QQE didn’t work.  Jawboning didn’t work.  Not even NIRP worked.  When all else fails, the only course left to central planners is direct intervention.  Welcome to direct intervention.

Yesterday, USDJPY tagged the bottom of a channel dating back to Nov 2014  for the second time in two weeks.  Remember, on Jan 20 it actually dipped below the bottom, resulting in SPX briefly dropping below the neckline of a large H&S Pattern targeting 1530.As we’ve discussed many times, this channel can’t fail without the yen carry trade suffering a huge setback and stocks plummeting much lower.

continued for members…Futures are up substantially off their lows following the BoJ intervention.   Look for SPX to try making a stand at the SMA10 (1907.45) and, if that fails, the SMA20 (1905.21.)  If it drops through both of those, there’s a TL of Wednesday’s lows t about 1904.27.  Beyond that, there’s the white channel bottom itself at 1889 and rising fast.It seems pretty clear that CL and USDJPY are both fully available today for propping duty.  Where they kick in is anyone’s guess.  But, with USDJPY already ramping and CL having found support, it shouldn’t take much.UPDATE:  9:35 AM

There’s the initial target.  Neither USDJPY nor CL are bouncing.  In fact, CL is dropping through channel support.  Staying short. UPDATE:  9:38 AM

CL just started bouncing.  Back to long here.

UPDATE:  9:41 AM

Back to short on continued CL and USDJPY weakness.

UPDATE:  9:47 AM

I suspect the red channel midline (1893.62) or the white channel bottom (1889.80) are up next.Beware of a possible bounce when CL reaches the red TL.

UPDATE:  9:51 AM

Getting that CL bounce here.  Back to cash until it’s over – probably at the SMA20 at 1905.21 where it can backtest that broken TL.

Note that this is also the .618 of the bounce from earlier in the week.I suspect the white channel bottom is next target.  It would align with ES 1881.68 below.UPDATE: 10:02 AM

Back to short here — though I’m probably a little early.  Keep an eye on both USDJPY and CL, as they both need to reverse in order for this next leg down to commence. UPDATE:  10:18 AM

CL is threatening higher, so back to cash for me here.

It’s apparently heading up to that jumble of SMAs around 31.75.  But, it’s hard to say whether it’ll stop there.

Here’s the real problem: NKD’s potential H&S Pattern.  Obviously, the BoJ is buying equities this morning in order to hold the .618 at 16630.  If the pattern plays out, it means another 1,500 point loss.UPDATE:  10:24 AM

Back to short as CL is relenting.UPDATE:  10:33 AM

ES is bouncing back above its .618, and this is too early for it to tag 1882 without breaking down through the red, dashed TL.  So, we could get a delaying bounce here for SPX that lasts for a while.  At the very least, enough to let the SMA10 catch down.  Back to cash. CL is also making a move.  Not sure where it’s going, but it’s going there fast.UPDATE:  10:43 AM

USDJPY is merely backtesting a broken TL, and CL has reversed its exuberant spike.  I’ll revert to short here at SPX’s SMA5 10 with tight stops. Just a reminder, I have to knock off early today.  I should be able to post until about 1:30 ET.  And, coming up, I’ll be off 4 days in the next two weeks.  I’ll be able to post first thing in the morning, but that’s about it.

– Thursday, Feb 11
– Friday, Feb 12
– Monday, Feb 15
– Tuesday, Feb 16

UPDATE:  10:59 AM

That’s close enough for me.  Back to cash here.ES still has a little to go, so I wouldn’t go long just yet.  1881.68 is the magic number.UPDATE:  11:05 AM

Back to long here at 1887.05 — the bottom of SPX’s large H&S Pattern.  Note that NKD has also tagged its neckline discussed above.  I might be a little early, as the .786 at 1884 would be a slightly better bounce spot, and would accommodate ES’s dashed, red TL at 1877. UPDATE:  11:18

Too early, back to cash.  Will try again after ES bottoms.   SPX’s .786 at 1884.03 looks promising. Note that NKD is now well below its neckline.  This is likely a sign that today’s bottom isn’t yet in. Hard to say, but ES might be aiming for the red .886 and purple .500 and 1.618 around 1870.  This could mean 1876 or so for SPX.

UPDATE:  11:41 AM

Back to short on the SMA5 10 tag.  Tight stops are in order in case it’s aiming for the SMA5 20 about to cross the white channel bottom at 1891.50ish.UPDATE:  11:51 AM

I think we’re going to get the bounce up to the SMA5 20.  I’ll go back to cash here just in case.  In recent days, this has led to long, protracted bounces that may prove to be a bottom, but are just as likely to yield one last thrust lower at the end of the day.  USDJPY isn’t exactly charging higher… NKD bounced off a TL connecting two other recent lows, and might be headed for its neckline.  So far, it’s holding back.CL backtested a broken TL — sometimes a good bearish sign.I’ll try shorting one more time if/when SPX reaches its SMA5 20 — probably after 12:00.  Frequently, the turning point is at 12:09.  If it doesn’t turn down then/there, then I’ll likely go to cash for the weekend.

UPDATE:  12:03 PM

Shorting here at 1889.97 per the above update.  The target is SPX 1878.51 or ES 1870.UPDATE:  12:39 PM

The algos appear to have kicked in.  As thrilling as this is, I’ll bail on the short and revert to cash for the day.It hasn’t popped yet, but with NKD easing up over the red TL, it probably will.Looking ahead, the expectation has to be for a bounce on the neckline for USDJPY, ES and SPX.  But, I’d be cautious about taking any position, long or short, going into the weekend.  While the potential bounce is a positive, we have to look at why it’s all the way back down here: the yen carry trade is in very big trouble.

Remember, every neckline provides extremely strong support — until it doesn’t.

I’ll be updating several other charts over the next few days.  I’ll also be posting the month-end review and updating the big picture.  Until then, have a great weekend everyone.