Charts I’m Watching: Nov 19, 2014

SPX nailed the higher of our two upside targets near the close yesterday — the purple 1.618 extension.2014-11-19-SPX 30 0600It has also clearly risen above the red, dashed trend line connecting the previous tops.  If it successfully backtests this TL, expect to see continued strength to the larger scale 1.272 extension at 2073.28.  If not, more downside ahead.

As usual, it has help from USDJPY — which last night reached another new high: 117.67 (so far.)  I continue to expect USDJPY to reach the .886 Fib level at 118.59 before it undergoes any significant corrections — if then.

2014-11-19-USDJPY 15 0615It appears that the second of the two rising wedges (a bearish pattern, shown in red above)  is being groomed as a rising channel (bullish, shown in purple.)  It could easily reach the .886 as early as tomorrow morning, but we could also see a series of headfakes in between here and there as it fleshes out the purple channel.

The dollar continues its coy ways, hanging about the small, red 1.272 extension after completing the Crab Pattern last Friday.  This would normally be a quite bearish development, as DX and SPX have been highly correlated of late.

But, as we’ve pointed out many times, the purple .886 at 88.48 remains the much more important upside target — and one which I suspect TPTB will pull out of their bag of tricks when the need arises (rising dollar = rising USDJPY = rising SPX.)

2014-11-19-DX daily 0600Like USDJPY, it could happen as early as tomorrow and be in keeping with the other chart patterns — in this case, the rising white channel midline.

UPDATE:  10:10 AM

The red TL did not hold the backtest attempt, a bearish development.  Note that VIX not only backtested the falling white channel, but popped by 10.5% afterwards [see: yesterday’s update on VIX] to reach the white .886.

2014-11-19-VIX 15 0707I suspect it’ll be monkey-hammered back down at this point, and SPX will bounce off the red .786 as NKD and USDJPY retake their rising TLs.

2014-11-19-NKD JPY 5 0705

But, if not, there remains the matter of the SMA10 way down at 2037.52.  One of these days…

2014-11-19-SPX 5 0709Jonathan Krinsky of MKM has made headlines lately with the observation that SPX has closed above its 5-day moving average for what, as of yesterday, was 23 days in a row.  This has only happened twice before.  As in “ever.”

In December of 1996, SPX fell 5.9% over the ensuing 11 sessions.  While in July of 1998, it fell 11.2% in 12 sessions and 21% in 31 sessions.  Of course, back then, central bankers weren’t co-hosting CNBC and brazenly propping up markets.

Bullard Bounce

The Bullard Bounce          source:

A close above 2043.99 (updated 3:45) today would set a record.  And, while that might sound quite bullish, it might also bring unwanted attention to the farcical antics of the stock “market.”  Regular readers of this website are well-versed in the manipulation that has reinflated bubbles in nearly every investment class — but, especially stocks.

2014-11-19-SPX 5 day MA

But, the TPTB might wish to avoid the scrutiny that would accompany the headlines of a new, 24-day record — especially when earnings and economic news has been so disappointing.  If so, look for a SMA10 tag and recovery to somewhere south of 2044.  At this point, this is my base case going forward.

If not, and they choose to ignore the incredulous stares of those who can see behind the curtain, there’s still a good chance of a tag and bounce at 2037.  VIX at 14.55 looks to me like an interim high, at best.  The better targets are up around 15.17 and 15.72.

UPDATE:  2:55 PM

The SMA5 now stands at 2043.65.  Seeing as how SPX is lurking around 2046, and seems to be in no hurry to bounce back with an hour left in the session, I’m liking that theory discussed above even more.

We’ll see if the algos can resist the urge to ramp up into the close as usual.  Keep an eye on NKD.

2014-11-19-SPX 5 1153


Well, that theory completely crapped out.  We have a new record — 24 days without a close below the 5-day moving average — to underscore just how wonderful the economy is.

In the end, it was the Nikkei 225 that couldn’t contain its algorithmic enthusiasm.  Note how ES dropped like a rock when NKD’s triangle originally broke down.  But, it bounced back with a vengeance when NKD broke back above the triangle.

2014-11-19-NKD 5 min 1300Nothing to do with the economy, interest rates, earnings, etc.  Just a computer-directed trading program that buys NKD contracts in order to goose ES, which in turn gooses SPX.  A grand total of 407 NKD contracts traded between 3-4pm.  That’s $35 million nominal — $1.7 million worth of margin — moving 159,500 e-mini contracts worth $16.3 billion and whatever the cash value of SPX was during that time.

USDJPY was fairly neutral through the last hour of trading, but VIX helped ramp stocks higher — falling from 2:45 through the close even though there was Fib fan support.  The brief peek above 14.73 was a nice head fake — no doubt stopping out lots of folks who follow it.2014-11-19-VIX 5 1300

Just another day in the unrigged market…







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