Fireman Trump has snuffed out the flames that pyromaniac Trump set last week. The futures are melting up in appreciation — and, because nearly every one of our factors is supporting them this morning.

Perhaps the two biggest moves in the after-hours: AAPL has pushed through its SMA200……and, BA is waking up to the specter of a potential death cross. continued for members… (more…)

It’s been a while since we dedicated a post to all the currencies we follow.  Since USDJPY, EURUSD and DXY are closing in on our targets, it seems like a good time to remedy that situation.

Lately, the driver has been interest rates or, more specifically, interest rate expectations.  Note that TNX finally officially tagged our 20.34 target.But, there are other factors at work.  Just yesterday, JPM opined that the BoJ will likely drop short-term interest rates from -0.1% to -0.3% and the 10Y to -0.2%  Why?  They want to stay well ahead of the US in debasing their currency.

Another story which caught my eye was this one about a Danish bank offering negative interest rates on mortgages.  Imagine taking out a mortgage and having the bank pay you interest.

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The best part of being a chartist is discovering a pattern that promises a big move and then seeing that move play out.  The worst part of being a chartist is waiting for the move to play out.  These days, those waits can last forever.  But, they’re worth it.

A case in point is the 10Y, which came within 3bps of our next downside target earlier this week……or the e-minis — which nailed our interim downside target on May 31.  Since then, we’ve been waiting for the next shoe to drop.  The sharp bounce in equities over the past two days has tested the patience of those of us looking for much more downside.

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If the past couple of days seem somewhat familiar, it’s because we saw a similar pattern in March.  After backtesting the 2.24 Fib extension (2728.79) on March 8, ES rebounded sharply — closing barely in the red for the day and roaring 50 points higher the following day.  It didn’t stop until it had piled on 233 points — about 8.5%.Repeated bounces off a horizontal line of support can be great for stocks – indicating that it’s safe to buy. The only hitch is if the third bounce only extends as far as the initial one. In such a case, we have the potential for a Head & Shoulders Pattern — which is quite bearish.

We’ve seen it happen twice already: the neckline between Apr 3 and May 8 which targeted 2806 (ES reached 2799) and on a larger scale between Mar 12 and May 28 which targets 2638 (a 10.9% from the April highs.)

This one is a little suspect, however, as ES bounced back above the neckline (for now) at 2806. In so doing, it also broke out of the falling purple channel,

The bulls have the reins as long as they can keep ES above 2806 — broken above the neckline and broken out of the falling purple channel.  But, if it should fall back below 2806, then the H&S targeting 2638 will be back in business and we’ll set up a much bigger H&S (with the 2.24 Fib as the neckline) targeting 2495.  This would be a 15.7% drop from the all-time highs.

Bottom line — if this break out turns out to be a head fake, watch out below.

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It’s been a great time to be a chartist, lately.  ES reached our 2.24 Fib target yesterday, reaching 2728.75 around noon and bouncing 40+ points to nearly the SMA200.  At the same time, AAPL came within .27 of its next downside target……and TNX came within 0.15 of its next downside target.But, it’s the factors which haven’t reached their targets which suggest there’s more fun ahead for the bears — that the current bounce is probably a nifty bit of misdirection.

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About a month ago SPX/ES pushed to new all-time highs, suggesting stocks were off to the races.  I wasn’t convinced.  From our April 29 post:

A move above the Sep highs is technically bullish. So, trend followers will be compelled to go/stay long with the former highs as their stop.  Personally, I would be extremely cautious in chasing it, keeping an eye out for rejection and shorting it if/when it drops back through 2940.

We labeled the downside targets and waited to see if the rising wedge would break down.  Spoilers…it did.

Now, 7.7% later, we’re presented with a new challenge. ES came within a few points of our 2728 target overnight.  Will it get a bounce here or is it susceptible to additional downside?According to our bond charts, there’s more pain to come.

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For a guy who has so often touted the stock market’s performance as a measure of his own prowess, Trump has been the bears’ best friend lately.  We’re certainly not complaining, as our downside targets are being tagged one after another.

The 10Y has gained a spectacular 7.7% in the nine months since our bottom call last September. Futures are now off about 6.5% since our April 30 top call and are closing in on our next downside target.USDJPY is closing in on our 108.50 target.RBOB is closing in on our 1.76 target.COMP, having already reached our SMA200 target, appears likely to tag our 7391 target. Even AAPL has compliantly continued to sink toward our next lower target.The big win would be VIX…but the other factors have been so effective in driving stocks lower that VIX is still languishing in the teens.  Perhaps not for long…continued for members… (more…)

TNX nailed our 22.94 target last week, completing the move we forecast in December when the red trend line shown below broke down [see: Dec 26 Update on Bonds.]It has taken considerably longer than originally anticipated because the more violent downdrafts in 10Y rates prompted violent equity sell offs.  Some cooling-off periods — long, drawn-out bounces — were necessary.

While the rising purple channel has now been fleshed out, our price charts indicate the move might not be complete — a view shared by our yield curve model.  We’ll take a fresh look at the big picture, and the dramatic move it implies for stocks.

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