publish future stock prices while they’re at it?

continued for members…

USDJPY has been going sideways, as is seen in the flat triangle traced out over the past few weeks. CL is breaking trend this morning — perhaps to finally backtest the SMA100 at 36.89 — but stands ready to ramp as far as necessary to support stocks. SPX should backtest the broken gray channel top at 2002 — but, that’s a tall order unless CL breaks down significantly.   The easier backtest is the yellow .618 at 2010.72.If either the gray channel top or the .618 holds, then our 2050 target is officially in play, with the timing to be somewhere around the end of the month.  There are a few alternatives — depending on when it happens — but, breaking out of the falling white channel is the key. Of course, should the BoJ and the Fed both disappoint, then 2002 won’t begin to function as an adequate backtest.  Look for a proper backtest of the falling white channel midline at 1894-1920.

UPDATE:  10:20 AM

CL had no trouble reaching the SMA100, and is continuing lower in order to force SPX down to the .618 at 2010.72.  It should reach it shortly.

USDJPY has some downside firepower of its own, should they decide to use it.UPDATE:  1:10 PM

CL’s five dips below the SMA100 weren’t enough to convince the machines that there’s more downside to come.  Likewise, USDJPY has avoided any real weakness.  As a result, SPX has continued inching higher.  I believe the goal might be to make sure it tags 2010.72 where the red TL intersects it — either later today or tomorrow morning when the SMA5 200 arrives. One issue that is confusing things is ES, which has come within a point of its SMA200 today.  We should expect TPTB to allow a tag, or near tag at 2012.81.  But, I doubt they want to have SPX push through resistance until there’s some justification for it (e.g. more central bank intervention.)

It would look bad if SPX spikes higher right the BoJ declines to expand QQE.  TPTB would feel obligated to permit SPX to fall back to where it was.  If BoJ does expand QQE, then there’s all the justification in the world to allow SPX to rally.

Better, I think, to keep it close and then spike it through resistance (if the news warrants it) or let it dip if the news doesn’t.  With the FOMC announcing the next day, there’s plenty of opportunity for it to rebound from a mild sell-off.

UPDATE:  2:41 PM

Testing my above theory right now…  ES has pushed above the previous high and the SMA 200.  I’m inclined to let it alone and see if it reverses off the SMA200 (and, SPX off the red channel top.)

UPDATE:  3:15 PM

ES is backing off its SMA200 so far, should continue lower.  But, TPTB has switched from delay tactics to propping-up tactics, and it now looks likely to close at the yellow dot — the 1.272 Fib at 2019.98. The safe bet is to cover at the close and take a 3-4 point loss for the day.  But, if you can watch and/or hedge overnight it should be allowed to tag 2010.72 in the wake of whatever news comes out tomorrow from the BoJ.

While I’m thinking about it, there’s quite a bit of economic news coming out this week — not just the FOMC and BoJ.  I’ll be traveling all day Thursday and Friday and won’t be able to post during market hours.