Charts I’m Watching: Oct 3, 2014

As we discussed yesterday, the key to SPX’s path forward was USDJPY — which nailed our .618 intermediate target yesterday before reversing. It retraced a whopping 78.6% of its drop from 110, and now sits at the .786 channel line where it should at least take a pause or, more likely, reverse here at 109.63.

2014-10-03-USDJPY 60 0600

Stocks also behaved as expected.

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  .If so, it would likely see a quick decline to the .786 at 1929.28 and reversal to backtest the SMA100.

SPX reversed strongly at the .786 a la Feb 5 and closed in the green.  Thanks to the overnight ramp job, SPX should open at around the SMA100 (1958.78.)

2014-10-03-SPX daily 0600

No doubt, many investors will rush in at this point, which might be a risky move. There’s definitely pop and drop potential today.

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