pebblewriter

Month: February 2013

  • The Euro is Doomed

    From Bloomberg, reprinted in its entirety:

     

    Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface

    By Mahmoud Kassem – Feb 18, 2013

    Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S, said the euro’s recent rally is illusory and the shared currency is set to fail because the continent hasn’t supported it with a fiscal union.

    “The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.”

    The euro has gained 8.2 percent versus the dollar in the past six months and reached as high as $1.3711 on Feb. 1, the strongest since Nov. 14, 2011. The European Central Bank forecasts the euro-area economy will shrink 0.3 percent this year and ECB President Mario Draghi said on Feb. 7 that the currency’s gains pose a risk for growth and inflation.

    While the euro has strengthened, the economies of Germany, France and Italy all shrank more than estimated in the fourth quarter. Ministers from the 17-member euro area met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region’s debt crisis.

    “I’d be a bigger seller of the euro at anything near 1.4,” according to Christensen, who said he isn’t making any speculative bets against the currency.

    The euro declined 0.2 percent to 1.3332 against the dollar, falling for a fourth day.

    Shrinking Investment

    France is grappling with shrinking investment, job cuts by companies such as Renault SA and pressure from European partners to speed budget cuts. While Germany expanded 0.7 percent last year, France posted no growth and Italy probably contracted more than 2 percent, the weakest in the euro area after Greece and Portugal, according to the European Commission.

    The economy is on the brink of its third recession in four years and the highest joblessness since 1998. Prime Minister Jean-Marc Ayrault said Feb. 13 the country won’t make its budget-deficit target of 3 percent of gross domestic product this year as the economy fails to generate growth and taxes.

    “Another possible fallout is getting rid of some of the countries that are being ruined by being in the euro, notably the southern European economies,” Christensen said. “People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full- scale crisis, it’s over. Even the Germans cannot pay for that one and probably will not.”

    Cyprus Election

    Cyprus has been shut out of debt markets for nearly two years with lenders including Bank of Cyprus Plc and Cyprus Popular Bank Plc losing 4.5 billion euros ($6 billion) in Greece’s debt restructuring last year. The nation is holding a presidential ballot today where the economy is the main issue rather than reunification of the divided island.

    Spanish and Italian bonds rose last week as debt sales allayed concern the nations may struggle to raise funds before Italy goes to the polls to elect a new prime minister. Yields on Spain’s 10-year bonds fell for the first week in five as European Central Bank President Mario Draghi said the country had achieved “enormous progress” in its reforms. The spread between Spanish 10-year bonds and comparable German securities decreased two basis points to 354 basis points.

    Spain, which plans to sell three- and nine-month bills tomorrow and bonds maturing in 2015, 2019 and 2023 on Feb. 21, faces a sixth year of slump. Output is forecast to contract for a second year in 2013 with unemployment at 27 percent amid the deepest budget cuts in the nation’s democratic history.

    Record Debt

    Public-sector debt is at record levels, having more than doubled from 40 percent of gross domestic product in 2008. The European Commission, which is due to update its forecasts this week, sees it rising to 97.1 percent of GDP next year.

    “It’s the political world that has been extremely supportive of the euro, not for economic reasons but for political reasons,” said Christensen, a long-time critic of the single currency who now lives in Switzerland.

    TPG Capital, the private equity firm started by David Bonderman, bought a 30 percent stake in Saxo Bank in August 2011 for about $560 million. Christensen and co-founder and co-CEO Kim Fournais maintain majority ownership of the company.

    The Hellerup, Denmark-based bank said in August that first half profit dropped to 44 million kroner ($7.8 million) from 346 million kroner a year earlier.

  • Just Another Day: Feb 15, 2013

    Just another day in the financial markets…

    The G20 works feverishly to hold a summit that doesn’t disrupt world markets, while our elected “representatives” work feverishly to position themselves for a standoff that will.

    The mainstream media provides detailed reports on a $4 billion pyramid scheme that’s been exposed, barely mentioning the $17 trillion one that has corrupted markets and could destroy the economy.

    Credit rating agencies are fined billions for lying to investors, and threatened with annihilation if they dare tell the truth.

    We ignore the long-term jobless so we can report 8% unemployment instead of 23%, and send out debit cards to 47 million hungry and impoverished Americans so the rest of us won’t have to witness unsettling bread lines.

    And, the bankers who started it all continue to receive billions in bailouts and Cabinet posts.

