Oil futures are settling this morning — just in time to temper yesterday’s low volume algo-fest. 
DX continues to flesh out a falling wedge that has almost reached the .382 at 92.32.
And, USDJPY has backtested the top of the falling red channel.
Put it all together, and we should see yesterday’s ramp job peter out as discussed yesterday, with targets as discussed in the members’ section.
continued for members… (more…)
The dollar continues to slide…
…largely to the benefit of the euro…
…and, of course, oil futures.
It’s enough to get a good, old-fashioned ramp job going overnight. Yes, again. The futures are up about 13 points, which should be good for reaching yesterday’s highs on SPX — not too surprising given that tomorrow is OPEX and, well, because they can.
continued for members… (more…)
SPX reached our initial downside target yesterday with no difficulty, bouncing to just slightly higher than our upside target. From yesterday’s members’ section:
On an intermediate basis, this morning’s drop to the red .618 (2086.93) is probably as much as the bears can hope for…
It appears that the next leg down will have to wait. Futures were all over the map last night, presently showing a gain of 4 points after ramping as high as 9.50.
CL provided most of the boost, but has now retraced .786 of the recent losses…
…while USDJPY is arguing for a sell-off, particularly if that SMA100 is broken again.
The US dollar is monkey in the middle, with a clear retreat from yesterday’s broken channel backtest to a less-than-clear destination below.
continued for members… (more…)
Note: We’ll continue yesterday’s update to our analog after this morning’s wrap-up below.
* * * * *
The big story chart-wise is the 10-yr — which reached our 23.2 target (23.35 intraday.) As we discussed last week, the normally inverse relationship between TNX and SPX has been magically turned on its head since mid-April. Will it revert as TNX starts dropping off?
The US dollar continues its lackluster backtest of the broken purple channel.
And, CL continues to move sideways, flirting with a breakdown of the rising channel after completing a Crab Pattern last week.
All in all, it wasn’t a productive environment for SPX, which finished the day fleshing out the falling white channel we proposed two weeks ago. Our downside target from last week remains intact.
continued for members… (more…)
Friday we had one of those algo-driven ramp jobs that carried over into the cash markets and just wouldn’t quit.
CL reached our immediate downside target and has bounced, though not cleanly.
While, USDJPY continues its sideways action, basically marking time as per our analog.
We’ll review the analog this morning, taking a look at the big picture and likely turning points between now and then. For our new members, it will be helpful to review the analog, its origin and implications, before continuing. The original posts can be found here:
And, for those wondering what the heck an analog is in the first place, check out:
It takes you through a spectacular analog I came across several years ago that accurately predicted the 21.6% July – October 2011 crash to the day and dollar — giving buy and hold types ample opportunity to protect their holdings and aggressive traders an opportunity to make a killing.
continued for members…
(more…)
SPX tagged our second downside target on Wednesday, and promptly reversed to tag our bounce target on Thursday.
This would have been a logical spot to digest some of those gains — maybe a .618 or .786 retracement. But, CL had already reached our downside target the day before.
And, though USDJPY is reversing when we expected it to, it slipped up past 120.11 in the meantime — which was enough in combination with the jobs report and CL to ignite those wonderful momentum algos in ES (currently up 18 points.)
Continued for members… (more…)
SPX reached our second downside target from Apr 30 yesterday [see: While Investors Are Away], tagging the SMA100 on the dot before rebound as expected.
It was aided by USDJPY (which has slightly overshot its own SMA100 before rebounding two sessions in a row, now)…
…and, EURUSD, which shot past the large scale .618 to complete a Crab Pattern overnight at the white 1.618.
Both are slipping this morning, but there’s a third lever that should drive stocks’ next move.
continued for members… (more…)
SPX nailed our initial downside target yesterday (in yellow below) before USDJPY and CL bounced just enough to stave off any further drops. In all, it was a 33-pt reversal that the pundits laid at the feet of the trade deficit report — which certainly got the few remaining fundamental investors off the mark.
The algos and technical types were no doubt unnerved by USDJPY once again giving up the major .618 Fib line at 120.11…
…and the inability of CL to come to the rescue.
As we anticipated, CL is under pressure from a dollar that needs to rebound for technical purposes — despite the fact that it is, itself, under pressure from the fundamentalists who noted its responsibility for the crappy trade numbers.
