As we discussed yesterday, the key to SPX’s path forward was USDJPY — which nailed our .618 intermediate target yesterday before reversing. It retraced a whopping 78.6% of its drop from 110, and now sits at the .786 channel line where it should at least take a pause or, more likely, reverse here at 109.63.
Stocks also behaved as expected.
Though the charts would clearly indicate further downside to the white .786 or even .886, I wouldn’t rule out a 2/5/14 type reversal here — particularly if bonds and the yen are monkey-hammered into submission .If so, it would likely see a quick decline to the .786 at 1929.28 and reversal to backtest the SMA100.
SPX reversed strongly at the .786 a la Feb 5 and closed in the green. Thanks to the overnight ramp job, SPX should open at around the SMA100 (1958.78.)
No doubt, many investors will rush in at this point, which might be a risky move. There’s definitely pop and drop potential today.
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