    The stock market couldn’t care less about any of this stuff – only that the Fed continues to pump $85 billion per month into the markets in order to “ease unemployment.”  [Expect it to test the 1524.69 highs again today…you know the drill: intra-day longs.]

    *  *  *  *  *  *  *  *

    I have to run out to chat with a bunch of middle school kids about the working world.  Preparing for it has been a very illuminating experience.

    I plan on holding short into the weekend, but will monitor the situation “from the field.”  I should have a chance to post again before the close.

    Here’s where we are right now:

     

    UPDATE:  3:50 PM

    RUT daily chart is essentially unchanged from Feb 5.  RUT completed one Crab at 920.95 (purple), and is about to complete a second at 933.36 (white pattern) which will also be a tag of the channel top.

    The Global Dow’s goose looks positively cooked.  On Feb 1, GDOW came within 8 points of completing a very well-formed Gartley Pattern (white) and 4 points of completing a measured move (in red.)

    And, just yesterday, the daily RSI broke down below the midline of a well-formed channel that dates back to the Mar 2012  .618 Fib tag.

     

     

     

  • What Recovery?

    source: eurostat.ec.europa.eu

    It was thoughtful of eurostat to include the US in their chart.  Funny, that’s not the chart one would picture based on the MSM’s steady drumbeat of “recovery!”

    Germany, which had previously taken an ambivalent attitude about the soaring euro, might change its tune following its worst GDP print since Q408.  The main culprit?  Exports, which fell 15.4% from November – the worst monthly decline since 2007 – and 5.7% YoY.  Straight from the Bundesbank:

    Housing figures for Q4 should be out soon, but look for a continuation of the slide.

    A falling euro might increase exports, but make oil even more expensive – the same energy/export conundrum in which Japan finds itself.

    UPDATE:  12:20 PM

    SPX continues to move sideways.  The H&S pattern completed yesterday busted, completed again, busted, and is working on completing a third time.  This is a very ugly pattern, with hardly anything normal about it — especially the 3 right shoulders.

    It should have already paid off yesterday with a trip down to 1511ish.  The red channel I drew yesterday is holding nicely so far, but a departure to the downside this morning was quickly erased.  It even fell through the larger red channel midline but rebounded.

    Clearly, the bulls are trying valiantly to defend the 1520 level.  But, can they?

    continued for members… (more…)

  • What Gives? Feb 13, 2013

    It was worth watching the SOTU last night just to see Boehner’s contortions, trying to scowl in a dignified, statesman-like way.  Nothing much new in the speech or the response.

    More interesting was Mitch McConnell’s comment on CNBC last night that the sequester will go into effect. I don’t know any reputable economist who believes we can go through sequester without a sizable hit to GDP.

    But, the market is ignoring the tenuous economic situation and continues to edge higher.  What gives?  Aside from the $85 billion mainlining into the banks every month courtesy of the Fed, that is…

    Zerohedge ran a BofAML study last night that pretty much says it all.  The market is currently reflecting bullish sentiment that’s higher than almost any time since 2002.  I imagine it’s even a little higher this morning.

    Most past ventures into this sentiment range have not ended well for the markets – especially when there is a huge divergence between soaring markets and faltering economic backdrops, as the charts below show.

    Notably, the market is ramping these past few days on negative divergence in every single time frame – from weekly on down to 5-minutes.  And, it has completed some very significant harmonic patterns at the very top of a massive ending diagonal/rising wedge that’s precisely aligned with several previous tops (Jul 2011, Apr 2012, Sep 2012.)

    SPX surpassed our IHS target of 1522.60 from yesterday.  I’m closing out longs here at 1524 and will play the downside.

    UPDATE:  3:15 PM

    Getting a nice little push to the downside here — now 7 points off the daily high.  The white channel line that had been providing support is now providing resistance at around 1518.60 (the purple Crab’s 1.618 Fib is 1518.57.)

    SPX just completed a little H&S pattern that targets about 1510.80.

    Stay tuned…

     

  • Financials: End of the Line, Again?

    Financials have had a great run ever since we called the June 4, 2012 bottom [see: So Crazy, It Just Might Work].  But, all good things must come to an end.  I’d give them another few days/points at most.

    I had jumped on the short side Mar 27, 2012 [see: End of the Line and Lots More], riding GS, MS and JPM down around 30%.

