Since SPX completed a Bat Pattern on Nov 2 [see: Beware the Bat] it fell a normal enough 97 points to just below the .618 Fib. Though, as I recently pointed out, the bulk of those points came in gaps lower in the opening minutes and were, thus, only available to futures investors or those willing to hold short overnight — a dangerous game for many years, now.They also came almost entirely courtesy of a carefully controlled decline (purple channel) in USDJPY which merely took it from the top to the bottom of a steeply rising (white) channel. So, we took notice last week when the channel that’s guided USDJPY higher since Oct 15 finally broke down.
Surely, it would precipitate an overdue drop in equities — or, at least make a dent in the acceleration channel that’s guided the 77-pt rally since the Nov 16 lows. But, that’s not what TPTB had in mind at all.
As we anticipated on Nov 13 [see: Why Oil Should Bounce Here] CL bottomed out and began a vigorous 7% bounce that, combined with well-timed USDJPY ramp jobs, produced just enough reason for the algos to stay happy. Thus the melt-up was spared any unsightly divots.
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