When we examined the likely outcomes of next week’s FOMC meeting yesterday [see: Now and Then] we devoted a couple of column inches to the possibility that Wall Street would throw a fit, much like it did in October 2014, January 2015 and August 2015, to demonstrate how sensitive it was to the taking away of the proverbial punch bowl.

Having said all that, there is one other possibility that shouldn’t be completely ignored.  As we’ve seen in the past, a sudden, severe plunge in stocks can be very effective in changing the FOMC’s plans.

Were SPX to drop to, say, 1920, 1856 or 1823 in the next several sessions (6.4, 9.6 or 11.2%), there’s a pretty good chance that the Fed would delay actual implementation of a rate hike.

The words seemed rather silly as I typed them, particularly since every tiny dip was immediately bought yesterday.  With another of those now-routine 1% pre-opening plunges  facing us this morning, they seem a little less silly.

continued for members…We’ll start with NKD, a good barometer of what’s to come.The culprit, of course, is USDJPY — which just ticked below Wednesday’s lows and is well below the SMA200.The net effect on futures is a push to nearly the .886 at 2010.64 – a 26 point drop.Translated to SPX, we’re looking at a a drop to at least the red .886 at 2029.07 (red dot.) But, I suspect the real target is the purple channel .236 line — just below the Nov 16 lows at 2019.39 (the white dot.)

For now CL is settling lower along the bottom of the falling red channel, where it is available for propping duty.  With a little over two weeks left until the end of the year, don’t be surprised to see it bounce here.

And, the dollar is again closing in on our target of the moving averages.

  UPDATE:  9:35 AM

SPX tagged our red target and is threatening lower.  Holding short.UPDATE:  9:43 AM

USDJPY is getting a nice bounce, but CL is sitting pretty near 36.  ES presently has 9 points to go to reach its .886 — the equivalent of 2020ish for SPX. UPDATE:  9:54 AM

ES very close to its .886.  I suspect we’ll see a bounce here, so will take profits on the short position soon.  Looking for a bounce at the .886, followed by another thrust lower to below SPX2019.39.  CL is inching lower again.UPDATE:  10:02 AM

I think that’s probably close enough for now.  USDJPY is getting a nice bounce, which will no doubt affect ES and SPX.  Back to long at 2022.76 for a bounce up to the .886 or even SMA100 (2031.86.)  I suspect it’ll be back later.UPDATE:  10:06 AM

That should about do it for the bounce.  Back to short at 2030.91 for another stab at below 2019.39.Although the way these things often go is a higher low now, followed by a bunch of head fakes for hours, culminating in a plunge to the session lows at the close.  In other words, adjust your stops accordingly.

UPDATE:  10:13 AM

Probably jumped the gun on that short.  USDJPY is getting another, bigger bounce.  Will close the short if SPX pushes past 2031.86.UPDATE:  10:25 AM

USDJPY is getting support at its SMA10, so I suspect SPX will too.  I’ll close the short here at 2027.62.  Not sure about the upside, as the SMA100 might limit things.  And, I’d revert to short on a drop through the SMA10 or if we get a reversal at 2031.86.

Note that CL is inching back above the bottom of its broken red channel.UPDATE:  10:31 AM

Granted it’s a weird place for a reversal, but ES just tagged its daily SMA100.  So, I’d dump the long position here and revert to short with tight stops — because there’s a 50-50 chance of the rising 5-min SMA10 scooping prices higher when it comes along and the SMA10 at 2036.02 hasn’t reached down to current prices yet.BTW, we’re having heavy rain here on the California coast today.  The internet cables are susceptible to weather, so if I suddenly go dark, it takes a few minutes to switch over to cellular.  If the cell towers go out, then I’m off with my laptop to the nearest coffee shop with DSL.

UPDATE:  10:40 AM

Getting support from that SMA10, and USDJPY is inching higher.  I suspect SPX will pop up to the SMA20, now at 2034.65.  So, I’ll revert to cash here at 2029.28.  I’d be happy to reopen a short on a push below the SMA10 or reversal at the SMA20.UPDATE:  10:45 AM

Here we go.  Back to short.  Keep an eye on USDJPY and CL for signs of reversals.  Neither is confirming just yet.  Fair chance of a head fake and quick bounce up to 2032 here. UPDATE:  11:06 AM

This is about right for a hgiher low if that’s the plan.  USDJPY and CL are bouncing, but haven’t broken out.  I’d take profits here and go to cash.  I’d consider reshorting if SPX reacts at the approaching SMA20……or, if USDJPY does so… …or, if CL pushes back below the red TL and accelerates.Coming up on the euro close, which often produces a bump.

