USDJPY reached the bottom of the white channel — and then some — slightly overshooting our 119 target.

We identified 119.07 as the line in the sand, and it’s hovering right there this morning.  Meanwhile, SPX reached our 2018.78 target.  From yesterday morning’s post [members’ section]:

As such, I’m looking for an initial bounce at the red .618 at 2038 (also just below the SMA50), followed by a dip to the white TL mentioned above (2018.78 if it happens today or tomorrow, otherwise 2030.)

We called for a bounce there, and the rebound I’m expecting in USDJPY should accommodate one.  Keep an eye on 118.59 — the purple .886.

On the oil front, CL reached our 49.52 target overnight. And, TNX is nearing its ideal bounce point — the red .886 at 19.27 (though 19.79 would also work.)

But, currencies should rule the day.   EURUSD is still hovering above the Jun 2010 lows.  And, DX remains above our 90.272 target in what looks like a channel break out.

Stay tuned.

UPDATE:  11:00 AM

That nice 13-pt bounce was just undone by lower rates, oil’s continued weakness and USDJPY’s drop through 118.59.  Note that PMI, ISM and factory orders all disappointed.

It’s possible the purple .382 will hold, but it will require a reversal by TNX and USDJPY.  The stronger support is at the SMA100 at 2003.77.

UPDATE:  11:50 AM

TNX just reached our 19.27 target…

…at about the same time as SPX reached the SMA100 identified in the above update…

…and, VIX is nearing the purple channel midline.

The problem child is USDJPY, which has dropped below the purple .886 yet again.  It’s tough to tell when this highly-manipulated currency pair is producing a head fake or is legitimately in trouble.  Need we remind readers that the pair is now well below the key .618 at 120.11?  The next support is the red .500 at 118.18.

The bulls should be expected to try and hold SPX 2000, but it would require that all the above reverse muy pronto.  According to Bill Gross, who draws a slightly higher readership than yours truly, we shouldn’t hold our breath.  In his just-released annual outlook, he tells investors “the good times are over.”

I certainly have no qualms with his macroeconomic and market fundamentals reasoning.  I’ve thought the same for quite some time.  But, IMHO, the “good times” can be extended for as long as central bankers are willing to continue shoveling moolah into the banking system (as opposed to “the economy”) and the BoJ is willing to continue trashing the yen.

The rest is shoulda-coulda-woulda.

continued for members… (more…)

The downturn we called for last week has exceeded our expectations — the most bullish target proposed on Dec 31.  Why?

Stocks can handle the troublesome economic news and sketchy geopolitical developments out of the euro zone.  They can even handle lower crude prices.  But a USDJPY that’s — again! — back below the key .618 we’ve been watching?  No way.

The futures are currently down almost 10 points, which points to a retest of Friday’s lows at the very least.  Beyond that, we have to wonder whether USDJPY will remain in its rising channel.  The line in the sand looks like 119.07.

TNX continues settling toward our Dec 31 target.

And, crude light is closing in on its next target.

continued for members…

A failure to snap back above 120.11 at this point would be troubling to the bulls case, and most likely result in a dip to support at 2038 or 2019.  The channel picture is a mess at present, so we’ll stick with Fibs, daily moving averages and the white TL off the Dec 16 lows.

As such, I’m looking for an initial bounce at the red .618 at 2038 (also just below the SMA50), followed by a dip to the white TL mentioned above (2018.78 if it happens today or tomorrow, otherwise 2030.)

The dollar is showing plenty of strength, shooting up past the .382 (adjusted for contract change.)

It’s all on the back of the euro’s weakness — which does nothing for the yen carry trade crowd.  The EURUSD briefly dipped below its Jun 2010 lows this morning.

UPDATE:  1:30 PM

SPX just tagged 2019.28, very close to our 2018.78 target.  We should get a nice bounce here.

CL hasn’t quite reached the .786.  A bounce in CL would support a more significant rebound in stocks.  A little more downside to 49.52 would help SPX with a more precise tag of the .618 at 2018.78.