USDJPY reached the bottom of the white channel — and then some — slightly overshooting our 119 target.

We identified 119.07 as the line in the sand, and it’s hovering right there this morning.  Meanwhile, SPX reached our 2018.78 target.  From yesterday morning’s post [members’ section]:

As such, I’m looking for an initial bounce at the red .618 at 2038 (also just below the SMA50), followed by a dip to the white TL mentioned above (2018.78 if it happens today or tomorrow, otherwise 2030.)

We called for a bounce there, and the rebound I’m expecting in USDJPY should accommodate one.  Keep an eye on 118.59 — the purple .886.

On the oil front, CL reached our 49.52 target overnight. And, TNX is nearing its ideal bounce point — the red .886 at 19.27 (though 19.79 would also work.)

But, currencies should rule the day.   EURUSD is still hovering above the Jun 2010 lows.  And, DX remains above our 90.272 target in what looks like a channel break out.

Stay tuned.

UPDATE:  11:00 AM

That nice 13-pt bounce was just undone by lower rates, oil’s continued weakness and USDJPY’s drop through 118.59.  Note that PMI, ISM and factory orders all disappointed.

It’s possible the purple .382 will hold, but it will require a reversal by TNX and USDJPY.  The stronger support is at the SMA100 at 2003.77.

UPDATE:  11:50 AM

TNX just reached our 19.27 target…

…at about the same time as SPX reached the SMA100 identified in the above update…

…and, VIX is nearing the purple channel midline.

The problem child is USDJPY, which has dropped below the purple .886 yet again.  It’s tough to tell when this highly-manipulated currency pair is producing a head fake or is legitimately in trouble.  Need we remind readers that the pair is now well below the key .618 at 120.11?  The next support is the red .500 at 118.18.

The bulls should be expected to try and hold SPX 2000, but it would require that all the above reverse muy pronto.  According to Bill Gross, who draws a slightly higher readership than yours truly, we shouldn’t hold our breath.  In his just-released annual outlook, he tells investors “the good times are over.”

I certainly have no qualms with his macroeconomic and market fundamentals reasoning.  I’ve thought the same for quite some time.  But, IMHO, the “good times” can be extended for as long as central bankers are willing to continue shoveling moolah into the banking system (as opposed to “the economy”) and the BoJ is willing to continue trashing the yen.

The rest is shoulda-coulda-woulda.

continued for members…If SPX doesn’t hold 2000, the next levels of support include the red .786 at 1998.45, the red .886 at 1986.35, the former low at 1972.56 and — the most important — the SMA200, currently at 1959ish.

If USDJPY doesn’t bounce back, SPX’s 200-day moving average starts looking like a very good target.  It coincides with a channel line coming up from 2009 that was broken (but magically recovered) in mid-October.

The bullish case for USDJPY is shown below by the yellow grid.  The initial reversal at 120.81 would suggest a Crab Pattern up to 125.  But, as we’ve discussed many times, the key is really the white .618 at 120.11 — meaning the pair would have to regain the white channel that is currently in trouble.