Charts I’m Watching: Nov 3, 2014

Keep an eye on VIX, which completed a bullish (bearish for stocks) Bat Pattern Friday.

2014-11-03 VIX 60 0600This, as USDJPY just tagged the .786 retracement of its slide from 124 to 75 between Jun 2007 and Oct 2011…2014-10-06-USDJPY 60 0600…and, the Nikkei 225 (futures) just tagged the .886 retracement of its crash from 18,365 to 6,990 between Jul 07 and Oct 08.

2014-10-06-NKD wkly 0600This is another moment of truth for the Japanese carry trade.  While it’s hard to bet against the momentum exhibited late last week and the (by now, obvious to everyone) script for further coordinated bubble inflation written by central bankers around the world, I would be very leery of chasing this rally.

I think the goal is to establish new all-time highs in all the major indices (SPX just missed on Friday) in time for tomorrow’s elections.  After that, we should see at least a retracement of last week’s spurt higher.

If I’m wrong, the 1.618 extension of 1576 to 666 is up ahead at SPX 2138 (3-4 days at the pace set the past two weeks, but May 2015 if the rising white channel holds.)  Though, there is no reason to expect a serious reaction there as long as the algos and central bankers are in charge of the day to day (remember 1823…)

If 2020.04 were today’s high, the first downside target would be to close the gap at 1994.95 – also the .786 of the spurt higher from 1987 — though we should expect a bounce at 2000 first.


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