The third of our Dec 3 year-end targets [see: Update on Currencies] has been reached.

USDJPY: 120.05
EURUSD: 1.22635
DX:  90.272

DX just tagged our 90.272 target a little ahead of schedule.

Recall that this represents the 38.2% retracement of the Big Drop from 121 in 2001 to 71 in 2008.

The spike in DX means our forecast for a rally through the major .618 for USDJPY is also playing out.

We’ll have new highs today, of course, but should see a reaction from DX.  We’ll take a look at how our VIX, TXN and SPX targets are coming along after the bell.

continued for members…

The original forecast:

As we discussed yesterday, VIX has established a new falling channel , the midline of which has been breached.  Given the benefit SPX has derived from currencies, I’m not sure it needs to dip below 10.28.  Getting back to the purple channel bottom (the white circle below) would probably be enough to reach SPX 2138.

But, VIX is available, and engineering a decline to 11.28 or lower shouldn’t present any problems.  We saw stunning manipulation last week, and it appears VIX bulls have been beaten into submission.

As to notes, my target was probably unnecessarily ambitious.  From a yield standpoint, the SMA200 would make a nice balanced target at a year-end level of 2.46 or so.  But, like VIX, I’m not sure they’ll need to employ it in order to keep SPX’s momentum going.  The SMA100 at 2.32ish would probably get the job done.

Remember our thesis from Dec 3: getting to our various targets should get SPX to 2138. Getting SPX past 2138 will probably require getting our five instruments through their targets.

EURUSD and USDJPY have already pushed past a natural point of reversal.  If DX should push past and backtest 90.272, so much the better.  VIX and TNX have all kinds of bullish possibilities, and haven’t proven very difficult to manipulate thus far.

The biggest question on my mind is whether TPTB will play it safe and get SPX close to that phalanx of Fibs between 2138 and 2145 by year end — thus avoiding the natural reversal — or try to push through the natural reversal as occurred last Christmas.  The argument for the latter continues to grow with each determinant pushing through and backtesting resistance.