In our last update [see: June 28 Update on Currencies] we noted that EURUSD had broken out and was headed for a backtest of the neckline of a Head & Shoulders Pattern.  The breakout seemed significant, as the pair had not only popped out of a channel dating back to Jan 2018 but had spiked above its 200-DMA too — the first time since May 1, 2018.

I anticipate DXY finding support at 95.469, EURUSD finding resistance at 1.1447, and USDJPY testing 105.48.

EURUSD never quite made it to 1.1447; the breakout was a headfake. The pair reversed at 1.1413 and dropped 4% to tag our 1.0988 target earlier today.

For its part, USDJPY easily dropped to 105.48 and reached the next downside target at 104.74 on Monday, a drop of 3.7% from its Jun 28 highs.And, DXY bounced at 95.843 and has since rallied 3.7% as of today.These are all fairly sizeable moves for currencies in two months’ time.  Needless to say, the political turn of events in the UK has played an important role in the acceleration of EURUSD’s drop.  But, it’s safe to say that interest rates and equity volatility have also contributed.

As our analog unfolds, we should see more volatility — an expensive pain in the neck for hedgers but an excellent environment for traders.

continued for members... (more…)

With a positive August within its grasp, ES is bumping up against its SMA50 again. Only this time, it has DJIA’s completed IH&S and VIX’s breakdown on its side.

Our analog remains on track, with another potential turning point today its next test. Bottom line, don’t go into the holiday weekend without protection.

continued for members… (more…)

And, of course, the algos are eating it up.  VIX finally dropped below its SMA10… …and, ES finally pushed above its.The biggest story from a charting standpoint, however, is the Dow.  As we discussed on Tuesday, it has the opportunity to complete an Inverted Head & Shoulders pattern at 26,360 this morning.  Given where the futures are, keep an eye on this important test.

continued for members… (more…)

It’s only been three weeks since our last update on Gold, but I’m getting so many questions about it that it seemed like a good time to opine.

In our last update [see: Aug 8 Update on Gold] I noted that it had reached our 1484.60 target and wouldn’t face overhead resistance until 1560 — which it tagged on Monday, right on schedule.

This is also the top of the rising white channel as it is currently drawn.  Does it still have legs?continued for members… (more…)

“There’s a world of difference between truth and facts.  Facts can obscure the truth.”
— Maya Angelou

For over a year, now, the market’s rallies have been motivated by periodic announcements that the China trade dispute/war was resolved.  When that particular narrative faltered, there was often a dovish FOMC-related news blurb of some sort.

At this juncture, neither appears likely to come to the rescue of an ailing market.  Through a series of tactical errors, Trump has squandered any advantage he might have enjoyed in negotiations with China. And, investors loudly called BS on the latest report of a “very positive phone call.”  Two of them, actually.  Yeah, that’s the ticket.

Then, just yesterday, ex-Fed President of NY Bill Dudley suggested that the FOMC should avoid any rate cuts that might “bail out an administration that keeps making bad choices on trade policy.” I was astonished — not that Dudley felt this way, but to see it in print.

As long-time readers know, I have expected for quite some time that the global financial establishment, concerned about the uncertainty that four more years of a Trump administration would entail, would temper or even withdraw its “support” from the market since a correction back to November 2016 levels would neutralize some very important bragging rights.

Whether or not you support Trump or believe he’s on the right path with China, the truth is that a great deal of uncertainty has been injected into the market.  Markets dislike uncertainty, as do business owners and managers who have to make decisions which could prove disastrous depending on what the next tweet says. All the “adjusted” earnings reports, massaged economic data and other convenient “facts” can’t change that simple truth.

Trump has a difficult choice to make: go to the Chinese, hat in hand, and beg for a deal that will allow him to announce a victory and save face with his base — many of whom have suffered enormously throughout the trade war — or, be prepared for another 14 months of economic water torture.

 *  *  *

Our analog has been eerily accurate over the past month.  When it wasn’t, it was because stocks fell short of upside targets and declined more sharply than expected.  We should be in the midst of a multi-day bounce after bottoming where expected on Friday.  But, yesterday was a struggle.  Can the algos produce higher highs?

continued for members… (more…)

As our analog suggested, the bounce continues as expected despite a spate of mixed signals and general bad vibes from the politicians and persistently inverted yield curve.

continued for members… (more…)

Lots to cover this morning, as SPX slightly overshot our latest downside target on Friday.  Recall that we added the 2838 target on Aug 19 [see: Fine Tuning our Analog] when it became apparent that SPX’s downturn would be delayed.As it turned out, 2838 was a better downside target than the 2857 target originally forecast by the analog.

Thanks to a timely bounce by USDJPY at our 104.74 target last night [see: Update on USDJPY]… …and Trump’s predictable make-it-up-as-we-go trade announcement this morning, SPX will open about 20 points to the good this morning — still on track with our analog which has been roughly 98% accurate since inception.

continued for members… (more…)

As we await Jay Powell’s comments at Jackson Hole, the futures are slightly positive – backing off slightly from the 34-pt V-shaped recovery after yesterday’s run-in with hawkish Fed presidents and another brief 2s10s inversion.This morning, we’ll hear from Jim Bullard (a perennial dove) and Jay Powell himself. So, we should expect another very volatile day.

continued for members… (more…)