Last week’s charting worked out well, with the H&S Pattern and price targets we forecast Wednesday Mar 4…

…playing out nicely by Friday.

USDJPY reached our 121.12 target a few days ahead of schedule — which, unless the previous high is at least tested, will leave it with little levitating power.

And, CL is showing few signs of being ready to reverse just yet.

Aside from the ECB’s QE finally starting, and a couple of Fed president’s speaking today, I don’t see a lot that could change Friday’s intermediate-term forecast.

continued for members…From Friday’s post:

In fact, my leading case is a slight wave 1/wave 4 violation before a bounce up to backtest the SMA20 — currently at 2094ish.  It could be by just a few pennies — enough to stop out weak longs before a nice bounce.

If the H&S should play out, it would target around 2060 — which is coincidentally (or not!) the SMA50 and might allow a backtest of the broken falling gray channel.

Ultimately, I think we’ll see backtest of the falling gray channel as we suggested last Wednesday.

The SMA20 might be ambitious.  A simple backtest of the H&S neckline at, say, 2088ish would also suffice for the upside.

It’s tough to see which might come first and when.  But, at this point I’d have to go with more downside before the big bounce gets started in earnest.  The SMA50 at 2062 would be a good starting point, though the gray channel backtest at 2055-2057 is more appealing.

This being the first day of ECB QE, I imagine Draghi and friends will want to establish what a wonderful thing QE is for the markets.  I’m sure that, somewhere along the way, someone came up with the idea of a euro-fueled carry trade that would take the reins from the yen.

But, at this point, the picture is quite muddled.  Yen weakness/dollar strength has worked wonders for SPX.  But, USDJPY has reached another potential top (the yellow .618 at 120.11 and white .886 at 121.12) and can’t be counted on to boost prices higher.

If the yen strengthens, then it puts pressure on the dollar to weaken at the same time that euro-carry traders need it to strengthen.  And, considering the frontrunning plunge it has already made, does the EURUSD really have a lot more downside immediately ahead of it?

The bounce at the .618 of 1.12 didn’t amount to much, and it has now descended to the purple 1.618 — which may or may not matter.

The next major target is the .786 at .9898 — about 8.7% lower.  It’s enough to fuel a rally in SPX to 2138 without too much trouble. But, the timing looks like much later in the year.  And, to get there, US interest rates will need to increase — at least on the short end.  It’s a tricky proposition for the FOMC as we’ve discussed many times before.

UPDATE:  1:35 PM

SPX needed a bounce, and USDJPY has accommodated — completely ignoring the white .886.