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With the first quarter restored to green after SPX’s breakthrough yesterday [see: Why Today Was Critical], window dressing has reached new levels of absurdity.   Investors can go back to complacently counting their profits, right?  Not so fast.

The yen carry trade, the major driver of stock prices since 2011, has gone nowhere since melting down in February.

And, CL’s 60% spike — which has driven stocks’ recovery since February’s lows — could have serious repercussions for a monetary model built on the premise that inflation is too low.  How many more breakouts — even fake ones — can consumers sustain before their budgets are strained beyond the breaking point?And, what of the US dollar?  As it slips further, what will befall an economy that imports, well, pretty much everything — not to mention all the other currencies that are racing it to the bottom?The Powers That Be may have achieved their price objectives for now; but, the road ahead is anything but clear.

continued for members…

DX continues to test the limits, backtesting the falling gray channel for a third time.

While USDJPY continues to threaten another return to the red channel bottom.And, CL is losing ground — albeit mostly in the after-hours.I’m still looking for SPX to backtest to some extent.  The .886 at 2052 would be ideal. UPDATE:  9:50 AM

Something you rarely see in SPX, a gap higher during the trading session.  It was immediately reversed, so we’ll count it as a pretty impressive headfake and hold short. Note that CL remains pegged to the SMA20.  Being parked here, it remains a constant threat to shorts.  If the pace or direction of SPX’s drop isn’t to its liking, it’s a very simple matter to shoot up 10-20 cents and bring it to a screeching halt.UPDATE:  10:07 AM

So far, it’s shaping up as a triangle — a holding pattern that could break either way or, as is often the case, will merely maintain current prices until Q1 is in the record books.  I’ll step aside here and wait for it to break out or break down — either one.  Back to cash.

If it’s going to break down, it should be when the SMA5 200 reaches 2052.71, the backtest target.  I show that happening around 10:35 EDT.

As expected, it’s being modulated entirely by CL.UPDATE:  1:13 PM

More of the same.  Since the apex was reached, we should see a series of false breakouts and breakdowns.  The currrent breakdown has been confirmed by a drop through ES’ TL, and the SMA5 200 is now up and over our first downside target.  So, a drop to 2056.60 is possible here.But, neither USDJPY nor CL has shown any signs of breaking down.  So, it’s probably just a market maker headfake designed to separate you from your money.

UPDATE:  10:17 AM

Just noticed that this morning’s dip set up a perfectly proportioned C=A corrective wave to exactly 2056.60.  I’ll take a crack at a short with tight stops if we get the slightest reversal in CL or USDJPY. Note that SPX’s SMA5 10 has now crossed beneath the 20, 50 and 100.

I don’t expect it to, but if it does it should happen soon, before the SMA5 200 climbs too high to justify 2056.60, or at the close in order to trick some weak bulls into selling.UPDATE:  1:30 PM

This is usually the time when downside starts to accelerate, if it’s going to.  I’ll try a short position here with very tight stops.  If it gets going, we’re targeting 2055.91 to close yesterday’s gap, with an alternative target of 2052ish to backtest the white channel top. Expect a bounce, however, whenever SPX reaches its SMA5 200 — possibly around 2059.16.CL and USDJPY are showing some slight weakness. UPDATE: 2:31 PM

I’ll play the probably bounce here and go to cash until it starts down again.It could be a very small bounce, say 2-3 points.  We’ll know there’s more downside when CL drops through the first TL again and passes through the SMA5 200 on its way to attack the second white TL.Another potential clue: USDJPY back below 112.46. UPDATE:  2:39 PM

SPX slipping further on CL weakness.  Back to short.UPDATE:  2:46 PM

CL just bounced at its SMA5 200, so SPX should bounce as well.  With any luck, it’ll be limited to the falling SMA5 10, about to intersect the SMA5 200 at 2059.90. UPDATE:  3:20 PM

Guess that’s all the fun we’re going to get, as SPX is pushing up past the SMA5 20 and neigher CL nor USDJPY is doing anything about it.  Back to cash and likely done for the day.There’s one more chance for a reversal, when ES backtests its SMA5 200 at 2053.79 — probably about SPX 2061.50.  But, again, we’d need some participation by CL and USDJPY.

UPDATE:  3:32 PM

Here’s the ES SMA5 200.  Trying a short position here for 2055.91 or lower.UPDATE:  3:45 PM

Guess that’s probably all we’re going to get.  Back to cash, probably  for the night.In the end, it was the guys pushing the VIX button that outweighed whatever the CL and USDJPY guys had in mind.             UPDATE:  3:50 PM

Hmmm… CL plunging again as NKD reaches SMA 5 200.  One more try at short here if CL pushes below its SMA5 200.Here we go…maybe some kind of weird quarter-end rebalancing stuff?  Back to short, but not overnight.UPDATE:  4:00 PM

Back to cash for the night.  Guess the backtest will have to wait till Q2.  If you’re in options or futures, there’s probably more ahead in the next few minutes.And, for anyone playing CL, don’t be surprised if it ends up back in the falling white channel tonight.