USDJPY is nearing our downside target of 120.11 — first charted back on early June [see: Sell in May, Go Away.]Recall that this is a critical Fib level — the 61.8% retracement of the drop from 147.65 to 75.56 that began in August 1998.  As we’ve detailed countless times, the yen’s demise has been almost solely responsible for stocks’ rally since 2011.

The effects of the yen carry trade [EXPLAINED HERE] have been especially easy to see since this past December, when USDJPY first reached 120.11.

SPX (thin purple line) went into a holding pattern until mid-May, when USDJPY finally shot above 120.11 in a meaningful way.  Since completing a Crab Pattern at 125.76, it’s been all downhill ever since.While USDJPY’s volatility has surprised some, it fits perfectly with the analog [WHAT’S THIS?] we first proposed in late March [see: A New Analog] and refined along the way.  The post focused heavily on USDJPY’s SMA200:

…[the] tag back then …would equate to July 29, 2015.  According to my calculations, USDJPY’s SMA200 — which is currently at 111.91 — should arrive in the vicinity of the critical yellow .618 at 120.11 around the end of July.

This analog has been extremely helpful in keeping our results above average in June [see: June Results] and over 5% thus far in July.

It’s pretty clear now that the SMA200 will arrive at 120.11 around that time.  And, it’s pretty clear that Japan Inc. is taking it on the chin as USDJPY dips to meet it.  This is all by design.

Our central thesis has been that the carry trade would ultimately be strengthened by an expansion of QQE, but that said expansion would only take place when the BOJ was sufficiently panicked by a market sell off.

The Nikkei 225 futures are off over 5% today, and down 7.5% since the Jun 24 highs.  I’d say we’re pretty close to panic time.

SPX tagged our downside target yesterday, reaching 2044.02 vs our initial 2050 (adjusted to 2046.17.) From One Step Backward:

Still dropping, but just tagged the bottom of the red channel at 2046.17.  CL just tagged the white .786 as well, so this is likely nearing the end.  I’d take another stab at a long position here.

It proved to be a profitable bottom call, as the 39-point bounce picked up steam along the way, turning into an algo-driven breakout from the falling white channel.

Today’s “market” is shaping up as a battle between the contagion that is China versus the Greece is Fixed (again!) news out of Brussels.

Look for SPX to backtest the broken falling white channel at 2068ish and try to catch a lift from USDJPY, which is about to tag its SMA100.

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When we last looked at the big picture in EURUSD in March, it appeared the pair was about to backtest the broken .618 Fib level at 1.1210.  It got there, but a couple weeks later than expected due to a deep retracement of the March lows in April.Instead of respecting the Fib and then reversing, it managed to inch higher over the subsequent month to complete a Bat Pattern (part of the apparatus that levered stocks higher. )

It has appeared to me over the past several months that EURUSD is tracing out a Flag Pattern that would tag either (or both) the upper bound at 1.1810 (the pale blue .382) or 1.0722 (the white .786 and purple .236.)

Given the turmoil in the eurozone at present, it would seem the lower target is much more likely.  Besides fitting two Fib Patterns and the Flag Pattern, it fits with the notion that the ECB will likely expand QE due to the Greek situation.

Stay tuned.

When broad indices such as the S&P 500 can be easily managed via HFT, currency manipulation, etc., capitulation is practically unheard of.  The most we can hope for is to recognize that a planned move is about to get underway.

Yesterday, our targets worked out beautifully.  Things never got out of control — thanks in large part to the carefully controlled rebound in USDJPY.   Note, however, that the well-defined rising purple channel broke down this morning…  … which means that the 15-pt ramp job in ES came undone in the last six hours.There are two reasons this was permitted.  One: in order to relieve the pent-up selling pressure on the euro.  Note that it is closing in on our target from two weeks ago, albeit a few days late.  In our last update on the euro [see: Staying Alive] we noted:

Yesterday’s dip below the purple channel midline and today’s backtest suggest further downside.  I like the idea of it, but the timing suggests a 4th of July low.

The other reason is that once in a while you have to take a step backwards in order to facilitate the next two steps forward.

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With the Greek vote coming back a resounding “no,” the burden is on The Powers That Be to prove to the rest of the financial world that a Grexit is a non-event.  And, that’s exactly the way the “markets” are shaking out thus far.

Thursday, SPX reached our bounce target from last Monday [see: All That Matters]…

…the charts suggest that the bounce could easily reach 2072 (the red channel midline) or, with a little more effort, 2081 (a backtest of the broken purple channel bottom.)

…and, even managed to close below Thursday’s short call [see: Greece Fixed Yet Again] at 2081.51.

SPX just tagged the purple target, backtesting the purple channel at 2081.51. I’d look to be short here with reasonably tight stops to protect against headline risk from “you know who.”

The S&P futures were permitted to drop to the SMA200 in the opening minutes of Sunday’s trading — nailing our downside target from last week. Note the gap has almost been closed already.
Likewise, the currency pairs all dropped to a fairly sturdy support point and promptly rebounded.

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I’ve toyed around for the past few months with the idea of tracking the effectiveness of our forecasts.  Since we started offering memberships again this week [AVAILABLE HERE*], it seems the logical thing to do.  Folks want to know what they’re buying.

For those who don’t know, I stopped offering memberships in 2013 when I took time off to start and manage a hedge fund.  It didn’t work out as well as I had hoped.  I’m really, really good at forecasting [see: 2012-2013 Results] — not so much at trading.

For one thing, it had been a while since I had managed a portfolio of other people’s money.  It was harder than I expected, especially since most of my investors were friends and family.  And, though I had some solid service partners, I was routinely working 70-80 hour weeks trying to keep up with the paperwork.

