USDJPY, having lost the rising white channel as expected, found the purple .236 channel line.  Recall that the rebound of the yen was one of the central tenets behind our last major market call [see: USDJPY update.]

At the time, the pair had reached a TL dating back to 1998.  The previous 3 tags had resulted in drops in the S&P 500 of 22, 35 and 57%.  In addition, Japanese stocks had reached what I believed to be a turning point:

The TOPIX off almost 6% since then, and has found trend line support here at 1229.

In general, the market is due for a retrace, but I necessarily wouldn’t hang my hat on the USDJPY channel line as a catalyst. In fact, this channel has been pretty sloppy. I’m particularly interested in whether the pair can push back above the falling white midline and, hence, the Jan 13 lows.

There is pretty obviously (to me at least) plenty of additional downside, but things could change quickly if the FOMC/IMF/ECB comes to the rescue due to the EM unrest.

This week is a minefield of economic and earnings news, and I’d be very cautious on any position long or short.  As discussed Friday, this week we’ll get:

…new home sales, durable goods, the FOMC announcement, initial claims, advance GPD, consumer confidence, Michigan sentiment and Chicago PMI.  The unemployment report (Wednesday) should be a big boost, as the 1.4 million folks whose benefits Congress just declined to extend will no longer be counted.  The unemployment rate should plunge.

All in all, I think it’s a week best suited for scalping, as I’m not willing to risk my gains from last week’s shorts on the accuracy of my FOMC crystal ball.

continued for members…From Briefing.com:

UPDATE:  11:20 AM

From a short-term chart standpoint, ES isn’t terribly clear.  The rising white channel can be drawn in several different ways.  The harmonics are a little less obtuse.

1773 looks like good support, as it represents the red .786 and the purple .618.  However, there are plenty of other options.

The red .886 lines up with the white .382 at 1764/1765, so any push through Friday’s bottom is likely to be bought there at the white channel .236.

And, the purple .886 and white .500 come together at 1740-1742 at the white channel bottom sometime next week (probably Feb 5.)

Again, I think the best approach given all the headline risk lurking in the shadows is to be aware of the potential turning points and play the confirmed breakouts and breakdowns.