SPX hit both of our next downside targets yesterday: the SMA100 and the .618 at 1948.51. The key continues to be the USDJPY, which — along with NKD — had its most significant sell-off in months yesterday. It moved below the acceleration channel midline, and could fall to the white .786 before the channel is in danger.
The close-up shows the immediate target of the .618 at the SMA20 9108.05) and the bottom of the channel at 107.50.
If the pair is allowed to settle further, there is easily more downside potential in SPX. It closed well below the SMA100 and just below the .618 — ending up at a TL connecting the 6/24/13 and 2/5/14 lows. The 2/5/14 low was, IMO, an aberration — reversing before it should have thanks to a similarly (seemingly) unimportant TL. Though the charts would clearly indicate further downside to the white .786 or even .886, I wouldn’t rule out a 2/5/14 type reversal here — particularly if bonds and the yen are monkey-hammered into submission.
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