    JPM:       46 – 32 = 31%
    GS:       127 – 92 = 28%
    MS:    20 – 12.50 = 38%

    On June 5, we loaded up on the long side.  Our targets, as posted that day:

    JPM:  today’s close = 31.99, price target = 38.69 (+21%)
    C:       today’s close = 25.75; price target = 34.79 (+35%)
    BAC:    today’s close = 7.10; price target = 11.34 (+60%)

    Obviously, those targets proved to be a little conservative.  JPM reached its target by Aug 21, consolidated for 2 weeks, then zoomed even higher – reaching 49.31 today and finally (after 4 near misses) reaching the .886 retracement of its 53 to 14 plunge.

    C reached its 34.79 target on QE3 day (Sep 14 — lovely being able to dump all those crappy MBS on the Fed) backed off a few points, then proceeded to rally up to today’s high of 44.50.

    It only ever recovered 7.95% of its 2007-2009 plunge from 570 to 9.70 (adjusted for reverse splits) and is struggling to reach the .786 of its swan dive from Jan to Oct 2011: 51.50 to 21.4. If the .786 at 45.06 doesn’t do the trick, the .886 at 48.07 should.

    And, just today BAC came within a nickel of the 50% retracement (12.39) of its post-2009 high.  It reached our 11.34 target in mid-December.

    If it gets past 12.67, it could still take a run at 14.13.  But, it won’t be easy.

    Most of the financials are in a similar situation — at or near major resistance either from Harmonic or Chart Pattern targets.  But, it’s XLF itself that looks shakiest.

    Today, XLF reached an important channel line as it tagged the 1.618 of the Mar-June 2012 decline.

    If it sneaks up past current levels, the .382 retracement of the fall from 38.15 in 2007 is waiting at 18.21.

  • AAPL: Breaking Out?

    AAPL has bounced nearly 50 points since its Jan 25 low, leading many to wonder whether the worst is over.  When I started this post about a week ago, all the talking heads were talking “breakout.”  We’ll give the old crystal ball a polish and see whether that’s likely.

    When I posted that AAPL seemed to finding support back on the 24th, it was because of the long-term channel (in purple, below) that’s guided its upside since the year 2000 [see: That All You Got?] The top of it, by the way, is up around 1775.

    AAPL bottomed the next day at 435 (one point from our Nov 27 forecast), and obviously still hasn’t broken that channel.  The channel top, by the way, is currently up around 1880. [note: these long term charts are as of Feb 6.]

    As we’ve noted before, there are other long-term channels at play, too.  Note the white channel casts a rather bearish pall, while the yellow channel promises at least a bounce here.  So, which to believe?

     

    GETTING HERE

    We’ve been very fortunate in forecasting AAPL over the past several months, calling several significant tops and bottoms with decent accuracy.

    Nov 8:  Harmonics Are Your Friend:  

    It looked like AAPL was about to bottom out, followed by a sizable bounce.

    “AAPL should get a brief bump higher as SPX does — perhaps to 600 or 620.  Of course, if it stalls there, it will have formed 5/6 of a huge H&S pattern… “

    It bottomed 6 sessions later when the S&P 500 dropped down to tag our 1344 target  [see: Charts I’m Watching Nov 15.]  From there, we were looking for a bounce to 600.

    Nov 27: Update on AAPL:

    As AAPL approached our 600 target, I anticipated a reversal and completion of a Head & Shoulder Pattern that would bounce first at the neckline before plunging below.

    “A reversal here could quite likely spell a return to the channel bottom — which will be around 434…

    …it’s easy to imagine a scenario where prices drop to [the neckline at] 500 into the end of the year, but can’t quite seal the deal on the H&S pattern…

    If, on the other hand, AAPL breaks down below [the neckline], look for a back test followed by a more serious plunge.”

    AAPL topped out two sessions later at 594 and plunged to the neckline at 501 where it failed to “seal the deal,”  bouncing for two weeks before finally falling below the neckline on Jan 15.

    It back-tested the neckline for a week before taking a “more serious plunge” down to 435, one point from our original Nov 27 target.

    GOING FORWARD

    The purple channel has done its job so far.  The big question is whether it can continue to stave off the damage of the completed Head & Shoulder Pattern.  H&S Patterns commonly back test their necklines.  Back tests can even exceed the neckline, as has AAPL’s in several cases.

    As we’ve discussed many times, AAPL has been in a fairly tight price channel all the way down from 705 (below, in white.)

