It’s a morning chock full of interesting charts — the perfect setup for the day we’ve been looking for a pullback [see: A Nod to Black Monday, It’s Alive, etc.] Of course, SPX has continued to melt up since then, so the original 2536 target is looking pretty far-fetched at this point.
The first interesting chart is the Nikkei, which took a break from its straight-up channel to tumble 935 points.
The culprit, of course is USDJPY. It fell below its SMA10 and SMA20, which was no big deal when it occurred within the rising channel. But, the channel appears to be breaking down, which is quite another kettle of sushi.
Ordinarily, CL and RB would start ramping higher in order to offset the USDJPY drop. But, they’ve all been ramping together, lately. As we discussed yesterday, there are repercussions when this happens.
The price of oil in yen is up 76% since Jan 2016. Heating oil is up 80%. Japan, as broke as they come, is facing a decision: shore up the economy or the stock market.
Speaking of oil, did anyone catch the interesting Financial Times article about the Saudi oil reserves misdirection? It’s behind a paywall, but ZH excerpts it nicely. Orbital Insights is calling BS on the kingdom’s inventory report, suggesting there’s a lot more still in storage than the jawboning Saudis would have us believe.
The next most interesting chart is VIX. Members will recall we placed a rather lofty target on its chart for today.
continued for members…
We don’t get a lot of pushes past the SMA200, but this could be one of them.
As for equities, and our last interesting chart, ES just busted the TL that should have held if damage were to be avoided.
SPX started out with a TL break, and is trading at its lows of the day in the first 30 minutes — not a great sign for bulls.
The dollar failed, again, to hold the rising channel midline.
This gives GC another boost in its quest to reach 1300, with 1333 and 1380 waiting beyond.
UPDATE: 2:36 PM
Interesting possibility…
UPDATE: EOD
And, that’s exactly where ES landed…
The 1.618 extension of the first wave down is 2533.44.
The 1.618 extension of the drop from 2488 to 2415.75 is 2533.46. The red channel midline is right there. The white channel midline is right there. The SMA50 is right there.
Could ES really plunge 50 points tomorrow? The last time that happened was the night Trump was elected. It would be somewhat poetic, coming almost on the anniversary of his election.
BTW, if it does happen and if 2533 holds, all is well in the neighborhood. 2600, here we come. If 2533 didn’t hold, there are all sorts of juicy targets below it, with my favorites being 2488 and my second favorite being the end of the month around 2435.
But, again, for that to happen I feel we’d have to get a collapse in oil prices and a collapse in USDJPY. They’re both overdue. But, we’re also only 7 weeks away from year-end. So, who knows if TPTB would permit it.
I meant to mention earlier, but I have two meetings out of the office tomorrow. The first is at 9:30 and the second is around 3pm. I’ll be able to post before the open and again in the middle of the day — but, that’s it.
GLTA.