There’s one theme that’s characterized this “market” for the past six weeks since Brexit: push a little here, pull a little there — always just enough to keep it on an upward trajectory.

Yesterday, it was a USD breakout [see: Manufacturing a Breakout] that kept prices high enough into the end of the month. Nicely done, Fed jawboners. But, what’s next, now that the dollar is up against strong resistance?

Did it surprise anyone that the Fed jawboner du jour (Evans, non-voter) walked back all that hawkish bravado, promising low rates forever?  Like Fischer yesterday, he made it clear that the only data upon which the Fed is dependent are stock indices.

“If necessary, we could normalize policy much faster than currently envisioned and still keep the pace gradual enough to avoid a disorderly change in financial conditions.”

For those who missed it, Stanley Fischer’s comments on Bloomberg yesterday:

“Well, clearly there are different responses to negative rates.  If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices.  But, we consider all that and we have to make trade-offs in economics all the time and the idea is the lower the interest rate, the better it is for investors.”

There you have it savers, insurance companies, pension plans, banks, and pensioners.  Sorry you can’t earn anything on bonds — the bedrock of your portfolio. At least you’re not paying interest like Japanese and European investors — not yet, anyway.  Take comfort in the fact that stock investors are reaping the rewards of your sacrifice — a fair trade-off, no?

Note to our new members…remember to follow @pebbletrades for notices of intraday position updates.  It’s a private Twitter feed for members only, so you’ll need to be approved.  If your Twitter handle is wildly different from the name under which you subscribed to pebblewriter.com, message me so I can put the two together.

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Last week [see: Oil Takes a Breather] we identified key support for CL at 45.34.  At the time, that represented a nifty intersection of the SMA100 and the top of the broken white falling channel. 

It looked likely to happen within a few days.  And, CL was kind enough to trace out a well-formed falling channel pointed right at it (seen below in red.)

The following day, however, someone pulled the plug on the falling channel.  CL spiked out of the channel (on reports of much higher inventories, at that!) then spent the next five sessions going sideways.

Until today.  Moments ago, API reported a smaller than expected inventory build (which should have sent prices higher.)  CL, which spent all day going nowhere, suddenly spiked lower, reaching 45.75 and finally tagging the (now higher) SMA100.

The move wasn’t terribly difficult to see coming, and it provided a nice guide to stock prices.  Again, from Aug 22:

The big question now, is whether it can properly flesh out something resembling a channel, and backtest the large white channel it left behind on the 16th.  If it doesn’t spike higher, SPX should have no trouble reaching 2165 or even 2161.

SPX tagged 2160.39 four days later, the low over the past 3 1/2 weeks — yet again, validating oil’s value as a great tool for influencing stock prices.

My son, a bright and successful financial planner in Austin, asked me today what I thought were the three biggest drivers of global oil prices.  Without hesitation, I answered “BoJ, ECB and FOMC.”

The bigger questions remain: will CL bounce here, and what are the repercussions if it doesn’t?

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Another day, another Fed official jawboning the dollar higher.  Gee, you’d think they’re trying to get it to break out or something…

The US dollar has been heavily manipulated over the past year.  We’ve covered the “why.” As an importing nation, the US needs the things it buys to remain relatively cheap or the “we need higher inflation” meme falls flat on its face.

Without it, there’d be no excuse for the continuation/expansion of easy money policy that’s propping up the “markets.”

As to how…well, when you have unlimited funds at your disposal and can legally play the currency game any time you like, it’s not exactly rocket science.

And, they’ve long since given up on the pretense of an investor-driven market.  You don’t get chart patterns like these — with frequent breakouts from well-established channels — just because.

You get them when investors panic, choking off the prospect of continued new highs, forcing central bankers to do what they do best — propping up prices.

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For now, it appears as though the Fed won the battle without having to fire a single shot.  Expectations of a September hike have doubled, the US dollar has pulled out of its nosedive and futures are back in the green (by 1 point, but green.)

To the casual observer, it would appear that they must have all the right answers.  Of course, the real culprit for all things bright and beautiful is the yen, which was monkey hammered on more Kuroda gobbledygook about massive QQE expansion.

Whether he will or won’t — who knows?  But, the USDJPY spiked higher and NKD is back above the ominous TL below which it broke last week.

This, of course, is even more an illusion than the dollar’s strength, as the buying was done by the BoJ itself — not “market” confidence in the wisdom of its policies — which are piling ruin upon Japan’s already bleak future.

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When we looked at gold last April, we saw upside potential to 1380 [see: Update on GC: Apr 8, 2016.]

