With the FOMC announcement coming tomorrow, we can expect every move from here on out to revolve around the question of whether or not they’ll entertain a rate rise in June.  Given the overwhelming weakness in both earnings and macro, it hardly seems possible.  Yet, they’ve been talking up a storm, trying to portray it as a viable option.  Why is that?

Could it be the US dollar, which has had one heck of a time regaining any momentum.  The chart illustrates a continuous prop job over the past two weeks.  Imagine that, the world’s reserve currency needing to be propped up. continued for members…Stocks finished at the red .618 yesterday, inches away from our bounce target.  If the rebound continues, 2092.35 is in play.  If it fades into the opening, then the SMA20 or even the yellow .786 at 2065.25 is the next downside target. USDJPY’s next move is a little hard to read……while CL appears to be in a ramping mood again today.UPDATE:  9:34 AM

SPX tagged the .500 Fib at 2092.35 and seems to be backing off.  But, CL appears to be breaking out and ES found support at its SMA5 200 and its now higher SMA10 at 2084.38.  Consumer confidence is coming out at 10:00, which will probably determine whether or not SPX breaks past 2092.35.  I’d short here, but with very tight stops.  If it breaks out, the top of the falling white channel is around 2097.71. UPDATE:  9:45 AM

Pulling the plug on the short position, as USDJPY and NKD are threatening to break out. UPDATE:  10:24 AM

SPX made it up to the red .382, pretty close to the channel top, before sliding back toward the red channel midline.  It seems to be breaking back through, so I’ll revert to short here with tight stops.  It’s entirely possible it’ll find support at the red channel top, so caution is advised.  If it breaks through, the initial target is 2086ish followed by the SMA20 at 2071.85.USDJPY and NKD are still threatening to break out, and CL isn’t that far away. UPDATE:  10:55 AM

SPX just closed this morning’s gap and backtested the SMA10.  It should get down to the SMA5 200 at 2086.45, but the SMA10 is arguably more important support.  Given that CL has moved up to the white TL, threatening a breakout, I’d be inclined to take profits here and go to cash.  If it drops below the white midline, (2085.33ish) we can always reopen a position for the next 13 points.USDJPY’s new highs:And, VIX’s break out… or, is it a fake out?UPDATE:  12:15 PM

The channel picture is ripe for a reversal, though CL and USDJPY are still pushing higher.  I’d try a short position here, but have relatively low expectations for it.  More of a probe, if you will.  So, very tight stops.The supporting cast… UPDATE:  12:51 PM

Not looking very good for the short position working out.  Notice that NKD has worked its way up to the TL connecting previous highs as well as the white channel .236 line.  If it pops out, SPX will head higher.  CL and USDJPY are showing no signs of letting up, though USDJPY is showing signs of a rising wedge — which used to be a pretty good bearish sign back when every little dip wasn’t managed by TPTB.  Watch your stops. UPDATE:  1:17 PM

USDJPY and NKD are breaking out, by which I assume the BoJ has seen enough of a sell off.  Back to cash here.If USDJPY backtests/reverses off the .618 at 111.457, then I’d look at shorting again.  But, for now, it appears they’re putting a floor under SPX (as if we needed another reminder why swing trading has become nearly impossible.)

Keep an eye on SPX as the SMA5 10 (2090ish) approaches. VIX has been helpful today — but mainly as confirmation.  There have been plenty of head fakes along the way.

UPDATE:  2:29 PM

Probably a headfake, but SPX just raced back to the bottom of the rising red channel on USDJPY weakness and CL ambivalence.  If it pushes through the SMA5 200 at 2086.25, I’d be looking to short for 2071.85.A quick FYI…I have to take off a little early this afternoon — probably about 3pm.

UPDATE:  2:50 PM

SPX is swinging around a lot now, even though the moves are relatively small.  As mentioned earlier, I have to take off early.  There’s obviously support at the red channel bottom, and below that at the SMA5 200 at 2086.40.  Below that, we have the white channel midline at 2082.30-2082.50, depending on when, and finally the SMA20 at 2071.85. Nothing wrong with trying a short position if it drops through the red channel bottom as long as you use stops in case of a bounce.  ES’s VWAP is at 2085.40, about 2091.10 on SPX.  If, by some miracle, SPX plunges in the last hour to 2071.85, I’d be prepared to take profits rather than hoping for further losses on FOMC day.

GLTA.