UPDATE:  11:15

Back to short here as USDJPY is pushing lower and CL broke back below that red TL.

UPDATE:  11:21 AM

Back to cash, as USDJPY is breaking out.

NKD seems to agree — for the moment.If CL plumbs new lows, or USDJPY reverses its breakout, then I’d be back to short.

UPDATE:  11:27 AM

New lows for CL, and USDJPY back below the TL.  So, it’s back to short for me.UPDATE:  11:36 AM

ES just tagged its .886, so it and SPX should bounce here.But, CL and USDJPY aren’t yet.  So we’ll hold short until they do in case that lower low is about to happen.  Remember, the threshold is SPX 2019.39.

UPDATE:  12:11 PM

Just broke the 2019.39 lows.  Closing the short here.CL completed a nice little falling wedge.

Though, I’d be more confident had USDJPY tagged 120.753 — the red 1.272.

UPDATE:  12:18 PM

Back to long here, as ES just reached the 1.618 target at 2005.7.  Tight stops, however, as downside to 2000 or 1996 is in sight. UPDATE:  12:27 PM

Back to short for those lower targets as USDJPY continues to slide, probably to 120.35. UPDATE:

USDJPY, ES and NKD are all bouncing.  I’ll revert to cash here and wait to see some more downside impetus.UPDATE:  12:40 PM

I’d love to play a bounce here, but we need USDJPY or especially CL to break out.  UPDATE:  12:46 PM

CL wedge holding, and USDJPY gently rising.  I’ll take a shot at a long position here with tight stops.UPDATE:  12:58 PM
CL’s wedge is breaking down, but USDJPY and NKD are inching higher.  And, ES is back above the 1.618.  I’d hold a bit and see if CL is throwing us a head fake.  Alternatively, they could be propping it up till 1:00.  SPX has a TL (red, dashed) to break out of, if it will… UPDATE:  1:15 PM

I’d be cautious here, as USDJPY is sorta breaking out, but not definitively.  SPX needs to catch a ride on the rising SMA10 if it’s going anywhere — which might only be to the falling SMA50, by the way. UPDATE:  1:23 PM

ES has fallen back through its SMA10, as has USDJPY.  Back to short here with multiple targets: 2006, 2000, 1996.3 and 1991. Tight stops advised, as CL hasn’t yet confirmed.UPDATE:  1:44 PM

Not liking this vacillation. USDJPY is settling sideways/lower, but CL higher.  And, ES just popped through its SMA10/20 which are now bullishly aligned.  So, I’m going to cash for the time being.

I suspect it’ll run up and tag the SMA50 as it crosses the white channel bottom at 2022.20 or so, and then either keep going or (more likely) slip on back down to one of those lower targets for the close.

UPDATE:  2:19 PM

Very interesting that SPX just popped above the channel and SMA resistance, but USDJPY and CL aren’t rallying at all.  I’ll take a short position here and see what happens. Note that DX doesn’t have much margin for a bearish drop…UPDATE:  3:05 PM

Final hour of a bearish day in a bearish week with lots of event risk coming at us after the weekend.  Seems like most investors would want to take some risk off the table.But, USDJPY is being ratcheted higher, so it’s a good test of real investors — yes, all six of them — versus the usual levitation mechanisms…UPDATE:  3:25 PM

Should get a bounce here.  Back to  cash, will look for reentry point if/when runs out of steam — which will probably be when USDJPY finally drops through that TL.ES has now reached (exactly) its Nov 15 lows of 1998.50.  Will TPTB defend it or set a trap?I’d like to see a bounce to the SMA10 – perhaps at 2013-2015 – followed by a plunge into the close.

UPDATE:  3:34 PM

USDJPY tested the 5-min SMA50, rejected so far.SPX just tested the SMA10.  I’ll try a short position here at 2014.41, but would keep stops reasonably tight in case USDJPY or CL suddenly goes on a tear.  That white channel bottom should be a good line in the sand.UPDATE:  3:51 PM

They’re working USDJPY pretty hard.  Planning to close the short at the close — ideally around 2007 (white dot) or 1996 (purple.)

UPDATE:  4:00 PM

USDJPY’s ramp took a little downside off the table.  Still a decent day.