Having utterly failed to arrest Japan’s economic malaise since its inception, will QQE suit up once again now that Japan has officially entered its fifth recession of the past six years?  From zerohedge.com:

Don’t look for Abe or Kuroda to fall on their swords.  Because, while debasing the yen has obviously done nothing to fix the Japanese economy, it has done wonders for the Nikkei.And, if that story sounds familiar, turn to this morning’s Empire State Manufacturing report from the NY Fed.  The latest miss (-10.74 vs expected -6.34) is the fourth monthly contraction in a row (most since the financial crisis) and the 9th of the past 10 months.

Makes it tough to believe the FOMC will really raise rates next month, no?  We’ll see if the “market” views it this way, taking the bad news as good from a Fed intervention standpoint…

continued for members…Futures had rebounded nicely over the weekend, with ES rallying 28 points from Sunday’s 1998.50 lows.  But, the Empire State survey was seen ES shed 10 of those points.

Bottom line, the futures are back to very close to Friday’s cash close and obviously back within the megaphone’s bounds.  But, the prospect of a slumping economy and incipient rate hike are proving to be a bearish combination — the kind that only a ramping USDJPY can cure.

Fortunately, USDJPY is stirring to life.  It reached Friday’s downside target yesterday, and has broken out of the falling purple channel.SPX closed Friday below its SMA100, a bearish setup that we’ve seen it shake off many times in the past.  With the futures pointing to a dip on the opening, we have to wonder whether or not SPX will prove so resilient today.We posted the next major lower support on Friday — the .500 and .382 at 2000.90 and 1969.32.  But, note that the TL off the recent highs lies at about the target of the latest H&S Pattern — about 2018.  I’ll be watching CL and USDJPY to see if they support this floor.UPDATE:  9:34 AM

SPX dipped to 2019.39 on the opening, and is getting a little bounce here.  I’d be inclined to hold long with tightish trailing stops just in case.  The first test will be the SMA100 at 2034.31.Note that, with a rebound here, TNX will have closed its gap from last week.UPDATE:  9:42 AM

Bumping up against the SMA100 here.  Nimble traders could take profits here, while daredevils might even consider shorting.  Personally, I think any pullback will be minor and short-lived.UPDATE:  10:12 AM

SPX has reached MA support, and should bounce here……as long as CL doesn’t derail things.  Having more properly reached the white channel bottom discussed in the last oil update, it appears to be considering tagging the .886 for good measure. And, USDJPY would really benefit from tagging that 5-min SMA100 in yellow.If CL would simply stabilize here and tag the .886 after hours, that would enable SPX to properly tag the daily SMA100, retreat enough for USDJPY to backtest its 5-min SMA100, and then the pair of them could rally to their hearts’ content.

UPDATE:  10:55 AM

USDJPY is staying atop MA support, but backed off the opportunity to break out earlier.  This supports the idea of a 5-min SMA100 tag coming up. This will keep SPX under pressure, and could lead to a bigger backtest here — possibly 2020-2022?

UPDATE:  11:14 AM

This is a good spot for an ambush — a very typical spot for a reversal off the moving averages as they roll over.UPDATE:  12:33 PM

SPX just popped through the SMA100 and is closing in on the white .786.   It might reverse here, as USDJPY hasn’t broken out……CL hasn’t broken out……and, ES has run into the top of the little white channel.Ideally, the reversal would be limited to a backtest of the SMA100.  But, any sustained drop through it would obviously have me considering dumping the long position.

UPDATE:  12:53 PM

Dumping the long position here at 2034 and going to cash.  If UCDJPY and/or CL breaks out — which could easily happen any minute — and SPX also retakes the SMA100, I’d be happy to reopen a long position.  But, for now, this is a red flag. UPDATE:  1:00 PM

SPX is breaking out, and USDJPY is on the verge.  Back to a long position here at 2034.51 with tight stops.  Watch out for a .886 reversal at 2038.67.  If that clears, SPX should seek to top 2041.15 — if only by a little.  Note the proximity of the 5-min SMA200 there.UPDATE:  1:26 PM

I think anywhere in here should be fine.  I’ll go ahead and take profits and see how things shake out.Again, if USDJPY takes off like a rocket, I’d consider jumping back in.  But, for now, it looks pretty much out of gas.UPDATE:  1:55 PM

CL just broke out so SPX could top 2041.15.  It might be a good shorting opportunity if they’re looking to set up an IH&S.  Let’s keep an eye on CL and see if it drops back down or gains momentum.