    The upper bound of this channel intersects with the H&S neckline at about 498-500 around Feb 19 (there is some wiggle room, depending on exactly how the channel is drawn.)  This likely represents the extent of any short-term upside.

    As for the downside, the white channel midline intersects with the purple channel at about 450-452 around Feb 20.  The white upper bound intersects with the purple channel bottom  465 on Mar 18.

    But, note the large red falling channel.  It’s dicey to consider it well-established, since the “top” consists of only one tag.  But, it looks to me like it has potential over the medium-term.  Today, AAPL is testing its 25% line; and, a close above 473 or so would be positive — arguing for the more bullish of the two scenarios above.

    The daily RSI recently poked up through the white midline and the yellow 75% line, but appears to be backtesting both.  This would be consistent with a dip to 450, where AAPL could back-test the white price channel midline and the purple channel bottom (the purple circle).

    From there, the top of the yellow RSI channel beckons — which probably corresponds with a return to test the neckline around 500.  As noted above, this could occur as soon as Feb 19 if prices are to remain in the white channel.

    And, what if prices break out of the white channel?  Keep an eye on the RSI.  A break above the neckline would probably require a break out from the yellow RSI channel.  While, remaining in the yellow channel probably means a period of consolidation until early May, when the purple channel and neckline intersect at about 490.

    One other issue often discussed is the expiration of the 30-day wash sale period.  The biggest volume spikes in the past few months were the plunges of Nov 16, Dec 6, Dec 14 and Jan 24-25.  So, the only remaining relevant buyers who might rush back in are those who sold in the 435-465 range on Jan 24-25.

    Since the stock has gained a few points since then, these sellers might be expected to believe the worst is over and that it’s safe to re-enter at these levels — especially since the rest of the market is setting new highs.

    SUMMARY

    My best guess at this point is a test of the purple channel bottom around 450-455.  If it bounces, it has potential to the white channel top around 495.

    But, it’s important to note that AAPL just closed a huge gap.

    60-min RSI shows support coming up from a channel midline (white) as well as a rising channel bottom (purple.)

    If the channel bottom breaks down, the H&S target is way down around 304 — only a short hop from the yellow .618 at 317 and the white .786 at 307.

    GLTA.

  • Because We Said So (wait, what’d we say?)

    Just as we were getting a tad nervous about simmering currency wars, the G-7 announces there are no wars — everything is fine.

    Then, a G-7 official announces that everything is fine except for the Japanese — who are obviously sort of fighting a little war (see Brainard’s endorsement of same…)

    From Reuters about 30 minutes ago:

    But, really, everything is fine…except that by now the markets don’t know which way is up anymore.  Hopefully by the time the pub crawl lands in Moscow, they’ll have their story straight.

    The USDJPY, which had fallen to its channel midline following the Japanese Finance Minister’s comments that the yen’s fall had, perhaps, been a touch more than anticipated, rose on Brainard’s comments, fell on the first G-7 statement, and rose on the second.

    The pair remains in our target area, but I wouldn’t put any money on it staying there – or anywhere for that matter.  With the press releases flying, who knows where it’ll land when the music stops?

    The EURUSD is suffering from it’s own case of vertigo. In a now familiar refrain, the Germans and most northern EZ countries are just fine with the euro’s strength, while the more fragile economies of France, Italy, Spain, Portugal, Greece, etc. are taking it on the chin.

    The equity markets have been all over the map, albeit in a tight range the past week. SPX is testing 1518 for the 6th time in less than three sessions.

    Apparently, the market can’t accept our assertion that it’s time to sell off.  I don’t know why… Goldman did.

    Speaking of Goldman, Apple CEO Tim Cook is speaking this morning at their Tech Conference.  Apple will offer a live audio feed HERE.

    As discussed yesterday, I’ll add an intra-day long to cover any push above 1518.57 — which might be expected after the little IH&S pattern on the 5-min chart.

    continued for members… (more…)

  • Charts I’m Watching: Feb 11, 2013

    It was a beautiful weekend here on the central California coast.  Seems like everyone was out surfing, golfing, taking walks on the beach — at least that’s what I heard.  I spent the weekend poring over ECRI’s Weekly Leading Indicators for the past 30 years.

    Okay, in the interest of fair disclosure, Friday night was the annual Father-Daughter dance at my 10-year-old’s elementary, and I needed a couple quiet days off my feet.  If you’ve ever been in a room full of screaming prepubescent girls for two hours of JB and 1D, you know what I mean.

