Yesterday’s algo-driven meltup went straight to our upside targets and sat there.  So, our targets are essentially unchanged from yesterday morning, which are essentially unchanged from Monday.

An hour ago, Janet Yellen confirmed the Fed’s plans to raise rates sometime later this year (they won’t.)  And, this seems to have taken the bloom off the overnight ramp job just a bit — though USDJPY is more than making up for it.

continued for members…

Our downside targets as detailed yesterday:

I’m looking for at least a small pullback, with the leading candidate a backtest of the SMA100 at 2095 and the secondary target the SMA20/red channel backtest at 2089.

Note that I have expanded the smaller, less steep red channel to include the Jun 18 breakout.  It now also includes yesterday’s high as well, showing the symmetry between the two upside moves.

Needless to say, a break up through the white channel bottom negates the downside case as well as the effect of the breakdown beneath the two channel bottoms altogether.

As bullish as the “markets” have acted the past two days, remember our “let’s scare the crap out of the BOJ” scenario wherein there’s a market meltdown significant enough to prompt the quasi-governmental hedge fund to increase its QQE and/or yen-bashing efforts.

It’s why we drew those right shoulders on the chart last week — the red and white “S” we arrived at yesterday.  Yesterday’s highs would make excellent right shoulders for H&S Patterns targeting 1950 and 1841.

Admittedly, 1841 seems a bit of a stretch: it would essentially be backtest of the big yellow 1.272 at 1823 — which has already occurred once.  But, a return to the white channel bottom would signal a potential H&S Pattern that threatens to reverse the entire run-up from 2014 and 2015 — perhaps enough to get BOJ off the dime.

Again, whether of not this scenario unfolds is anyone’s guess.  USDJPY has rallied sharply over the past two days without any official QQE expansion or BOJ statement (currency manipulation at its finest.)  But, CL has reversed off its SMA10 and is a solid short on any drop below 53.

Stay tuned.