In our last update on Jan 6, we noted that USDJPY had reached 34.17 our next downside target, commenting:

In an unrigged market, it would suggest a possible bounce… But, the noose of USDJPY is still hanging around CL’s neck, and could easily drag it lower.

USDJPY needed another leg lower to reach our downside target.  So, CL dropped through three additional levels of support, dipping through our 29.61 target before finally getting an unbelievable 18.8% two-day bounce — the equivalent of 3,000 points on the Dow.

Needless to say, if the Dow had gained 3,000 points in two days, even the MSM would wonder if something fishy was going on.   But, CL’s bounce has attracted no such incredulity.

Most observers continue to frame its moves in terms of fundamental supply and demand.  But, as we’ve noted countless times, CL has become just another tool by which stocks are manipulated higher via algorithmic trading.  But, there’s the rub.

continued for members…As we noted on Jan 6:

USDJPY can’t move higher (yen lower) unless TPTB accommodate Japan with lower oil prices to compensate for the hit of higher import prices (chiefly oil — which is priced in USD.)

USDJPY finally reached the channel support we had noted in our latest big picture update, and began bouncing.  With a BoJ policy announcement later this week, we’ll find out if CL has been driven low enough to facilitate another round of yen bashing.

The falling purple channel and the falling white channel both broke down.  But, CL has regained the white channel and is making a bid to backtest the purple.  It could hold, and continue to rebound.  But, there’s an alternate falling red channel that suggests another leg down.

If the BoJ punts, and USDJPY is not supported in its rebound to beyond 120.11, then stocks will experience another leg down and CL will be under further pressure.  The next downside support isn’t until 26.22 — the .886 of the rise from 10.65 in 1998 to 147.27.