Can stocks rally in the face of a rising yen?  We should find out today, as USDJPY reached our second downside target overnight.  As we discussed in Tuesday’s members section:

The BoJ would love to morph USDJPY’s fluctuations into a (less aggressively) rising channel, but that means including some tags on the lower Fib levels such as the red .618.  They’re more likely to chicken out at the rising red TL and purple .236 at 119.27 — especially if SPX is tanking.

Stocks might have tanked, but most of USDJPY’s downside was saved for the after hours, when ES is more easily manipulable. All the same, SPX came within 1.73 of our 1989 target in the members section of Pennant no More.

And, note that the 118.26 tag does, in fact, reaffirm the white channel bottom while suggesting that the rapidly rising purple channel might finally be ditched.continued for members...

A close up:Other charts I’m watching…  ES was up big overnight on central banker dovish comments and Hilsenrath’s reporting what we’ve said all along: no rate rise in 2015.  Note, however, that it looks more like a backtest than anything else.

If TPTB were smart, they’d allow it to test the SMA20 (1952) or even the purple .236 down at 1900.68.  It would make for a fabulous IH&S targeting ES 2170.

I think the stage is still set for SPX to complete a SMA50 tag down at 1987.2 and possibly the white .618 at 1963.96.  I would be looking to fade the backtest of the white channel and purple channel midlines at 2001ish.

Unless USDJPY is ramped back up to 119.8 or so, I’d want to get short for a ride down to 1987 and potentially 1963 (though, that will probably have to wait until Friday or Monday.)  As always, use stops.VIX did a pretty good job yesterday of confirming moves and warning of reversals.  I’d keep an eye on its 15-min chart all day — but, especially when attempting shorts.

And, USDJPY’s 5-min chart is a must, as they’ll try to keep it down here in the cellar — a test of a potential new normal — as long as it doesn’t disrupt SPX’s rally.  Whatever big resistance SPX runs into today, USDJPY can overcome it with a rapid spike back to the purple channel bottom.  The smaller obstacles can easily be overcome by popping out of the falling channel.CL is finally backtesting the broken Pennant Pattern — a couple of days later than expected.  Note the falling wedge it’s using to get there — suggesting, at least, a strong bounce once it does.  Unless USDJPY rallies, CL should rebound strongly. When USDJPY is in the cellar as it is today, CL is frequently used to ramp SPX higher.  It’s another good 5-min chart to have open on your screens.Last, NKD in a nice bottom yesterday.  Let’s see if it can maintain momentum, or ends up fading at the SMA10. Remember, I’ll be out of the office all day today.  I hope to get a chance to update things midday, but it’s going to be touch and go.

GLTA.