Charts I’m Watching: Dec 26, 2014

Wednesday’s last minute sell-off fulfilled our expectation of a small sell-off, though it only got as close as 2081 before the close.

My expectation is that we’ll get a small sell-off somewhere along the way — perhaps as early as at the close today — just to shake out the weak bulls and set the stage for the last leg.  An obvious target would be to close yesterday’s gap at 2078.73.

Last night’s ramp job in futures got SPX right back into the channel at the opening bell.

2014-12-26 SPX 15 0640The latest bullish central bank influence came not from the ECB, nor the BOJ — but the PBOC, which adjusted financial institution deposit ratios in a fashion that should stimulate more lending.

As expected, USDJPY is holding at above the white .618 — this as more abysmal economic news from Japan hits the wires.

2014-12-26 USDJPY 60 0625 Zerohedge summarizes it nicely HERE, but the the latest Abenomics accomplishments include:

  • a 0.6% decline in industrial output in November (consensus growth)
  • November consumer inflation slipped thanks to falling oil prices
  • real consumer spending dropped for the eighth straight month
  • real disposable consumer spending reported at -.2.5% YOY
  • real disposable income slid -3.9% YOY (wages -4.3%) biggest drop since 1988

Recall that DX reached our year-end target at the opening bell on Wednesday: the yellow .382 of the decline from 121 to 71 beginning in 2001.  The reversal contributed to Wednesday’s late-session decline.

Since then, it has rebounded to the .886 of Wednesday’s high (tiny white grid) — meaning SPX might not get much more help from DX.

2014-12-26 DX 60 0625

A close-up (updated 10:30):

2014-12-26 DX 15 0725

The other factor in Wednesday’s downturn was TNX, which reached a TL we were watching.  Breaking through that TL could pick up the slack from DX, and reaching for DX’s upside targets would help boost SPX to our year-end target.

2014-12-26 TNX 60 0625VIX continues to do its part, slowly and steadily approaching our initial downside target.

2014-12-26 VIX daily 0700Bottom line, while DX and TNX are at least temporarily be of little help to higher SPX prices, USDJPY, EUR and VIX are still very much available.




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