Two Down, Three to Go

The EURUSD tagged our 1.22635 target from Dec 3 [see: Update on Currencies] overnight, leaving just three more year-end targets to reach: ZN, DX and VIX.  Note that, like most other coincident indicators, EURUSD prices have diverged from SPX (thin purple line) — particularly over the past six months.

2014-12-08-EURUSD daily v ES 0600Following news that Japan’s Q3 economic contraction was even worse than originally thought (-1.9% versus -1.6) the USDJPY has also sold off — down .50% so far.  Incredibly, a Japanese government spokesman was immediately in the news saying that “the economy continues to gradually recover.”

2014-12-08-USDJPY daily v ES 0600

USDJPY, along with VIX [see: Our Unrigged Markets] provided the usual closing bell boost to equities Friday afternoon, and is now leading futures lower (-6.5 at present.)

2014-12-08-USDJPY v ES 60 0600SPX reached a little higher (2079.47) than we expected Friday before turning around and sliding toward the close.  The above-mentioned last second manipulation by USDJPY and VIX saved it from a red day.

With USDJPY tagging the channel top and a small scale 2.618, I wouldn’t be surprised to see the rally fizzle here at 2077 and set up for some of that chop we’re expecting. Any significant downside should be constrained to 2055 — as the SMA20 is about to cross the red TL connecting tops from the past several months.

2014-12-08-SPX 15 0635If USDJPY can hold the rising wedge lower bound, SPX should hold the small white channel.  If not…

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