If it breaks above 1246, then the purple .618 at 1257 is a gimme.  From there, we have potential resistance at 1270, which is also about where the purple midline currently resides.If it breaks above the purple midline, then 1379-1380 is the next logical target, perhaps in Sep/Oct.

Gold got to 1377.50 last month, and hasn’t been able to push higher since.  Here’s the same chart as last April, with the chart patterns and price action extended to today.

It’s trading right now at 1325, about 4% shy of our target.  Does it still have the potential to move higher, or were July’s highs it?  And, the Federales‘ comments from Jackson Hole — do they give us any clues as to what to expect?

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Will they, or won’t they?  Even under tenacious grilling by the MSM, the Federales haven’t given much guidance as to whether they’ll hold the line in September.  We have our own thoughts on the matter, which informs our analog [see: A New Analog: Aug 3, 2016.]  It’s still (drumroll, please) on track.  But, today marks one of those inflection points that will make it or break it.

SPX came within a few points of our next downside target yesterday, held at bay by USDJPY, which kept threatening to break out beyond this totally meaningless TL — a charting straw man if ever there was one.

And, of course, CL got in on the action — ramping just a little higher every time SPX ticked down a little.  Its former falling red channel is now a distant memory.  And, it’s back to playing cat and mouse with its SMA10.

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We’ve seen a lot of interpretations of the bad news/good news story over the past five years.  We’ve become inured to the idea that bad news is good, because it ensures continued central bank easing — which is supposedly good for the “markets.”

So, with ever louder cries for rate and policy normalization, and all eyes on the Jackson Hole confab, it’s not too surprising that the futures aren’t loving this morning’s strong durable goods beat.  There was a lot under the hood on this report, namely:

• Durable goods new orders +4.4% vs 3.3% exp.
• New orders ex-transportation +1.5 vs 0.5% exp.
• Non-defense cap goods ex-aircraft +1.6% vs 0.3% exp.

While it was a nice month-over-month beat, the year-over-year comparisons were atrocious:

• Durable good orders -6.4% (2nd big annual drop in a row)
• Capex shipments non-def, ex-aircraft -9.5% (unadjusted)

The futures are off across the board, with CL notably well on its way to our downside target and stocks likely to follow.  Our downside targets from last week and our Aug 3 analog remain in place.

Note: This is the last day of our current membership promotion.  $299 gets you three months of full access as well as technical analysis on the security or index of your choice.  This offer is limited to new members and former members whose subscription has lapsed.  For more details and to sign up now, CLICK HERE.

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With oil on track to our downside target, it suddenly shot up 4% from its overnight lows on rumors which were immediately proven false while failing to drop even a little on quite bearish API inventory.  What else is new?

While SPX broke out of the tightest falling channel it had going, it still failed to make new highs.  This says a lot about the kind of “market” we’re in now.

Our analog continued on track, with the biggest current question being where the next rise begins from.

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Last December I slapped a couple of upside targets as well as a downside target on the NYSE index and pretty much forgot about it [see: Update on NYSE Dec 29, 2015.]  I’m not a fan, as it regularly ignores chart and harmonic patterns.

But, at the time, a large H&S Pattern promised significant downside if NYA wasn’t able to break out.

If… it can’t break out of the red channel, then the bottom of the rising white channel could be called upon to support it a third time in only 4 months (about 9940) with the neckline of a huge H&S Pattern (in yellow) waiting below at about 9640.  The H&S targets 7800, but the more likely target is…9040.  It would allow NYA to put in a higher low that’s in line with the falling red channel bottom.

Five sessions later, NYA plunged through the white channel bottom, followed in short succession by the yellow neckline.  By the time the dust had settled, NYA had reached 9040, and even overshot it a bit.  All in all, it was a 21% correction from the May 2015 highs.

What next?

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It was a pretty quiet night, yet the futures still managed to levitate 15 points off their lows for no particular reason.  CL continues its decline, and is about 2/3 of the way to our downside target.  USDJPY, which hugged the underside of a rising TL all day yesterday, broke down overnight.  And, VIX is just a mess.

The problem is the Nikkei, which spiked 130 points last night, only to almost immediately plunge 215 points before returning to its starting point.  Talk about mixed signals…

Note: Our membership special ends this Thursday, Aug 25.  $299 gets you three months of full access (instead of one) as well as charts on the security/index of your choice.  This offer is limited to new members and former members whose subscription has lapsed.  For more details and to sign up now, CLICK HERE.

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