Charts I’m Watching: Mar 20, 2015

Stocks topped out just north of our 2102.49 target on Wednesday [see: Mar 17 CIW] and spent most of Thursday backfilling and testing the SMA20.2015-03-20 SPX 60 0600Since USDJPY is back above the critical .618 Fib at 120.11, we’re meant to believe it is breaking out yet again (despite Paul Tudor Jones’ warning.)  But, as we point out in yesterday’s Update on USDJPY, this is the fifth time above 120.11 since December. 2015-03-20 USDJPY 4 0610

Four of the previous times sent stocks reeling when USDJPY wasn’t able to break out:

1.  a 107-pt drop from 2079 to 1972 in seven sessions.
2.  fell 101 points in five sessions (and, marginally lower over the next two weeks)
3.  gained 52-pts (on oil’s bounce) but tumbled as USDJPY failed a second try
4.  a 30-pt slide on USDJPY’s pullback from the Fib and the red, dashed TL
5.  a 64-pt drop (when oil’s bounce failed)

Wednesday’s CL, USDJPY and DX takedown was discussed extensively in Algos Gone Wild.  It analyzes beat for beat the means by which the markets have been manipulated higher over the past three months through a combination of moves that supports the yen carry trade.

It has been very effective and won’t stop working until USDJPY fails to hold 120.11, oil tumbles much further, or the dollar reverses sharply.  And, when the carry trade falters, there’s always the overnight ES ramp job, VIX manipulation, bond futures manipulation, etc.

Last night, it was the DAX breaking through resistance combined with a nice bounce in oil that enabled ES to rally 14 points.  It’s backing off now, as that same oil bounce is causing DX to plummet, thus dinging USDJPY.

2015-03-20 CL v DX 60 0628It’s the same set of circumstances that led to Wednesday afternoon’s turmoil.  It’ll be interesting to see how TPTB handles it today with CL clearly breaking above a two-week TL and the resultant hit to DX and USDJPY.

Stock bulls will see this as bullish, even though it runs counter to the Fed’s objectives and will require corrective action that could undo SPX’s rally.  One possible way would be to take EURUSD down, potentially strengthening DX without as much impact on USDJPY.

2015-03-20 CL EURUSD v ES daily 0651

The less elegant, but often used, method is to wait until after the cash close.  Of course, this being a quad-witching day and with the futures already up so big, all they have to do is hold the opening spike.  We’ll have to wait and see.

Overhead resistance is at 2102.49 today.  If SPX breaks through, our next upside targets remain intact.

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