pebblewriter

All Clear or Dead Cat Bounce?

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One of the biggest challenges in charting the day after a big plunge is whether the subsequent rebound is the start of a new trend or a relief rally before the real ugliness sets in.  With the futures currently up around 20 points, our decision to go long at 1904.11 yesterday afternoon looks like the right one.

For all you daredevils out there, here’s your opening!  Long at 1904.11.  And, if you do, good luck sleeping tonight!

Will we still feel the same after today’s action?

continued for members…

Look for SPX to test the rising purple channel around 1933ish.  If it can get past that, the next target is 1957. I have two rising channels because the purple one was looking great until yesterday’s decline bit it in the ass.  It’s possible that the white one will be more correct…we’ll wait and see.2015-09-02 SPX 60 0600The problem with higher is, of course, USDJPY.  It has bounced back above 120.11, but has retreated back to it for a backtest.  Assuming the backtest holds, all is well.  If not, well, remember yesterday?2015-09-01 USDJPY 60 1800Here’s today’s daily picture:2015-09-02 USDJPY daily 0620ES is showing a nice little IH&S if it can clear 1938.50 or so.  In general, its charts are a little clearer — showing the overhead resistance at the falling white channel midline.

2015-09-02 ES 60 0600 2015-09-02 ES daily 0600UPDATE:  9:33 AM

That’s more than we hoped for, and ES is already retreating from the IH&S neckline, so we’ll take profits here at 1936.50 and try on a short position until USDJPY backtests.

2015-09-02 SPX 60 0633UPDATE: 9:37 AM

Never mind.  That took all of one minute.  USDJPY is back at 120.11 and appears to be holding the line.  Assuming it bounces, we’ll want to be long again right here at 1936.  At this point, I’d only get interested in shorting if USDJPY dips below that line.

2015-09-02 USDJPY 15 0633And, I’ll only get excited about another leg up if ES can clear its neckline.2015-09-02 ES 5 0641UPDATE:  9:52 AM

USDJPY is playing around with 120.11.  I believe it’s only the algos, trying to dislodge some bulls from their long positions before the next leg up.2015-09-02 SPX 60 0652UPDATE:  10:26 AM

USDJPY continues to vacillate below 120.11, and SPX just broke down from that little triangle it’s been forming.  I’ll bite, and switch to the short side here at 1927.1. Probably just a backtest.

2015-09-02 SPX 05 0726Odds are USDJPY is going to find support at the red TL and we’ll go long again.2015-09-02 USDJPY 05 0731UPDATE:  10:56 AM

I’d feel more sure about it if USDJPY had actually tagged the TL, but it’s taking off towards 120.11 again, and SPX has backtested a falling wedge.  So, I’ll switch back to a long position (though might switch right back after 11:00 for a trip back to 1916.55.)  Upside target is the triangle bottom at 1930ish.

2015-09-02 SPX 1 0756UPDATE:  11:02 AM

Quick peek at USDJPY.   Not crazy about the red TL overhead with a long position, might be reversing here.

2015-09-02 USDJPY 5 0756SPX seems content to go higher, but is definitely eyeing USDJPY and its sudden halt…  I’ll go short again if it breaks trend, dipping below 1925 or so.2015-09-02 SPX 1 0804UPDATE:  11:26 AM

SPX just backtested the triangle and the purple channel line.  I’d take profits here at 1931 and see whether it reverses.  Back to short at 1931.45, with stops at the purple channel line itself.  No signs of a breakout by USDJPY, and the euro close is coming up in a few.

2015-09-02 SPX 1 0826Just a heads up.  I’m going to have to duck out for about an hour around 12:00.  Will update again before I go.

UPDATE:  11:56 AM

USDJPY just tagged the TL, so I’ll close the SPX short here and go run that errand now.  I’d be long, with tight stops going forward and quick to sell if USDJPY suffers a sustained push below the trend line.  Still like the idea of SPX 1916.55, but can’t see it happening unless USDJPY breaks down below this low.

2015-09-02 SPX 5 08562015-09-02 USDJPY 5 0855 UPDATE:  1:11 PM

Looks like a nice bounce, but SPX running into trouble again at the purple channel line.  Will go back to short here if it can’t punch through…2015-09-02 SPX 5 1011USDJPY not helping much by clinging to 120.11.  Will have to choose between breaking out or breaking down in the next two hours. And, it’s sure acting reluctant to break out.

As we’ve discussed, this is not the position BoJ wants to be in — forced into propping up every little decline.  Yet, they put themselves here. 2015-09-02 USDJPY 5 1011UPDATE:  1:22 PM

Don’t like the way this smells.  I’m going to cash here at 1936.48 and will stay there until USDJPY makes a move one way or the other.

Note that SPX has now formed the basis for an IH&S, but is reluctant to complete it.  I’m going to work on some other things, but would be long with trailing stops on any rally past the neckline at 1939ish.

2015-09-02 SPX 5 1022USDJPY back below 120.11.2015-09-02 USDJPY 5 1022I expect it to break out, but seeing is believing.

Bonus chart: VIX trying to decide, too.2015-09-02 VIX 60 1022UPDATE:  2:07 PM

USDJPY threatening on the upside, will take a stab at a long here if SPX breaks out, too; back to cash if USDJPY or SPX can’t follow through.

2015-09-02 USDJPY 5 1106 2015-09-02 SPX 5 1106UPDATE:  2:12 PM

New high for SPX, but USDJPY instantly retreated.  Holding off for now…

UPDATE:  2:18 PM

Think it might be a trap, but I’ll play along just in case it’s not. Long at 1938.92, w/ tight stops, of course.  And exercise caution if/when USDJPY reaches the dashed white midline currently around 120.3.

2015-09-02 USDJPY 1117 2015-09-02 SPX 1117It’d also be worth keeping an eye on ES and its 1938 neckline.

UPDATE:  2:40 PM

USDJPY balking, CL sagging, and SPX just broke the fan line.  I’m closing the long position for a slight loss at 1934.08 and going to cash.  It’s been a long day, and I don’t trust this sucker right now.

2015-09-02 SPX 5 1139Might give it another shot if USDJPY backtests 120.11 and the white channel line.

UPDATE:  3:25 PM

SPX has backtested the channel line again, and USDJPY backtested the white channel line and almost 120.11.  I’ll try another long position here at 1930.91 and see if we get a bounce into the close.  Stops at 1930 would make sense.

2015-09-02 USDJPY 5 1224 2015-09-02 SPX 5 1224As we discussed before, keep an eye on USDJPY if/when it approaches that channel midline up at 120.3.

UPDATE:

SPX just reached the purple channel bottom again.  I’ll go ahead and take profits on our long SPX here at 1939.40 and call it a day.  Might consider going long again if USDJPY can top the channel midline or VIX starts breaking down.

2015-09-02 SPX 5 12392015-09-02 USDJPY 5 1239I’d consider staying long if you can hedge or keep an eye on it overnight.  I have this weird feeling — nothing more — that tomorrow could be a big day.  Hard to justify after a day like today, when SPX made a nice move but couldn’t get any help.  It definitely feels more like an interim top, but kind of in an obvious way.  Maybe yet another head fake…

Have a good evening, everyone.

 

 

 

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