Charts I’m Watching: Mar 31, 2014

It seems TPTB are determined to close in the green for Q1.  The futures got most of their ramp job at yesterday’s open, and have edged up slightly more in the early hours this morning.

2014-03-31-ES 60 0615ES still shows a H&S Pattern (red) within the right shoulder of a larger H&S Pattern (yellow) and the channels we’ve been assuming for the past couple of weeks haven’t yet broken down — though each daily ramp job does its best.

USDJPY pushed through the red .618, doing its part in the carry trade, and is closing in on the .886.  A push above 103.75 would bring the white .786 or .886 into focus.

2014-03-31-USDJPY 4hr 0615As we’ve discussed extensively, the pair is moving higher on yen weakness due to: 1) open market manipulation (selling yen, buying USD) by the BOJ; and, 2) market participants’ assumption that continued weakness in the Japanese economy will necessitate additional easing.

But, as we’ve also discussed, this isn’t a foregone conclusion.  The increased sales tax begins tomorrow, and the Japanese consumer is already being clobbered by much higher fuel and food prices — both imported.   Additional QQE will make imports more expensive, and spending (and, therefore, tax receipts) will be further impaired.  A cheaper yen will not solve Japan’s problems.

UPDATE:  2:00 PM

Thanks to the overnight ramp jobs and stick saves, SPX’s downturn has been delayed — meaning the correction can potentially be contained to a higher low.  The purple channel bottom is now up to 1780, indicating either a .707 retrace or (more likely) an initial drop to the white .618 (1793), followed by the .786 (1769.)

2014-03-31-SPX daily 1111Also, thanks to the delay, the white channel bottom is converging with the purple’s.  The white channel bottom intersects with the white .786 Fib level around Apr 9.  By tagging the white channel bottom, bulls can hope to extend the rally long enough to reach the yellow 1.618 at 2138.  Interestingly, had the markets not consolidated for the past 3 months, that target would have been tagged right about now — as the white midline (dashed) intersects with the yellow 1.618 at 2138 on Apr 2.

2014-03-31-SPX daily since 2009 1111Of course, that would have required a push up through some long, strong channel lines and manipulation of currencies and bonds as well.  Note the 10-yr chart patterns are still very much intact, with a series of lower highs held down by the falling channel top.

2014-03-31-TNX daily 1144Though, a more modest decline in equities would probably translate into TNX hitting an intermediate target such as 2.20%ish (white channel midline) rather than the more aggresive white .786 and red channel bottom intersection at 1.91%.

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