Happy quadruple witching Friday…should be an interesting day.  No real data to speak of, lousy earnings and retail reports, very toppy market.

USDJPY is right where it was yesterday — either ready to break out on the flag pattern or completely out of gas.

The precision of the alignment with the channel top leads me to believe it’s done, but that would require a sharp reversal at current prices.

The eminis, having ramped overnight or no good reason (as usual) are nudging up against the .886 Fib level.

Momentum is on the bulls’ side, but that’s how it is at important turning points (or, there wouldn’t be any need to turn, right?)  In their favor, an Inverted H&S Pattern and setup for a Butterfly (with the big reversal at the .786.)  Working against them, a rather bearish big picture [see: Eye Candy for Bears.]

The euro continues to backtest the channel midline it broke yesterday.

It’s off to a good start after reversing at the top of three intersecting channels, and is one of the currencies that suggests stocks are due for a serious correction.

The two previous reversals at the yellow channel top produced SPX declines of 47.2% and 21.6%.  The other two declines through the yellow midline produced declines of 16.4% and 10.9%.    From today’s high of 1884, similar declines would translate into:

• 47.2%……SPX   994
• 21.6%……SPX 1476
• 16.4%……SPX 1574
• 10.9%……SPX 1678

There are many potential targets for EURUSD.  A mild downside case might be the white .382 at 1.3147 (also the red channel midline.)  A bigger decline could target one of the purple Fib retracements: the .618 at 1.2776, .786 at 1.2453 or .886 at 1.2260.  If the previous low at 1.20 doesn’t hold… well, it’s’ a long way to the bottom a la 2008.