Yesterday went according to plan, with the initial and subsequent moves in SPX tagging both our purple and yellow initial targets. From the initial post (members section):

SPX might limit any initial weakness to 2064 or so — particularly if they’re able to hold the line on CL.  If USDJPY reverses, or CL continues to plummet, then we’re probably looking at 2057 (yellow dot) to flesh out the rising white channel.  In either case, the goal for bulls is to break through the white channel top and reach 2080.70 — the purple .886/1.272 combo.

We added the second purple target as a less likely option after the yellow target was nailed, but set our sights on the red target at 2080.70.  From the 1:30 update:

SPX just tagged our initial yellow target (I had been uncertain as to when it would happen, so drew two yellow targets this morning.)  I’ve moved our upside red target (2080.70) over to tomorrow morning, and added a the purple dot at 2053.54 as a potential downside target. I don’t see it as very likely…

As mentioned above, 2080.70 is the .886 retracement of the drop from 2093 to 1980, as well as the 1.272 extension of the latest, much smaller downturn.  It caught my eye when SPX bottomed at 2040 Monday afternoon — setting up an intersection between the two patterns.CL broke out of the falling red channel overnight — a net positive.

But, USDJPY gave up the critical yellow .618 Fib line at 120.11 — a real headwind for SPX.

Note ES’s behavior the last time USDJPY failed at this Fib line. Today’s targets coming up.  Continued for members...

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Yesterday’s forecast worked out reasonably well.  From the members’ section:

I’m looking for a pop in SPX to the purple .618 at 2060.74, after which we might see it retreat.

Then, after reaching 2060.74:

Just reached our first target at the .618.  I think it’ll keep going, probably up to the .786 at 2065.87 — though it might not be a straight line.

We took a shot at a short position at 2065, but with the understanding that we might be premature:

I’d take a crack at shorting it here at 2065.72…If I’m wrong, we should see the .886 at 2068.92 instead.

SPX topped out at 2070.86 before closing at the .886 at 2068.34.

This morning, we have a battle between the ill effects of tumbling oil prices……and the carry trade magic of a rising USDJPY.  Which will win the hearts and minds of equity investors? Or, more accurately, which will trigger the stronger algos?

continued for members… (more…)

Yesterday’s forecast called for a dip to the 50-day moving average.  From the members’ section in our initial post:

I’m looking for the initial move to take SPX to our 2046.7 target, with a secondary target of the SMA50 at 2043.90. If that should fall, the next strong support isn’t until the white .618 at 2032…

SPX accommodated with fairly accurate tags at our target prices and times.

We finished up the day with some indecision about that lower white target:

Quick update…2nd target hit, and a 50:50 shot on the third.  VIX and bonds suggest it’ll happen tomorrow morning.  But, TPTB might easily hold the line here.  Hold the short only if you can hedge and/or handle the overnight risk.

For the umpteenth time, news (founded or not) out of Greece dominated the overnight sessions.  Zerohedge has been running a story (citing Bloomberg) that — following offers from Russia and/or China to fund its deficits — Greece has obtained a 6-month extension on its debt deal with the ECB.

Predictable, markets have ramped higher.  USDJPY broke through the trend line off the Dec highs — sending ES up over 12 points as we go to press.

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Isn’t it interesting how the exercise of democracy in the very cradle of democracy has the Eurozone scrambling?  No doubt the Troika wishes they could just turn back the clock, go back to the days of dictating economic austerity to member states.  But, central planning/banking has its limitations, and the Greek people have proven that citizens can, indeed, be pushed too far.

In other news, the Baltic Dry Index reached its lowest level ever today.  For those unfamiliar, it’s a measure of the price of moving raw materials by sea and an accurate reflection of global trade.

Friday’s shiny new unemployment report, which sent stocks soaring and bonds dumping, is likely to be forgotten as the Grexit again takes center stage.  Last Thursday afternoon’s forecast [see member section] proved fairly accurate:

Given the volatility and manipulation of the last two days, I wouldn’t be surprised to see SPX slightly exceed 2064 in order to stop out the bears before reversing.

When SPX overshot our target, we set our sites on 2073.28.  SPX reached 2072.4 before reversing on cue — bagging our first and nearly our second downside targets (2049 vs 2046.)

We concluded the day with an observation that there was more downside to come and that aggressive traders might wish to continue playing the downside.

With the futures currently down 11 points, that was the correct call.

USDJPY reversed nicely off the red TL as expected — though it topped out a little higher (119.21) than expected.

USDJPY, having done its job, will certainly retrace a great deal of this morning’s gains.  Look for it to top out around 119.08.

Today’s targets coming up. continued for members…
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This post updates our Jan 27, 2015 Update on Bonds:

This morning’s unemployment report has sent yields soaring.  The reasoning is that stronger employment will cause a stronger/earlier rise in interest rates than the Fed would otherwise have planned.

From a chart standpoint, the 10-year yield is very overbought.  In other words, we’d be aggressive buyers of notes here at 1.95% (128’150) with stops at 127’185.

