With the yen carry trade being the single biggest driver of the rally since 2012, how is it that the “market” continues to rally even after USDJPY has broken down?

Because, make no mistake about it.  The rising white channel has broken down.Fortunately for the bulls, TPTB have several other levers by which to force stocks higher.  And, as we discussed in our recent forecast update [see: The Big Picture] this low-volume holiday period is ripe for such a maneuver.

continued for members…CL, for instance, has remained on a steady rise and broke through TL resistance last night.And, interest rates have done more than their share of ramping these past several days — the tail wagging the dog.Look for SPX to test the SMA200 (2061.09) soon — perhaps even today.The close-up:

UPDATE:  9:39 AM

So far, so good.Note that ES’ SMA200 is at 2055.16 – slightly further away on a relative basis from current prices.  An overshoot is to be expected, as the top of the megaphone pattern will be too tasty a morsel to resist.

The ES close-up:UPDATE:  9:54 AM

SPX looks likely to take a breather here.  I’d take profits and go to cash until it’s ready to push through the channel line resistance.  I’d be leery of shorting, only because USDJPY looks like it’s waking up……as CL digests some of its gains.UPDATE:  10:00 AM

Back to long here. USDJPY just spiked up to the top of the falling white channel……and, CL is rallying. Watch your stops, though, because USDJPY’s spike only lasted about 30 seconds — so, could easily be a head fake.

UPDATE:  10:05 AM

It looks like the foot is off the gas for the moment, as the 5-min SMA10 is up above the white .618 at 2049.51.  A retreat to meet it and backtest the Fib is a good possibility.  I’ll switch back to cash in case it’s anything more than that. If our acceleration channel is drawn correctly, it looks like the SMA200 test could come around 11:30 or so.

UPDATE:  10:30 AM

TPTB aren’t shy, anymore, about flaunting their ability to move “markets.”  Check out this spike on CL when they realized SPX was going to backtest the .618 ahead of schedule. UPDATE:  10:44 AM

SPX breaking out again on CL’s continued spike. The 100.0 Fib you see is the Aug 24 low, so breaking it would be a big deal.  Back to long for 2057-2061 — a move I hope won’t be trashed by USDJPY’s failure to break out. UPDATE:  10:58 AM

And, now, USDJPY coming to life…breaking out of the channel and probably above the TL.  If it can push through, the SMA200 is in the bag.  If it reverses, then we’ll have to wait a little longer and undergo some whipsawing.It’s enough for SPX to reach the SMA20.  Note that ES’ is still several points higher.  ES is about 1.70 out of synch with SPX.  We should see it settle back here to pick up some MA support.UPDATE:   11:07 AM

CL and USDJPY are backing off their breakouts, so it’s back to cash we go for SPX. It’ll probably be limited to backtests, so swing traders needn’t get alarmed.  Scalpers, it could be targeting a backtest of the white channel line and SMA20 at 2053.58.

UPDATE:  11:19 AM

USDJPY is getting a bounce off the white channel top and CL is holding around the red channel line.  Hard to say, but SPX could hold on to the passing SMA10 for another run up to 2061.47 in the next 15 minutes.  If it doesn’t, the SMA10 is only a point or two below. I’d want to be long on any push through SPX 2057.74.

UPDATE:  11:37 AM

Looks like we could get that pop any minute.  USDJPy just backtested the channel top and some MAs.  Will SPX backtest the 5-min SMA20, first?  Is the channel midline even a possibility? UPDATE:  11:55 AM

SPX just got its SMA20 tag — in as gentle a landing as I can imagine.  I’d be back to long here — though, with less confidence than I’d have if we got a channel midline tag, too.  Note that I’ve added the megaphone target to the chart as well.  Looks to be about 2065.55 if it happens at the intersection of the rising white channel. Note: quite often 12:09PM EST ends up being an intraday high.

UPDATE:  12:24 PM

It’s probably going lower, but this is painfully boring.  I’ll take profits here at 2060.78 and call it a day. FWIW, VIX just made a new low on the week and dropped below the Dec 9 plunge (SPX spiked to 2080 on that monkey hammering) lows, but is obviously back down to channel support.  A drop through this channel would sure help SPX make new highs.  Remember, if SPX pops through its SMA200 at 2061.09, the next step is the megaphone top at 2065.58ish.  After that, the white .886 at 2068.60 could attract some attention.  But, I’m not sure how it would get there, exactly.  CL seems to be balking at pushing through the Aug 24 lows.

So, it’s up to USDJPY — which, so far, has been less than enthusiastic.  It’s been helpful today, but has had several chances to break out — and, didn’t.UPDATE:  2:42 PM

SPX just tagged the top of the megaphone.  For anyone who spent the last 2 1/2 hours in order to collect these extra 4 points, congratulations.

My best bet is it reverses here, and then gaps up over it tomorrow morning.  But, then, I’m a cynical bastard.UPDATE:  3:40 PM

Not a very dramatic reversal, but here we are back at the white channel bottom.  SPX can’t stay in it without closing above the SMA200.  So, either a headfake drop beneath it or 20 more minutes to melt up into the close.  In either case, SPX should break out of the megaphone tomorrow.All you swing traders, here’s a perfect setup — as long as you trust TPTB to not “schlong” you in the after-hours.  I’d definitely be long overnight if you can handle the risk and/or hedge to some extent.