A Tipping Point

One week ago today, we wrote [see: Update on Currencies] about the chop we expected prior to the end of the year.

Gaining 65 points in 20 remaining sessions means a lot of chop between now and then, so we could see some wild swings.

We listed five targets we expected to be hit in the next several weeks: USDJPY, EURUSD, DX, VIX and ZN.  Of the five, two have triggered so far: USDJPY and EURUSD.  And, DX appears to still be on track.

2014-12-10-DX v ES daily 1300VIX and ZN, however, are staging a mutiny — threatening our year end target for SPX.   10-yr note yields are testing their Dec 1 lows…

2014-12-10-TNX daily 1300…and, VIX has jumped back well above the purple channel bottom — rising almost 25% just today. 2014-12-10-VIX daily 1300One additional concern for the market is oil which, as we noted yesterday, needed to hold 63.72 in order to hold major support.  It didn’t, plunging below the white channel bottom today to as low as 60.43.

2014-12-10-CL daily 1300As the financial media is finally reporting, there are serious implications for highly leveraged energy companies and the banks that service them — not to mention a 93% chance (according to its CDS) that Venezuela will default on its debt.

And, as was barely reported by the MSM, the likelihood that the ECB is about to trot out some QE of its own has been greatly overstated according to a leak from within the EU.  Zerohedge covers it HERE.

Needless to say, if the BOJ and FOMC are both tapped out, the ECB is the last major central bank that can keep the QE party going.  If it’s unable to make a contribution (as I believe it is) then profiting from carry trades is going to get a lot tougher.




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