Charts I’m Watching: Jan 20, 2015

Friday’s SPX lows got a little closer to the red .886 target at 1986.35: 1988.12 vs 1988.44 on Thursday.  Sometimes it’s hard to time the USDJPY ramp job just right. USDJPY tacked on 1.90 Friday, and another 1.16 Friday’s post-Friday’s close.

2015-01-20-USDJPY 15 0605In last night’s leg up, it broke out of the falling red channel — enough to give futures an 11-pt boost (back down to 6 points as of this writing), on top of Friday’s rally. 2015-01-20-USDJPY 60 0605

Friday morning’s initial dip helped establish a broader potential falling channel, shown below in white.  The red channel took the pair to the midline, and this morning’s rally tests the upper bound.

If the upper bound holds, then this morning’s rally in stocks should burn out quickly after testing the SMA10.2015-01-20-USDJPY 4hr 0605If USDJPY holds, or punches through the channel top, then SPX’s upper targets include a backtest of the broken white channel.

2015-01-20-SPX 30 0600A little over a week ago [see: Jan 12 Update] we discussed the likely path USDJPY would take, and the ramifications on stocks.

I think USDJPY (118.34) is stuck.  I think TPTB have probably reached a limit on further yen decimation, and are trying to hold it in a range of 115-120 in order to prevent further SPX declines…If a floor can be established until the ECB begins QE — then, all is well.  SPX will be propped up.  If the floor gives way, SPX should go down and test the SMA200 (currently 1962) as we discussed last week.

USDJPY did, indeed, ultimately find support this past Thursday at 115.84.  This enabled SPX to be propped up, leading to the little double bottom that couldn’t quite reach a simple Fib level.

Gotta love our unrigged markets…

UPDATE:  9:54 AM

Speaking of which — USDJPY just reached the bottom of its little rising wedge…

2015-01-20-USDJPY 15 0653…meaning SPX should find support at the white TL after this morning’s sharp reversal.  If not, the SMA100 is just below at 2007.85.

2015-01-20-SPX 5 0652UPDATE:  10:16 AM

The consolidation we’ve expected over the past two weeks has been driven almost entirely by the USDJPY.  It’s essentially out of gas, meaning some other device has to come along to prop up stocks: the EURUSD.

The ECB is widely expected to announce new easing measures on Thursday the 22nd.  If they do, the EURUSD will pick up where the USDJPY left off.  If not, then the “market” is — what’s the technical term? — oh, yeah…screwed.

In between now and then, I imagine we’ll get a series of stick saves courtesy of the USDJPY — which will ultimately settle into the trading band discussed above.

More shortly.

UPDATE:  11:04 AM

A little deeper into the lower bound for USDJPY…

2015-01-20-USDJPY 30 0800…means a tag of the SMA100 for SPX.

2015-01-20-SPX 5 080411:40 AM

As discussed above, the presumption is that the ECB will come through with massive QE on Thursday, and stocks will be off to the races.  If not, the downside could be substantial.  We’ll take a moment, here,  to pinpoint some potential targets.

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