Friday’s runaway meltup was seemingly driven entirely by USDJPY.  On the daily chart, the 47-pt gain seems clearly correlated to the USDJPY rebound (that we had forecast several weeks ago.)

In reality, the initial USDJPY spike was responsible for only the first 20-25 points.  After that, it was all CL, which moved in tandem with USDJPY as it tried to regain its overnight highs.

So, what might it mean now that CL and USDJPY both just ran into heavy overhead resistance?continued for members…

Note that USDJPY not only pushed up to the red channel midline, but the SMA200 as well.  While it may eventually push higher, it certainly shouldn’t do so without at least digesting these gains.

CL’s rebound is even more iffy.  While it jumped up out of the falling red channel that dates back to mid-October.  But, in doing so, it backtested a seemingly very strong falling purple channel bottom.And, this is the problem TPTB face: how to sustain an equity rally with USDJPY — but, without pushing it to new highs — and, without having CL rally at the same time?  It’s a tall order that would involve a great deal of manipulation.  And, I’m not sure they’re up to it.  I do, however, expect them to try.

The first step would be limited this morning’s sell-off to a backtest of the daily SMA20 at 1924.87.  I’d start out short, and see if we get a bounce there.UPDATE:  9:36 AM

SPX just tagged the SMA20, so I’d switch to a long position here at 1924.83.  The immediate upside target is unclear.  But, I think it’s initially to the ES SMA5 200 at 1924.55 — about 1932 on SPX.USDJPY confirms the move.  But, keep an eye on this TL.  If it’s broken, SPX’s bounce is in trouble.UPDATE:  9:45 AM

SPX is in trouble, as USDJPY is pushing below that TL.  I’d revert to short here at 1927.01. I think they’re going for the ES SMA20 tag at 1910.78, which would allow SPX to tag its SMA5 100 currently at 1917.08.  The purple .382 is at 1915.23, which would make a good target if SPX overshoots the SMA5 100 a bit.  Note that the ES’ white channel doesn’t cross 1910 until 11:35 or so, meaning there could be quite a bit of bouncing around between here and there.UPDATE:  9:50 AM

USDJPY bouncing a bit, but looking like it’ll at least test the rising purple midline.  CL just getting going to the downside, pushing below the red midline and back into the red channel top that it was supposed to be backtesting. I have to step away for a few minutes.  Watch your stops, as SPX could suddenly decide to pop up to meet the falling SMA510/20 combo currently at 1929ish.

UPDATE:  10:01 AM

I’ll be evaluating whether to close the short when ES reaches its daily SMA10 at 1910.78.  With any luck, it’ll jibe with SPX tagging the bottom of the rising red channel. UPDATE:  10:44 AM

This is quite a bounce, and we’re underwater a bit on our short, but ES just tagged its SMA5 200 as SPX backtested the red midline.  As long as both start back down here, our SPX 1918ish target should be intact.  Note that if SPX’s rising red channel doesn’t hold, the SMA5 200 overlays the rising white channel midline — currently about 1906.1 (the red dot.) Note that USDJPY just backtested the red TL that it broke through earlier.UPDATE:  11:45 AM

Trying to be patient, but USDJPY simply isn’t allowing any further downside.  I’m giving up on the short and reverting to cash here.  I’ll pick it up later if it somehow manages to develop some downside momentum.  But, with ES’ SMA20 now over 15 points away, it appears unlikely anytime soon.

It’s pretty clear to me that BoJ or whoever is pushing the carry trade this morning cares little about charting propriety and very much about forcing stock prices higher.  It’s a very tricky time to be trading chart and Fib patterns.

UPDATE:  12:02 PM

After pushing up higher than it should have — through the red midline, SPX is picking up support at the SMA5 10.  USDJPY, by dipping back below the red TL, suggests it’s on its way back down.

But, NKD never did tag the SM5 200 at the white channel top (17,803), so there’s the risk that it’ll cause another leg up by suddenly shooting up there.  No volume, so plenty of head fakes are to be expected.

The trouble with these algos is you never know when they’re done.  I’d try a short position here, but with very tight stops. And, I’d keep a close eye on NKD.  1920.50 on ES looks doable.  Beyond that, we’ll have to see. UPDATE:  12:30 PM

Though there’s probably more downside potential, USDJPY just started up again.  So, we could get another bounce here that negates this nice little short.  I’d take profits and revert to cash for now. If ES comes back and dips below the SMA5 100 at 1920.5, I’d revert to short.UPDATE: 12:35 PM

ES just broke down below the purple channel.  And CL and USDJPY pushing lower.   I’d revert to short here.  Just watch your stops, as the rising red channel bottom at 1925ish or the SMA5 100 at 1926ish could easily be all the downside we get. UPDATE:  12:42 PM

Back to cash at 1928.81.  Too squirrely in here for me.  These sudden 3-pt pops are being driven by USDJPY and NKD, and are hyper-attentive to every little squiggle.  Not a good environment for charts nor Fibs. UPDATE:  1:38 PM

Lots more volatility, with an 8-pt bounce at the red channel bottom.  This could be what they’re aiming for.   So far, USDJPY and NKD are being used to prop up SPX despite a truly dreadful day for CL.   I’ll short SPX if it pushes below the red channel bottom (1929ish.)

UPDATE:  2:36 PM

Last chance to maintain some vestige of charting propriety.  I’ll try a short position here at the red .886 and see what develops.UPDATE:  2:40 PM

No dice.  Back to cash for the duration.USDJPY and NKD are being actively utilized to prevent any declines — though that could change at any moment.  I suspect they’re working on getting SPX up above Friday’s highs.  After they have a higher high in the books, then a decline might be allowed.