The falling purple channel in USDJPY has broken, and the third H&S Pattern has completed as expected.  In other words, the yen’s appreciation has accelerated — a definite negative for stocks.

Yet, ES has reached the bottom of one rising purple channel.  So, the market is clearly at a crossroads.  The problem for bulls is that the rising purple channel is the most bullish scenario.  There’s a more bearish option that argues the bounce isn’t yet here.  Note the white channel has plenty of downside to go.  The bottom is currently around 1724.

And, if neither channel holds, there’s always the larger channel that has guided prices from the 2009 lows; the bottom is currently around 1670.  And, lest anyone forget, the recent top was a very large Butterfly Pattern completion.  A mild reaction would be back to the prior top: in this case, 1546.75 on ES.

A common reaction would be to the .886 (1441) or .786 (1350) — which would fit nicely with the attractive alternative to the big rising white channel.  And, for the uber-bears, how about the .618 at 1194?  Would the Fed permit it?  Probably not.  But, unlikely as it is, if the Fed somehow took a hands off approach to the markets, it’s the best looking outcome on the charts.

Coming up, targets.

continued for members…

I’ve been struggling to come up with obvious bounce spots.  The problem with the white channel is that it doesn’t line up with any good Fib levels or moving averages.  The SMA 100 at 1764 is already broken, and the 200 is way down at 1696 — which is below the white channel bottom.

I have no problem with an intra-day dip below the white channel bottom.  So, we’ll put a pin in that price level for now.  But, we should get some reaction off the channel bottom first — perhaps at or near the Nov 8 lows of 1729.50 to set up the next potential H&S.

Note that 1729.81 is the .382 of the rise from Jun 24’s 1542.25 — the bottom of the correction from the May 22 high.  That slide was 120 points.  If we subtract 120 points off the Dec 31 high of 1846.50, we get 1726.50 — nearly a mirror image of the May-June swoon.

If TPTB were really clever, they’d time it to coincide with USDJPY bouncing off the SMA100 of 100.97 or the pair of 1.618 Fib extensions at 100.70.  Hmmm…  That way they could declare that the worst is over — just a little indigestion like last summer.

UPDATE:  3:00 PM

SPX broke its Nov 7 low.  ES is coming up on its.

DJI broke its .618 and appears headed for the .786 at 15,119 — another 270 points lower.

USDJPY broke the SMA100 and is closing in on the littld 1.618s at 100.67 — but the real support is down at the yellow channel midline around 99.40.

As a follow-up to the big picture charts from earlier…  If you’re enjoying the downside today and think ES 1200 would be kinda cool, here’s another channel to consider.  Note that the red midline, purple bottom and yellow .618 Fib all come together in May of this year.  Something to think about…