When USDJPY reached the 120.11 price level that marked a Fibonacci 61.8% of its drop from 147 to 75 that began in 1998, we thought it would signal a decline for stocks.  The BoJ, cagey as ever, kept the pair rising slightly — with occasional bursts higher when needed to support the yen carry trade [what’s this?]But, in the end, there had to be some capitulation after reaching a critical Fib level like that.  This past week, it began in earnest — dropping through the red channel bottom that has provided support since November 2014.

This morning, the plunge finally reached the next most significant support: the .500 Fib and the bottom of the rising purple channel from 2011.  USDJPY, along with WTI and SPX, should bottom here.  If stocks are to avoid a meltdown, they must bottom here.  The only question: is it too late?

continued for members…

I thought it would take a couple more weeks for the .500 tag.  But, it looks like they’ve decided to rip the band aid off right here and now.

A similar move for CL, which finally reached our 26.22 target late last night.If there is a concerted effort to create a bounce, look for the initial sell-off to reach our 1810 target and stage a comeback.  If it can’t, then the .886 at 1783 is in the cards.Start out short, but start looking for an entry point there — keeping an eye on CL, USDJPY and NKD for signs of a turn.  You’ll know because all three will be screaming higher.

As far as a bounce target, the initial goal would be to close this morning’s gap back at the channel midline around 1850.32.  Maybe Janet can force some dovish language this morning to help it along.  Beyond that, I’d start looking at  the white .618 at 1901.16.

UPDATE:  9:35 AM

SPX just tagged our target.  I’d go long here with tight stops, as we could see another leg down to test 1800-1810.  The key, as mentioned above, is to watch when USDJPY and CL reverse.  This will be my last trade alert for the day.A reminder: I’m out for the next four sessions on a bit of holiday.  I’ll try to post each morning like this, but it depends on scheduling and internet connections.

Good luck to all!