The futures are up over 30 points at present.  Why?  The headlines will point to China’s massive intervention, or this morning’s economic news, or maybe even speculation over the Fed’s upcoming action/inaction.

The reality is that the BoJ decided that things were getting out of hand, and they decided to bring USDJPY back to the magic salvation of the .618 Fib at 120.11.Who in their right mind could have looked at Friday’s falling red channel and felt bullish about USDJPY’s prospects?  As we wrote on Friday:

Stay short over the weekend and risk a big pop higher over the 3-day weekend.  Go long and risk a 55-pt gap down.

When equities, bonds and oil are all taking their cues from the whims of the BoJ and their notion of when “enough is enough,” well… that isn’t really a market anymore, is it?

continued for members…For all the excitement, ES is back to the IH&S neckline — no more.  SPX should play catch up, but bulls obviously need that neckline to be topped in order for the upside to develop.

SPX will be working on salvaging the rising white channel today, which means at least reaching the red midline for starters.  Unfortunately for bulls, even the 32 point gain in the futures won’t be enough to regain last week’s drop.  It’s going to need more, and quickly.  There’s no more room for downside if the analog is going to pay off.UPDATE:  9:43 AM

Closing in on the red midline, also a TL from the Aug 28 highs.  I put it at around 1966.  ES and USDJPY are starting to rumble — maybe up for a push through.  But, I’d expect it to initially offer some resistance and an opportunity for day traders to take profits, and swing traders to face some tough decisions.If it plays out as usual, it’ll not reach the objective on the initial push.  Keep a close eye on USDJPY and ES.

UPDATE:  9:53 AM

But, it all depends on whether USDJPY can top 120.11 and ES can top that neckline.

UPDATE:  10:29 AM

Despite the nice pop this morning, remember that the bulls need to top the falling red channel midline (and, ES that neckline) in order for momentum to switch to bullish.  Until those goals are reached, these are nice day-trading gains in an environment of uncertain direction that is looking more bearish with each passing day.

UPDATE:  10:40 AM

UPDATE:  10:46 AM

ES reached 1943.79, so good support unless it intend to tag the white channel bottom again (1940ish.)  USDJPY is still slipping, possibly looking for SMA100 at 119.68 or white channel midline at 119.58? 

UPDATE:  11:25 AM

Not only that, but CL is on the rise.  For a discussion of why, check out the CL update just posted.UPDATE:  11:30 AM

USDJPY reached the SMA100, and possibly the white midline (perhaps if I were to draw it more bullishly.)  A strong rebound here would help ES/SPX break out.  If it sits here or even declines further, then SPX’s SMA10 is our next downside target.UPDATE:  11:45 AM

USDJPY seems to be finding its feet.  It’s close to the white midline, and it has almost backtested the TL from the Aug 28 highs.  Unless this is a headfake, SPX could be about to bottom.  1943.48 remains my top target — though the 5-min SMA200 doesn’t cross it for another couple of hours.  In other words, it could take a while.UPDATE:  12:13 PM

USDJPY in a moment…

UPDATE:  12:15 PM

USDJPY’s move…  There’s plenty more room in the falling purple channel for upside.  So, keep a close eye on it.  A push through the .786 line would be reason enough to dump the SPX short.UPDATE:  12:30 PM

Note that ES has also reached channel resistance.UPDATE:  1:39 PM

SPX has behaved itself so far, and has run out of room to reach the SMA10 and still stay above the rising white TL.  Without another leg down soon, it will have to choose between the bullish rising white TL and the bearish one declining overhead — currently around 1956.25.

Clearly, a move through that TL should trigger a long position up to the red midline.I’d ditch the short in a heartbeat, but USDJPY hasn’t gone anywhere since reaching the purple channel .786 line.  It appears as though it wants to dip down and tag the SMA200 or the rising white channel midline as originally discussed this morning.Even if it pops higher, it still has the top of the purple channel to contend with.  In fact, tagging it could occur at the same time as SPX reaching the white TL.

UPDATE:  1:52 PM

UPDATE:  2:00 PM

It’s through.  Here’s where we find out whether USDJPY’s purple channel was legit.  An alternate exists, based on the highs instead of the lows.  It’s shown in white below.FWIW, SPX still has the opportunity to tag the red midline up around 1965 and get back down to the SMA10 later in the day.  We’ll see if USDJPY is prepared to go the distance and get back to 120.11.

Also, remember that consumer credit data will be released at 3PM.   It often moves the market.  Expectations are for $18.0BB.  FWIW, 3PM is also about the time that SPX’s rising white channel midline should intersect the red channel midline.  Another breakout or breakdown opportunity…

UPDATE:  2:27 PM

SPX just officially tagged the purple .786 (came up just short this morning.)  Be careful, as this would be a good place for an unexpected reversal — truncated 5th or whatever. Keep an eye on USDJPY, which has also reached double channel midline resistance and is just shy of the .618 retrace from this morning’s highs (120.004.)  A failure to pop through would be dangerous for the bulls.UPDATE:  2:43 PM

ES is at the neckline, trying to make up its mind.And, USDJPY was pushed back at the channel middle intersection.UPDATE:  3:35 PM

and USDJPY is likely to only backtest the white TL before falling further.Not saying there isn’t more upside, or that the IH&S won’t pay off…just that I’d not be interested in chasing it or holding overnight after a 2.25% day.