The panic felt on Friday over a 1.3% drop was surprising, given that the markets were still up on the week.  What will investors do when they face a real plunge of 5-10% or more?  On Apr 14, 2000, SPX dropped 100 points in a day — a drop to get excited about!

While things started out pretty well, by the end of the Friday’s session the drop felt tired and back in control — if it was ever out of control.  USDJPY fell to the .382 retrace of its last rise, fleshing out a rising channel bottom.

ES busted the crazy-steep purple channel, but never broke the rising white channel midline until last night — only to bounce back.

SPX found support at the latest .618 — near the purple midline and a channel bottom — but will probably benefit from a slightly lower bounce.

Bottom line — I’m certainly not turning bullish, but the potential for a bounce here shouldn’t be ignored.  Keep an eye on the yen — the driver of the whole mess.  If it can hold 102.98, we should be off to the races.

UPDATE:  1:55 PM

102.98 has held so far, even as SPX/ES managed to put in another lower leg as expected.  Aside from the highly leveraged go-go names that are over-represented in the hedge fund world, this decline still feels rather “managed.”

I’ll take a stab at some downside targets.     continued for members…

The following are the most prominent targets for ES, assuming things don’t get carried away on the downside.

• SMA 50 at 1831 is also the .886 retrace of the rise from 1823 on Mar 17;
• SMA 100 at 1816 is also right above the Imoku cloud on the daily chart and the .786 of the drop from Jan 15;
• round number at 1800
• 1789.29 is the .618 retrace of the rise from Feb 5 and a rising channel bottom.

My best guess is the decline will be permitted to continue, with bounces at the key Fibs and SMA’s mentioned, finishing up at 1789 around Apr 11.  It will constitute a 5.4% sell-off — not enough to satisfy the bears, but enough to deflect the criticism that the market isn’t being propped up by the Fed (it is.)

UPDATE:  3:45 PM

SMA50 still in play?

USDJPY is losing ground, might take a shot at 103.05 or even 103 again.