There were other issues, too, such as the “markets” evolving from occasionally to constantly manipulated — by everyone from central banks and their proxies to predatory high-frequency traders.  It has taken a while to learn how to anticipate their actions.  But, the past six months have proven to me that it can be done.

The bottom line is I enjoy analysis more than I enjoy trading. Puzzling things out, finding patterns, discerning the hidden mechanisms at work — these things are a lot of fun for me.

When I stopped taking on memberships, the site was attracting about 2,000 investors daily. Members were paying up to $1,800 annually.  My hope is that enough former members — as well as some new ones — will return to the fold that I can make the site the entire focus of my professional life.

While I’ll no doubt take on a few institutional clients, I’m not keen on going back to work for one of those Wall Street firms that has, in my opinion, so badly screwed up the financial markets.

To active investors: in the spirit of making calls more obvious and easily verifiable, I’ll resume using the blue boxes to highlight future forecasts. For newcomers, they look like the one below (from one of our better shorts on September 14, 2012):

I will tweet a notice of each position change (not the actual forecast, but a notice to check the site.) So, if you haven’t signed up to follow @pebblewriter yet, it would be a good idea to do so.  It will give active traders a chance to get the information fairly quickly.  I’ll also look into a texting service for those who are interested.

For buy and hold types, I’ll use the Current Forecast page [CLICK HERE] to keep you up to speed on larger, longer-term trends.  I’ll also tweet and email notices when things change.

A few technical notes about how results are calculated…

1. These are theoretical, not actual, trading results that assume the S&P 500 index (SPX) is bought or shorted based on signals generated by my research.
2. This data includes the price at which I made the initial call, the forecast price(s) and the results.  Prices are believed, but not guaranteed, to be accurate.
3. Assumes no leverage (100% long, 100% short or 100% cash) and no dividends.
4. Any gain/loss is limited to no more than the forecast price; e.g., if I forecast a rally from 2050 to 2060, but it runs up to 2065, I’ll only take credit for the 10 points up to 2060.  The only exception is when I post an amendment to the original forecast.
5. I recommend using reasonable stops and being very cautious about open positions overnight or over weekends.  What’s a reasonable stop for one investor might not be reasonable for another.  But, we’ll assume a 1% stop loss from “trade” inception.
6. Past results are not necessarily indicative of future results.  See Disclosures and Use Agreement for important information.

It’ll take a while to go back and identify each long/short call and tally the results. I’ll work backwards until all six months of 2015 are posted.  With that out of the way, here are the June 2015 results:

* We’ve had so many requests for this data since announcing the availability of memberships that we’re extending the discounted pricing through Saturday, July 4.  For more info, CLICK HERE.

For the first time since 2013, pebblewriter.com is once again offering memberships.  To kick things off properly, we’re discounting quarterly, semi-annual and annual subscriptions (up to 33% off) through the end of today.  Details are available HERE.

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Congratulations to the 223,000 bartenders, waiters and retail clerks who found employment in June.  To the 640,000 Americans who gave up looking for work or whose unemployment benefits just ran out — no doubt you’re heading out to celebrate how your demise helped lower the official unemployment rate to 5.3%.

You’re part of an elite club — only 93.6 million of you — whose patriotic sacrifice will be duly noted by the Fed the next time they decline to raise interest rates in an effort to keep the “market” on the rise for more fortunate Americans.  Happy 4th of July, indeed.   From Zerohedge:

On to that “market.”  Yesterday, SPX nailed our bounce target offered on Monday, topping out at 2082.78.  From Monday’s post All That Matters:

…the charts suggest that the bounce could easily reach 2072 (the red channel midline) or, with a little more effort, 2081 (a backtest of the broken purple channel bottom.)

The futures are showing small gains this morning.  But USDJPY reversed as we expected yesterday.  It’ll be an uphill climb unless USDJPY breaks out.  And, our thesis remains that such a breakout is unlikely just yet.

The global financial markets feed on the yen carry trade.  And, the BOJ — under pressure like all central banks for the unacknowledged inflation they’re generating — won’t further devalue the yen until they’re in panic mode.  I doubt if last week’s 4% blip in the Nikkei 225 was enough to panic them.

Yesterday’s targets remain in place.

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For the first time since 2013, pebblewriter.com is again offering longer-term memberships.  Just to kick things off, we’ve discounted the rates for the next 24 hours or the first 25 members, whichever comes first.  Details available HERE.

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If you’re feeling a bit of whiplash, it might be because this is the eleventy-billionth time the Greek crisis has been deemed fixed.  The second of Monday’s targets looks likely to be achieved on the opening this morning.

From the members section in Monday’s post [see:  All That Matters]:

…the charts suggest that the bounce could easily reach 2072 (the red channel midline) or, with a little more effort, 2081 (a backtest of the broken purple channel bottom.)

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Last December we noted that XLF, like many indices, had regained a trend line which it had lost.  It was the third time in a row for the ETF that focuses on banks and insurance companies — which kinda made sense.  As we wrote then:

I suppose it’s to be expected, as no sector has benefited from the Fed’s largesse so greatly as have financials.

It would all be amusing were it not for the fact that XLF just closed below a major TL again.

Will it bounce right back as though nothing happened, or will this plunge leave a mark?

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Only one chart worth showing at this juncture.  The daily chart shows NKD breaking the rising red channel from October 2014 just yesterday.

Recall that was the month when Bullard (on the 15th) and Kuroda (on the 31st) teamed up to push stocks through heavy resistance. In NKD’s case, it was able to slice through the .886 Fib (a completed Bat Pattern) and go on to make new highs.

Could NKD bounce back into the red channel as though nothing ever happened?  Sure.  In a centrally planned “market” anything is possible.  But, today’s backtest of the broken channel bottom should at least give one pause.

GLTA.