Lots of charts to post this morning — commentary later as there’s time.  The news came out yesterday that Japan has exceeded its inflation targets. No more deflation, no more need to inflate the economy through QQE.

Though corporations have benefited from a lower yen (though you couldn’t tell from their stock market lately), the people are feeling the pinch from more expensive imports — particularly food and oil.

The BOJ sounds like they probably will give QQE a rest, meaning the yen will rise and the carry trade will unwind — very bad for risk assets everywhere.  Note, this doesn’t mean they will give up manipulating the currency and equity markets through strategic purchases as they have been.  But, the effect shouldn’t be as great — and, investor expectations of a 105 USDJPY anytime soon should finally be laid to rest.

The USDJPY fell to our latest target, as did the Nikkei.  ES is off a bit, but right to channel support.  If the channels and yesterdays’ lows hold, we should see the beginnings of a nice rebound.  If they break — and, especially if the USDJPY plunges below the yellow channel midline — we should see a quick drop to 1850ish.

First, USDJPY is backtesting the falling yellow channel midline.  Bulls need a push back above the rising red channel bottom and falling grey channel top.  By letting the pair drop in the after-hours, they avoided the whoosh that might have accompanied a plunge with heavy equities volume.

The channels from the 2009 lows… Note that neither the purple nor the red are currently in align.

Fibonacci levels only…

UPDATE:  10:30 AM

I’m watching the dashed purple TLs on both SPX and ES — very close to the small 1.272’s and perfectly in sync with a similar setup on USDJPY.

The big difference is that ES and SPX have retraced just a small fraction of its rise from Apr 15, while USDJPY has retraced .618.

A stop at the red 1.272 isn’t justified, as the correct target Fib should be the 1.618.  But, that hasn’t stopped the bulls before.

As we noted several times lately, this decline feels very tightly controlled — letting the air out, buying heavily with any sense that things are starting to get out of control. And they likely will if USDJPY goes tapioca during market hours.

If these purple TLs and 1.272s break, watch the red 1.618’s and then the idealized IHS right shoulders marked above.

SPX presents an interesting choice of right shoulder targets depending on which of the falling red or purple channel is correct.  If red, this is a backtest.  If purple, the midline is down at 1833, also the bottom of the rising red channel.

GLTA.