Note that TNX has again tagged the underside of the rising red channel channel…

…while prices (ZN) have tagged an important .618 Fib where it intersects with the .236 channel line.

We think this bounce is very overdone, and are sticking with our Jan 27 forecast of a late February target of 1.53-1.58.  The ideal date: around Feb 20.

Because a channel bottom backtest is involved, the stops are pretty obvious.  A strong move north of this morning’s highs (19.53) would be cause for reassessment.

USDJPY says it all — busting through the falling purple channel top, the red triangle top and the last significant high — busting the downward pointing harmonic pattern in red.

With futures up 5-6 points at present, SPX will most certainly break horizontal resistance and make a second higher high.  Like USDJPY, this busts the downside harmonic pattern (gray.)

The employment report (and, especially revisions) supposedly increases the odds of a rise in interest rates this year. So, there is a dark lining to this silver cloud.  Watch out for the scenario we described in yesterday’s member section:

Given the volatility and manipulation of the last two days, I wouldn’t be surprised to see SPX slightly exceed 2064 in order to stop out the bears before reversing.

USDJPY, having done its job, will certainly retrace a great deal of this morning’s gains.  Look for it to top out around 119.08.

continued for members…

Unless SPX moves strongly through the top (2065), this is probably a good shorting opportunity.  Updated charts in a moment.

UPDATE:  9:53 AM

This is technically a megaphone pattern — a series of lower lows and higher highs (marked here with red lines.)  It can break out or break down.  But, the assumption is always a reversal at the bounds unless proven otherwise.  So, it can be played as a short, but with relatively tight stops.I also like the very well-formed rising wedge (also in red.)  If it does reverse, targets include the .886 at 2055 for starters, followed by the purple channel top at around 2046.

If it breaks out, instead, look for a move to the purple channel line crossing the 1.272 at 2073.28.

GLTA.

UPDATE:  1:13 PM

SPX eased up through the red TL signifying the megaphone top at 2065 to nearly tag our 2073 target (0.88 away), but has since fallen back below the red TL.  Note that the purple .786 was tagged, which makes for a decent reversal spot.  Downside targets, as detailed above, are the .886 at 2055 and channel top/.786 combo at 2046.

Note that I’ve sketched in a rising white channel that uses the rising wedge upper bound as its own.  This is purely speculative, but I often find that over-exuberant wedges broaden into channels when TPTB are determined to support a push higher.  The fact that the midline intersects with my downside target is a bonus, and lends credence to the 2046 target.

I probably don’t need to remind members (but, will anyway) that the normal and obvious downside targets such as backtests have been less than reliable ever since the market manipulation became commonplace over the past two years.  Stops are highly recommended.

UPDATE:  3:00 PM

SPX just reached our initial target: the .886 at 2055.  I still like the 2046 target more, but we’ll see.  USDJPY seems to have dug in at current levels, and may not come off until after the close.

I just posted an alert on bonds, which — IMHO — made much too big a move this morning.  In fact, it’s making me wonder if 2046 is enough of a downside move.

Thus, I’m throwing a couple of other targets onto the chart such as the red .618 at 2015 and the SMA200 at 1991.  It’s currently at 1979 and increasing about a point/day, so it’ll be there soon enough.  And, TPTB have been itching to tag it — just didn’t want to get things pointed in the wrong direction.  This way, they can tag strong support based on a Fib and SMA.

UPDATE:  3:35 PM

Cautious types might wish to take profits here at 2050 — a nice 22-pt gain from this morning’s reversal at 2072.  Aggressive types, especially those able to hedge their positions over the weekend — I think there’s more downside to come…

…especially if VIX pokes through that midline…

…and, USDJPY reverses as it should.

Just know that TPTB might plan on defending that purple channel top fairly strenuously — unless the megaphone pattern holds and it was all just a head-fake.

GLTA.

 

Yesterday was one of those “will she or won’t she” days, with SPX dancing around the SMA50 all day long before finally nearly tagging our upside target at the white .886 (2054.74 vs 2055.08.)

We expected a sell-off to the white .618/SMA10 combo at 2032 at that point.  From the 3:37 update in yesterday’s members’ section:

Just came to within .34 of the .886.  It’s worth shorting here for the move to 2032, but only with tight stops in case they ramp it up overnight.  As before, keep an eye on the SMA50 at 2044.

It got down to 2036.72 before a last minute blip higher in USDJPY provided a lift.  And, as we suspected, they ramped it up overnight.  E-minis are currently showing a 14 point gain that seems to be waning as the opening bell approaches.

Note that, for all its threats to break out, USDJPY continues to follow the purple channel top lower.  That hasn’t stopped it from providing timely boosts when needed.  But, the effect will be limited until a breakout occurs — if it does.

A troubling development for bulls: VIX.

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CL rallied hard yesterday…

…providing a relief rally for SPX… …that was only belatedly aided by USDJPY.Our original call was for SPX to move higher if USDJPY pushed through the purple channel:

At this rate, [SPX’s] SMA10 looks to be tested on the opening.  If USDJPY can break out of the purple channel, there should be additional upside.

