Real investors are troubled by what they see.  But, so far at least, TPTB have been able to keep the crap game afloat.

If we didn’t know any better, this would be a great time to get really, really nervous.  But, fortunately, our analog provides a great road map as to what to expect in the coming month or so — starting with today’s dip to 2090-2092 as forecast a week ago [CIW Apr 23, 2015]:

I’d be shorting here at 2118.85, with a target at 2090 and stops at 2125 or so.

The US dollar is threatening to break down.The euro is threatening to break out. The yen is acting positively schizophrenic — going nowhere during yesterday’s turmoil, and dropping like a rock today.

And, CL continues to make new post-crash highs.

Despite all the noise — and, that’s exactly what it is — we’re still quite comfortable with our SPX targets.

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DX reached our downside target of 95.667 overnight.  Note this is Fib and channel support, so we should see a significant rebound here.It meant a run up for EURUSD to test the last line of overhead resistance before open air…

…and a schizophrenic overnight session for USDJPY.Turns out at least a few investors still care about fundamentals, with ES currently off 15 points and the opening bell onlly 5 minutes away.  Last week’s targets remain in place.

UPDATE:  9:40 AM

In a replay of yesterday’s opening, it’s CL to the rescue, limiting the opening drop for SPX to only 7 points before the algo juice kicks in.  Only this time, there’s a limit to the good it can do.continued for members… (more…)

Steady as she goes.  Today’s targets remain the same from yesterday, which was first established in our Apr 23 post:

SPX is testing the all-time high of 2119.59, and will likely slightly exceed it before falling off (probably on Monday.) Though the 1.618 is only 18 points away at 2138, I don’t think SPX is ready to take a run at it yet — not without the support of USDJPY’s SMA200.  I’d be shorting here at 2118.85, with a target at 2090 and stops at 2125 or so.

SPX’s high was slightly exceeded, and we got a run up to 2125.92 before yesterday’s mild sell off.  Look for a continuation today.

USDJPY is reacting this morning just like yesterday — a little yen weakness on account of extremely weak retail sales.  But, as of yet, the pair hasn’t popped above the SMA100.

And, CL is backtesting the midline of the alternative red channel we added yesterday in anticipation of the purple channel breaking down.  We’ll keep a close eye on this, as the breakdown could be corrected intraday.Another chart on which to focus — the EURUSD.  It is staging a minor breakout that might also be an intraday excess.  If the move is more lasting/substantial, it could change the downside potential a bit.

No members’ section today, as your chief forecaster is a little under the weather.  More later…

UPDATE: 2:45 PM

EURUSD has reached the white .886, which should spell the end of today’s spike unless TPTB have actually decided on a new direction.

And it’s possible, as the combination of higher oil prices and a cheap euro have to be taking a toll.  Speaking of oil, that backtest of the red channel midline seems to be holding — but, right at the midline.

All things considered, it was enough for — drum roll, please — a V-shaped recovery for SPX which has now recovered most of its losses from yesterday’s high.  It came within 3 points of the SMA20 …so far.

Since the EURUSD looks ready to reverse, the USDJPY looks likely to continue a little lower, and CL is running into overhead channel resistance, it’s tough to see what the impetus might be for further downside.

But, tomorrow’s a big economic news day.  So, anything is possible.

DX looks just about spent — unless there’s a true breakdown in its future.  Our 95.67 target is getting awfully close.

So, the logical scenario at this point has to be an overnight reset for EURUSD followed by a data-driven dump in DX that leaves JPY largely unaffected (it’s happy treading water for now.)  The bounce off 95.67 could ding the euro and CL, producing a modest decline to our downside targets.

Of course, the Fed could also ignore all that and just pound the crap out of VIX tomorrow in order to advance the propaganda that all is well in the Eccles Building.  After today’s drop kick at the top of the falling gray “channel” it wouldn’t surprise me.  We still haven’t reached the red channel bottom at 11.73ish.It’s been a while since we had a good-old-fashioned post-FOMC algo-fest meltup.  Yee-haw.

