As expected, USDJPY traded down to the SMA200 in after-hours trading — tagging the .886 of the bounce off of 101.746 in the process. TPTB will no doubt do their best to prop it up, but this represents a critical support level that, if broken, opens up a can of whoop-ass on the bullish thesis.
To make matters worse, ZN has remained stubbornly above the .618 we discussed last week, leaving open the possibility of much lower rates in the 10-yr as the short squeeze continues. In yield terms, 24.71 is the important level.
With the war drums and really dreadful economic data coming out of Southeast Asia the past few days, look for both to continue their trends.
UPDATE: 9:50 AM
ES just took a run at the SMA10…
…motivated entirely by the one-way influence of the USDJPY. Rallies in USDJPY are magnified in ES to the upside. Declines are ignored. This is usually confined to the after-hours, but TPTB are (rightly) worried about the implications of the broken SMA200, and are obviously bringing the PPT online. Remember, today is a POMO day ($1.8 billion, in order to “boost employment” of course.)[For more on the all-important carry-trade, see:
Lots of leaks in the dikes this morning…will there be enough fingers to plug them all?
There’s a lot of talk about SPX dipping down and tagging the SMA100 — currently at 1847.44. I agree it’s likely, but if TPTB have their way, they’ll probably delay it just a bit. At current prices, it would represent a lower low than the Apr 28 low of 1850.61. Note that it would also represent a tag of the .618 of the run up from 1814 (Apr 11) to 1902 (May 13.)
In a few days, however, the SMA100 will be above 1850.61, and a reversal off it would represent a higher low — helping to bolster the bullish case. It’s exactly the sort of crap they like to pull — as evidenced by the “new high” established on May 13. In an unmanipulated world, SPX would be tagging 1800 today — the .618 retracement of the series of ramp jobs following the Feb 5 lows.