    Bottom line, the WLI research bolstered my confidence that our current position is the right one — whether or not the US economy is still in a recession, about to double dip, or is on the mend.  The key takeaway is this chart, showing the QE-fueled market continuing to pull away from the underlying economy (as measured by the WLI.)  Check out the article HERE.

    This morning, I’m hearing more and more talk about the market being frothy.  This is somewhat reassuring, as shorting at tops based on Harmonics often leaves one feeling very lonely.  I mentioned that SPX 1518 was at least an interim top to several other dads at the dance (guys who are in the biz) and they looked at me like I’d had too much fruit punch.

    I could have talked for hours about how applying derivations of a golden ratio based on 2,400-year-old mathematics enables effective market timing, but for some reason they had a sudden urge to go find their daughters and dance.  Funny how that always happens, and just when I’m getting to the good part…

    Of course, frothiness is what leads to overbought conditions — which, of course, is what you want when you short the S&P 500.  So far, the market is behaving itself — selling off a little while trying to sort out economic data, quantitative easing, currency wars and the upcoming sequester battle.

    continued for members… (more…)

  • Is It or Isn’t It a Recession?

    ECRI’s Weekly Leading Indicator (WLI) came out Friday at 130.2 — up from 129.6 the week before.  Further, they reported that the index’s annualized growth rate increased from 8.2 the previous week to 8.9% — the highest since May 2010.  I wondered: are they retracting their Sep 2011 recession forecast?  Are things really getting better?

     

    CAN’T WE ALL JUST GET ALONG?

    There’s currently an argument raging between various economists and analysts as to whether the US is still in/dipping back into a recession or is on the mend. ECRI is pretty sure we’re in one, while folks like Doug Short and, of course, the mainstream media think not.

    There’s no question that we’ve seen an uptick in several economic measures. My own thesis is that most of these have been not secular, but cyclical swings.  In other words, I don’t yet see evidence of a sustainable trend change, only natural swings from one side of a channel or wedge to the other.

    Here’s an example I posted last week. Total Confidence has traced out a pretty solid-looking channel, while the Present and Expectations indices have formed expanding wedges (and are nowhere near their upper bounds, especially given the recent downturns.)

    underlying chart from briefing.com

     

    Hardly a day goes by when I don’t second guess myself.  Is all the “good news” just one big, well-coordinated head fake or am I missing something?  I spent much of the weekend studying ECRI’s historical WLI (who says technical analysts don’t live exciting lives!?) and found a lot to think about.  First, a brief primer on Harmonics.

     

    HARMONICS

    Regular readers of pebblewriter.com (heck, even the irregular ones) know all about Harmonics and that the corrections experienced in April 2010, May 2011 and Sep 2012 correspond to the important Fib levels of 61.8%, 78.6% and 88.6%.

    For the uninitiated, measure the drop from SPX 1576 (Oct 2007) to 666 (Mar 2009) and multiply it by a Fibonacci 61.8% and you get 1228.74.  SPX reached 1219.80 in April 2010 (within 10 points) and promptly sold off by 17% over the next three months.

    In May 2011, SPX peaked about 10 points away from the 78.6% Fib level (completing a Gartley Pattern) and plunged 21.6%.  And, in September 2012, SPX reached the 88.6% Fib level (completing a Bat Pattern) and corrected by almost 9%.

    Those of us who follow Harmonics were well aware of each of these downturns well in advance [see: HERE, HERE and HERE] and profited nicely from the market’s plunges.  Those who rely solely on fundamentals or [involuntary shudder] the mainstream media…not so much.

     

    THINGS THAT MAKE YOU GO “COOL!”

    While I had noticed the WLI’s channel-like general decline before, I never noticed that it also complied with the rules of Harmonics.  From its all-time high of 143.73 in Jun 2007, the WLI plunged to a low of 105.40 in Mar 2009.

    Like SPX, it found its footing (thanks to QE1) and started higher.  Its first big pause was in Oct 2009 at the 61.8% Fib level.  It paused again in Jan 2010 near the 70.7% Fib, and eventually reached the 78.6% level in April — completing a Gartley Pattern as SPX had finally retraced 61.8% of its drop.

    One could infer from the mismatched Fib levels that the economy — as measured by ECRI’s leading indicators — was ahead of the market at this point. The WLI had retraced 78.6% of its drop, while SPX had only retraced 61.8%.  In any case, they both suffered from the removal of the QE drip – SPX shedding 17% and WLI 11%.