 

 

 

 

 

 

It was a strange economic news cycle over the weekend.  The highlights:

• The Boston Fed suggests that QE become a permanent fixture in the central planning toolkit.
• China is openly discussing jumping on board the QE bandwagon with direct purchases of local bonds and adding “unconventional policies.”
• Japanese businesses increase the volume of their opposition to QE expansion and further yen depreciation.
• Japan is downgraded by Fitch from A+ to A.

It’s this last item that, in addition to being chuckle-worthy, has sent the yen tumbling this morning — just enough to spike USDJPY past the SMA100 for yet another test of the rising white channel bottom.

Not to be left out of the party, CL has jumped by nearly 1% in early morning trading.

The futures are naturally higher, currently indicating +7 in pre-market trading.

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USDJPY continues to back off from its latest trip to the .618 Fib…

…while CL provides the cover. As of this morning, however, the cover is flagging.

Yesterday’s spike to new highs seemed to us overdone and premature.  So, we recommended trying a short position on as a short term trade:

We’d be shorting here at 2118.85, with a target at 2090 and stops at 2125 or so.

We still expect the short to play out, but would keep an eye on CL and USDJPY for any signs of a course correction.

On a related note, EURUSD is getting dangerously close to the red channel top.  It now has a decision to make between resuming its decline or breaking out.

The inflection point is quite telling.

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Will the 7th time be a charm?  The sideways channel guiding SPX nowhere since Feb 25 has successfully repelled six attempts at new highs. While the successive highs have been lower, the lows have been higher.  In other words, SPX is constructing a triangle that is entirely in keeping with our current analog.  If the trend continues, the SMA50/20 (2083-2087) should soon be tested.  But, might TPTB have something else in mind besides killing time (and traders)?

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The large purple Fib grid from mid-Oct never retraced to the .618, or even the .500.  The pale blue one from early Feb likewise came up short.  Could it be that the market movers are simply trying to establish the bona fides of the purple midline?

It’s too late to reach the purple .618 to flesh out the bottom of the purple channel.  That ship sailed on Apr 14 (day 245 of our analog.)

The next channel lines that align with interesting Fib levels are the red target (purple channel bottom and purple .500 Fib), the yellow target (.236 purple channel and .618 light blue Fib) and the purple target (purple channel bottom, white 1.272 and SMA200.)

USDJPY has nearly reached the 120.11 level again (at 120.085, close enough to be considered a backtest.) And, CL has an open (trap)door to 54.22, should it decide to avail itself……though the daily chart suggests the white .618 at 64.38 – a natural retreat after tagging the white .886.

UPDATE:  1:15 PM

Though USDJPY has backed off nicely, CL is going nuts today — up nearly 4%.  It’s offsetting the USDJPY drag, and then some. DX is sliding rapidly, but might have found TL support here at 97.34.  If not, the red target at 96.7ish looks good to me.

VIX is closing in on our target of the red channel bottom, but it looks premature.

SPX is testing the all-time high of 2119.59, and will likely slightly exceed it before falling off (probably on Monday.)

Though the 1.618 is only 18 points away at 2138, I don’t think SPX is ready to take a run at it yet — not without the support of USDJPY’s SMA200.  I’d be shorting here at 2118.85, with a target at 2090 and stops at 2125 or so.

 

 

 

 

CL closed yesterday atop the purple midline for support, then slipped down overnight to tag the .786 Fib and is backtesting the midline as resistance this morning.This would be a good opportunity for CL to flesh out the rising purple channel with a dip to the .618, but that would likely put a ding in the “every day is better than the last” meme of this “market.”

USDJPY is masking CL’s weakness in order to maintain green shoots in the futures overnight.  As expected, it didn’t make it through the SMA50 yeaterday.  But, it remains inside the rising white channel and within striking distance of 120.11 — which is enough.

Perhaps the most telling chart of the whole farce is VIX.  Channel tops and bottoms are made for bouncing.  Yet, VIX has been clinging to the bottom of the rising purple channel for a full two weeks.

In an unrigged market, one might say it represented “coiling” — gathering momentum for a strong surge higher.  In this “market” it represents keeping the index at a level from which it can easily be monkey-hammered lower in order to prop up stock prices.