USDJPY broke out only briefly before falling back (the white arrows.)  But, equities kept soaring to keep up with oil.  The last two hours of the session were boosted beyond our 2036 sell signal when USDJPY rejoined the party.

SPX gave lip service to the SMA50 with an 8-pt drop, then blew through the .786 before closing just shy of the .886 at 2055.

Daily forecast coming up.

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Greece.  The confusion continues.  But, it hasn’t stopped the USDJPY-driven algos from boosting S&P 500 futures 50 points off yesterday’s lows.

SPX hit our next downside target (yellow dot) on the nose yesterday. This was a TL connecting the Jan 6, 14 and 16 lows as discussed last Friday afternoon.

It then bounced to an appealing upside target — the SMA100 at 2010 — which seemed like a great place to short again (11:39 update.)

It dipped pretty convincingly, shedding 20 points toward the SMA200 until about an hour before the session ended.  At this point, the Greece is fixed rumors heated up and it spurted higher to complete a Bat Pattern at the small white .886.

USDJPY took over at that point, moving back above the red triangle bottom and even the falling purple channel top.  It looks like the SMA200 tag will have to wait a bit longer.

Note that DX has reached the lower bound of the acceleration channel that’s kept it rising since mid-December — usually with positive effects on stocks.

At this rate, the SMA10 looks to be tested on the opening.  If USDJPY can break out of the purple channel, there should be additional upside.  If not, the pop should turn into a drop fairly quickly.

UPDATE:  9:35 AM

Looks like a good place to sell. Note the white 1.272 is essentially also the larger scale .618.  And, USDJPY has continued to settle after tagging the upper bound mentioned above.

The very latest out of Germany — the soap opera which is the Greece debt negotiations is looking messier and messier:

From Bloomberg:

Volker Kauder, the caucus leader for Chancellor Angela Merkel’s Christian Democratic-led bloc in German parliament, calls Greek debt recommendation “half-baked” demands a refrain from new proposals “every day.”
“We’re not going to play this game,” Kauder tells reporters in Berlin ahead of CDU/CSU caucus meeting. “I’m not ready to comment on half-baked plans every day. The fact remains that we have agreements with Greece and not with a government — and these agreements have to be adhered to.”
“Greek Prime Minister Alexis Tsipras’s new government has a right to make proposals, though must bear consequences”
“The German tax payer mustn’t be held liable for the decisions of this leftist-populist government. It’s up to Greece to decide.”
Troika of ECB, IMF and Commission must remain as negotiating partner with Greece.
“I don’t like the tone of voice out of Athens at all.  That’s not the way to talk to one another in Europe.”
“There are new proposals and new reports coming out of Greece all the time and all of Europe and beyond seems to be holding its breath.”
“A government should first of all reflect, should make concrete proposals and not present something new every day.”
“The new Greek government doesn’t create any trust this way.”

Doesn’t sound terribly “fixed,” does it?

Speaking of the euro mess, note that the EURUSD continues to rebound since our bottom call upon its reaching our 1.12 target 10 days ago [see: Jan 23 update on EURUSD].

With JPY going sideways and the euro strengthening, it makes one wonder if that DX channel will hold…

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As we’ve been discussing for nearly two weeks, a triangle in USDJPY has been driving the volatile sideways action in SPX.  Yesterday, while half the world was absorbed in football, the triangle finally broke down — just long enough to tag a meaningful retracement.

By the time the game was over, USDJPY was safely back in the triangle, where it currently resides in the narrowing territory between the purple channel top and the triangle bottom.

It’s a lot easier to manipulate futures prices over a low-volume weekend, and this one was no exception. Has USDJPY’s plunge taken place right about now, SPX would be testing the SMA200 down at 1974.  But, that’s not the way the script reads…

S&P futures fell 9-points with the initial plunge, but have since risen more than 13 off the bottom. They’re currently showing a gain of 7 points – meaning yet another test of the white channel top and/or purple channel midline.

If the rally can be sustained beyond that, the SMA100 is currently around 2010. But, bulls might wish to keep an eye on the fading rally in oil.  CL briefly tested 50 — almost at the .886, and has since hinted at a retracement.

UPDATE:  10:11 AM

SPX just reached our next downside target at 1980.  A reminder, this is a TL that connects the Jan 6, 14 and 16 lows that we detailed in the 3:55 update (members’ section) on Friday afternoon.

Note that this move below 1988 completes a traditional H&S Pattern that would target 1912 if it were to hold.  Needless to say, not many H&S Patterns have held in the past couple of years.  They’ve effectively been banned by central bankers and algo-centric HFTs.

More importantly, though, it officially kills off the IH&S that TPTB were trying to sell us.  From here, the SMA200 becomes a much more reachable target — though we wouldn’t be surprised to see a decent bounce at this TL.

Next moves coming up.  continued for members… (more…)