    When the Fed realized their patient would flatline without more QE, they were back with QE2.  The market took off, reaching the 78.6% Fib in May 2011.  This also completed a Crab Pattern, a 161.8% extension of the amount of the Apr-Jul 2010 slide.

    The WLI, however, retraced only 78.6% of its slide since its 2010 high.  In other words, the market was now officially ahead of the economy.

    Following the expiration of QE2, SPX plunged 21.6% to 1074 through October 2011, while WLI gave up 8.9%.  From there, SPX climbed to 1474 primarily on Fed jawboning and promise of more QE — which it finally delivered the day before the 1474 high.

    The timing was no doubt an effort to send the SPX soaring right through the 88.6% Fib retracement of the 1576 – 666 crash.  I seriously doubt that “two points over” was what they had in mind (the market sold off anyway, correcting a respectable 8.8% to 1343.)

    The WLI, in the meantime, topped out at 127.77 — only an 88.6% retracement of its decline from its previous high in 2011.  Again, the market was outpacing the economy.

     

    IS IT OR ISN’T IT?

    The world of market prognosticators is, as always, divided.  There are those who believe the economy is improving, and the market – as a leading indicator itself – is all the proof we need.  Then, there are those who believe the market is priced well in excess of levels justified by the underlying economy — which remains in or is dipping back into a recession.

    Whether QE has “saved” the economy or not, I don’t know of any respected economist or technician who doubts that it has significantly goosed (i.e. “manipulated”) the markets. And, we should pay attention to the disconnect between the markets and the economy as evidenced by the SPX/WLI comparison.

    The WLI just hit an important Fib level (88.6%) after demonstrating that it does, indeed, pay attention to such things.  This occurred at the same time that the S&P 500 hit several important Fib levels and is thus, by my reckoning at least, poised to correct [see: Satisfaction.]

    We all know the old truism “the market isn’t the economy.” However, another quarter of negative GDP following the tax hikes recently enacted and spending cuts in the works would certainly remind investors that the market and economy are, indeed, joined at the hip.

    I care about the economy because I have children.  The Fed’s unprecedented experiment in QE will quite possibly end very badly for the country, for my children and for yours.  But, there ain’t much We the People can do to influence Fed policy.  They don’t answer to us or our political “leaders.” So, we play the cards we’re dealt.

    As an investor, my goal is to capitalize on whatever the market throws at us — regardless of how manipulated it might be, and regardless of what economists call the current business cycle. If depression or hyper-inflation come along, we’ll hopefully see it coming and be well-positioned.

    Are we still in or dipping back into a recession? Will the current QE4-ever result in another 2009-2011 run, or does the market’s yawn last September signal the end of QE’s effectiveness?  We’ll find out in time.  In the meantime, we have some very good tools at our disposal that have provided excellent returns in a very difficult market.  I’ll continue to call it as I see it, and appreciate having you all along for the journey.

     *   *   *   *   *   *   *   *

  • Satisfaction

    Will the sixth try be the charm?  SPX has futzed around in our target area for six sessions in a row.  Today, we should finally get some satisfaction.

    The dollar has broken out of and is back-testing the yellow triangle. Lots of juicy Fib levels ahead, starting with the cluster at 80.758-80.883.

    RSI appears poised to break out of the red channel and explore the upper half of the white.

    While the EURUSD looks like it’s ready to tumble.  The test I’ll be watching closest is the intersection of channels around 1.3253.  But, merely popping back down below those falling white channel lines would be a great start.

    If I’m right, the falling white and/or yellow channels will take it from here.  Note the negative divergence represented by the last two spikes up to the top of the yellow channel.  The flatish red channel dates back to the fall of 2008, and every sustained push below its midline — currently around 50.51 — has been accompanied by a nice sell-off in EURUSD.

    Japanese finance minister Taro Aso is frantically searching for the “off switch” on the yen-cinerator.  In a chat with a legislative budget committee, he admitted: “it seems that the government’s policies have fueled expectations and the yen weakened more than we intended in the move to around 90 from 78.”

    The 7 sessions in (and slightly above) our target area are looking tenuous.  A dip to the bottom of the white channel could take the pair back to 90.82.

    And a fall from the white channel could easily see a back-test of the midline from the purple channel dating back to 2000.

    continued for members… (more…)