And, it is on this note that I must diverge.  No doubt many have seen the news regarding one Navinder Sarao, alleged flash-crasher extraordinaire.  Zerohedge has done a good job summarizing the ins and outs of his arrest in Britain and the ongoing US extradition effort.

In short, Sarao is being charged with masterminding the May 2010 flash crash via spoofing, a means of manipulating securities prices by submitting hundreds or even thousands of market-moving orders and quickly (within nanoseconds) withdrawing them before there is a chance of them being executed.

Spoofing has been practiced by countless high frequency trading firms within and outside of the US for years. It is the scourge of the industry, and it is easy to see it in action on practically any given trading day.  Furthermore, it is practiced by major central banks themselves both directly and via their proxies — but, always in an effort to increase stock prices.

Now, Sarao might indeed be guilty as sin of contributing to the flash crash.  But, he most certainly was not the only player.  Nor, was he likely the largest.  FINRA and the CME could very easily put a stop to spoofing any time they like. But it’s one of the primary tools for keeping stock prices rising, and it generates enormous trading revenues for CME.

So, don’t look for any meaningful changes as a result of Sarao’s arrest.  He is a scapegoat who will likely divert attention from the very real and very dangerous practices at work in the “markets” every day — practices that will inevitably lead to more flash crashes down the line.

Coming up, a look at SPX and the progress of our analog.

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USDJPY provided a second ramp job in a row last night, shooting up past the SMA100 and testing the SMA50 — only .32 below the .618 at 120.11.  Note that last night’s move also reenters the broken white channel dating back to December 2014.

The futures like what they see, spiking another 12 points to test the all-time highs.  But, until the red, dashed trend line from October is broken as it was earlier in the month, ES is still in backtest mode. And, according to our analog, it’s premature.  In other words, I wouldn’t chase this move.

The Fed has gone to great lengths to reassure “markets” that interest rates won’t be increasing very much very soon.  From Bloomberg:

Policy makers have ruled out an increase at the next meeting of the Federal Open Market Committee, April 28-29. New York Fed President William C. Dudley stressed on Monday that once they start to lift rates above zero, “we will simply be moving from an extremely accommodative monetary policy to one that is only slightly less so.”

Our view continues to be that there will be no interest rate increase in 2015, in September or otherwise.

Note the 10-yr note yield action over the past month.  The ECB has created conditions where some homeowners with adjustable, LIBOR-based mortgages are being paid by banks to borrow.

Earlier today, the euro interbank offered rate – Euribor – dropped below 0% for the first time, meaning banks are now being paid to borrow.

Does no one remember the trouble that developed about 7 years ago when money got a little too easy and banks started doing some pretty ridiculous things with it?

Meanwhile, the US 10-yr rates are being propped up at 1.85% to give — just like talk of higher rates — the appearance that the US markets are healthy.

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Getting a bit of an early start this morning due to traveling…

Friday saw the repercussions of USDJPY continuing to operate below the SMA100 as our analog predicted.  USDJPY itself hasn’t fully given in to the downside.  The .618 at 118.02 remains the most obvious target.  It’s not much of a drop, but the potential implications for the yen carry trade are huge.

Unfortunately for bears, CL continues to take up the slack — propping up stocks with no difficulty.

Friday saw a decline below the 1.272 at 57.43, but the ramp job in the past 24 hours, as usual, has driven futures higher.  The 60 min chart:

VIX and TNX continue to play footsie with bearish chart patterns — hinting but not committing.  TNX can’t seem to get below 1.85ish…

…and, while VIX popped higher on Friday, it hasn’t even broken out of the falling gray channel.

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It’s now been three days since USDJPY closed above its 100-day moving average, and the strain is starting to show.

The S&P 500 futures were off 20 points overnight, which was finally enough to send USDJPY scurrying higher in plunge protection mode.

CL gapped higher, of course (now 37% off the Mar lows) but it hasn’t been enough to stem the overnight losses.

SPX’s first test will be the TL from December.  If that doesn’t hold, things could get pretty interesting.

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