Overnight, CL ramped substantially (yes, again) which has the eminis up 6.50 just before the opening bell. But, it has also run into important channel and Fib resistance at the 1.272 at 62.12 with an even more important, larger scale .618 Fib just above at 64.38. When CL runs out of steam here, how will this affect equity prices — especially with SPX this close to our 2138 target?
continued for members…
I doubt CL will make it over the hump, so we’ll look for the second leg of yesterday’s SPX decline to play out after this morning’s initial pop.
Recall that yesterday afternoon we were looking for a backtest of the SMA20 — now at 2101ish. But, if CL backs off here as I believe it will, the bounce likely won’t get there.
One wild card is the EURUSD. Like DX, it is outside normal bounds at the moment. It reversed at the white .618 — as we expected. It was a major Fib level. But, now it’s eked up past that previous high in order to permit some dollar weakness that won’t affect USDJPY too much.
I know, it’s very convoluted. But, that’s the way things are working lately. Bottom line, we should see that SMA100 tag (red dot above) before too long.
The fly in the ointment: USDJPY’s SMA100 is at 119.29. A sharp reversal there that allows the dollar to rebound and EURUSD to return to earth could undo — or, at least postpone — SPX’s drop. So, we’ll keep an eye on USDJPY as it approaches…
UPDATE: 2:10 PM
SPX has reached 2073.15 — awfully darn close to the red .618 where it intersects with the purple channel midline. It could inch a little lower — the SMA100 is at 2068.82 — but, I’d be looking for a bounce around here.
One caveat — the SMA100 for ES is down at 2059.75. And, lately, the ES chart features have been scoring just as well, if not better, than SPX. It would translate into 2066ish for SPX.
And, it would be completely typical (these days) to have a close at the low with a big ramp overnight to screw over those who stayed short into the cash close. Note the purple midline in the chart below.
It has provided many bounces thus far — and should be expected to continue to do so (until it doesn’t.) The purple channel is the one that has taken SPX up out of the gray channel dating back to 2009.
It’s worth noting that the SMA200 is currently at 2027 — just a tad below the white .618 at 2036. Looks like they should intersect in the next week or two. So, we’ll put a pin in 2036 as the primary “bullish” target for any sustained move below the SMA100 and purple midline.
And, we’ll keep a close eye on CL, which IMHO is worth shorting, especially with the SMA200 hurtling towards it.
The worst trade deficit miss ever…
…is what you get when you ramp your currency to unrealistic levels — proof, again, that in currency wars not everybody can win. As we detailed last month, the lower yen/higher dollar/lower euro/cheaper oil/stable inflation/stable interest rates/higher stocks scheme will only work so long as the three or four institutional investors that still give a damn about fundamentals don’t panic.
Negative GDP readings have been known to incite a panic. And, the “higher dollar is better” meme will be a tougher sell going forward.
USDJPY is tumbling, of course.
Yet, futures are only off 5 points (after being off 8 pts earlier.) Because, as we’ve noted countless times before, a weakening dollar (kneejerk reaction to the trade deficit report) strengthens CL — which is a key driver in today’s algo-driven “markets.”
The other consideration, of course, is the impact such data might have on Q1 GDP, and the likelihood that a negative print would compel the FOMC to jump in and “save the economy” with QE4.
Since the Fed engineered the dollar ramp — thus exacerbating the trade deficit and GDP weakness — rolling out QE4 would be akin to a rattlesnake administering antivenom.
Keep an eye on USDJPY, which TPTB tried to pitch us as breaking out yesterday. It won’t — at least not for a while. A nice reversal, though, is going to ramp up oil and delay DX’s inevitable rebound. No way this won’t present a headwind for stocks today…
Our analog is intact; our targets are intact. Our “markets” are most definitely not.
continued for members… (more…)
CL is taking a dive this morning…
…as EURUSD continues to back off after reaching our upside target…
…and USDJPY clings to safety of the .618 Fib at 120.11 — providing cover for all manner of “adjustments.”
The eminis are up 5.75 primarily on the yen’s weakness and Friday’s algofest which saw SPX break through overhead trend line resistance and rise above the neckline of the H&S Pattern it completed the day before.
continued for members… (more…)
