You know the market is in trouble when USDJPY ramps in the hours before the open and futures tumble into the red anyways.If you’re wondering why the BoJ picked this particular moment for USDJPY to break out, look no further than the NKD.  After guiding NKD higher for over 10 years, it doesn’t seem likely they’ll just roll over at this point.This on the heels of a pretty wild ride, yesterday.  SPX spiked up to slightly above our upside target and then got whacked, plunging 103 points from its highs before bouncing into the close.

In the process, SPX formed the right shoulder we were expecting — which opens the door to a much bigger drop than was originally the case.The algo backdrop is negative this morning, with VIX still above its key trend line and RB and CL dropping toward our next downside targets.  Stocks could be in for another rough day.  What if this is the day?

continued for members…

Bears should be cheering RB and CL lower… …and VIX higher.USDJPY is back on track for another backtest — which would be a fairly sharp spike higher if it hopes to backtest horizontal resistance and the broken white channel.It’s the kind of backdrop that should get SPX down to one of the .886s on our radar… …and, possibly further if VIX and CL/RB can overpower USDJPY.  If VIX fails and CL/RB balk, stocks will bounce under the pressure of USDJPY.

Note that COMP is still leaking lower.But, a few of the FAANGS are at important lines in the sand.  FB has reached our backtest target.  If it doesn’t bounce here, it could drop through to 130, 110 or even 89. GOOGL, which is having channel trouble, has tagged its .886 and desperately needs a bounce.NFLX has reached its .618 and .236 channel line. AMZN is nearing a long-term trend line of support.And, AAPL is nearing a backtest of the purple channel from which it recently broke out. UPDATE:  1:00 PM

ES did a pretty good job of holding its red TL until just a few minutes ago.  If the purple line doesn’t hold, then the .886s will have a chance. But, we’re still faced with the same problems as earlier.  USDJPY is still ramping and VIX has someone’s boot on its neck. Given the need to keep NKD afloat, I’m increasingly of the opinion that the next leg down — if there is one — will be a swift, sharp intraday plunge similar to what we saw on Jan 20 2016 or Feb 9, 2018.While it’s been cool that VIX hasn’t broken down, it obviously hasn’t broken out either.  So, I assume it would be part of the orchestrated plunge next Monday or Tuesday (election day.)  This is how it might shape up.

USDJPY plunges to its SMA200 (currently 109.83) and then rebounds sharply……while EURUSD — which ideally will have reached 1.1281 by then — pops up to its SMA200 (currently 1.1878.)  Also ideally, DXY will have reached its .618 at 97.873 by then, so will then plunge down to flesh out the rising white channel around 93.063 or higher.

If we’re talking a big drop, then I can see CL plunging to 59.47… … and RB to 1.6969 – 1.7241.  Meanwhile, VIX would pop up to 34.97, 41.71 or 45.73-48.  This combination of moves could theoretically take SPX down to one of three target zones: 2421-2448, 2280-2314, or 2138ish.The alternative is that SPX lingers in the range of 2553 – 2597 for the next week or so.  I don’t really see it taking off to the upside until at least after the election (11/6) or the Fed meeting breaks up (11/8) — if then.  Again, it will require VIX, USDJPY and CL to play along.

I need to step out for a while, will check back before the close.

UPDATE:  3:55 PM

SPX just poked up above the little red TL on a continuing push higher by USDPY and another dip below the TL by VIX.  Hard to know whether this will hold, but it might just put a stop to the H&S Patterns playing out.  At this rate, the 2.24 is likely to be tagged today or tomorrow — meaning a small break higher could trash the 2-week old falling white channel.