To any new members who’ve followed our calls exactly over the past three days, congratulations. If you were trading at least $10,000, you just paid for your annual membership! Haven’t signed up yet? It’s not too late.
There are still a few memberships left at the sale price of $640.42. To sign up now…
A few weeks ago, it seemed that CL’s tag of our 34.17 downside target was imminent. It had recently broken down below the critical channel bottom we charted on Dec 2 [see: CL Tests Support.] So, we posted this chart on December 14 [see: Dec 14 CIW.]
Of course, it was the last two weeks of the year. And, the bullish contingent was working feverishly to get SPX back to even on the year. They failed, of course, but it wasn’t for lack of trying.
Now that we’re into a new year, and the widening gap between the press releases and reality is becoming clearer, guess where CL just tagged?
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It’s an even better tag than it might have been before, only because it nailed the bottom of the falling purple channel.
In an unrigged market, it would suggest a possible bounce to the purple midline and .618 Fib at around 42.78 — a very playable 25% move. But, the noose of USDJPY is still hanging around CL’s neck, and could easily drag it lower.
Quick review for our new members: USDJPY can’t move higher (yen lower) unless TPTB accommodate Japan with lower oil prices to compensate for the hit of higher imports (chiefly oil — which is priced in USD.)
And, if USDJPY doesn’t start moving higher soon, we’re going to see a lot more days like today, with sub-2000 SPX [see: Yen Carry Trade.] Remember what happened the last time USDJPY explored new lows after falling below the critical 120.11 Fib level in August?
The only caveat to that admittedly tin-foil-hat sounding theory is the fact that CL, in itself, has become a pretty effective algo tool. That is, when USDJPY isn’t available for ramping duty, a strong spike in CL almost always works.
Note the effect on ES (the white arrows) whenever CL spikes (yellow arrows.) It hasn’t produced new highs, but it certainly keeps stocks on track.
If the BoJ has given up on trying to drive stocks higher by bashing the yen, then the rest of the world has no incentive to keep the lid on oil prices. Sure, it’ll crush Japan’s finances. But, since when did that outweigh good old fashioned self-interest?
If, on the other hand, the BoJ is merely taking a break from manipulating SPX higher via yen bashing, CL’s next downside target is the Jan 15, 2009 lows (33.20), followed by the white .886 at 31.96 that was almost tagged in 2009 and the co-located 1.618 Fib extensions at 29.61-29.94.
Beyond that, there are plenty of other targets, culminating in the yellow .886 at 26.22. Below that, things could get downright nasty. But, I suspect the go-for-broke-yen-carry-trade-on-the-back-of-cheaper-oil aproach would have normally compliant Japanese citizens rioting in the streets and oil companies rioting in the Congressional office buildings long before.
In a repeat of Monday’s pre-open, just about everything is off this morning. We’ll start with CL, which is testing Dec 14’s lows and nearing our next downside target.
Along with USDJPY, it should allow SPX to reach our next downside target at the open [see: Happy New Year, 9:46 Update.] In short, while it feels like the “market” is out of control, it’s playing out exactly as expected.
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Did you feel it? Something big happened yesterday, and it had nothing to do with China, Saudi Arabia, Iran or Donald Trump. Of course, I’m talking about USDJPY, which closed below the key Fib line at 120.11. 
Is it important? Well, the last time it dipped below this level, stocks were in the midst of a 12.5% plunge.
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December continued the trend of rewarding short-term traders while punishing swing traders and buy-and-hold investors. We finished the month up 19.90%, one of our best months of the year. While, SPX closed with its 6th monthly loss of the year at -1.63%.
I ended November’s monthly review with the warning:
…December will be full of more twists and turns, given the highly-anticipated FOMC rate decision. The ECB and BoJ are also expected to stir things up. I will continue to look for opportunities for larger, longer-term swing trades. But, I suspect scalping will generate better returns with less risk…
Truer words were never written. Of December’s 22 sessions, 15 featured gaps at the open. Thirteen of those 15 were a reversal of the prevailing trend into the previous close. And 17 of the 22 produced daily ranges of 20+ points! It was a nightmare for swing trading, but a dream for day trading.
What’s more, 13 of the 22 sessions criss-crossed the 200-day moving average at some point during the day. If that doesn’t impress you, consider that prior to July 7, 2015, the S&P 500 had only dipped below its SMA200 once since Nov 2012 (the October 2014 lows.)
Perhaps most surprising of all was the way markets reacted to the most consistently bullish driver of this never-ending rally: central bank utterances. The ECB, FOMC and BoJ’s monetary policy pronouncements were each followed by sharp sell-offs (after the requisite post-press conference rally, of course.)
Could it be that the steady drip, drip, drip of Central Bank algo-driven gains are a thing of the past? Based on the past few months, it certainly seems so. Countless high-profile hedge funds have announced their closure in the past month. I suspect at least a few of these funds were leveraged, long-only funds that hedged in name only.
It’s been a fabulous environment for traders — though it has required an enormous amount of work to stay abreast of the daily swings and, more importantly, avoid being clobbered by the frequent, massive head fakes.
If you kept up with every one of the long/short calls over the course of the month, you did better than most. With all that volatility, it wasn’t unusual to finish posting one position change and find that SPX had just reached the next target, necessitating another update. Sometimes this helped members’ performance, as my initial call was premature; but, sometimes it hurt.
As a result, I’m in the process of setting up a private Twitter feed that will get messages out faster for those who actively trade. I’ll post signup instructions once it’s up and running. It won’t be an instantaneous transfer from my brain into your trade platform — but, trust me, that’s a good thing!
In the meantime, we’ll say good-bye to a fabulous 2015. For someone who nailed every single entry and every exit as I posted them, a $10,000 stake would have grown to $64,042.49 (compounded monthly.)
To celebrate, I’m offering Charter Annual Memberships at $640.42. All you monthly, quarterly and semi-annual members who were waiting for the best deal of the year — this is it! I’ll have it posted in the next hour or so. To sign up, CLICK HERE.
Yes, I’m supposed to be off today. But, I couldn’t resist commenting on the bloodbath facing traders as they return from the holidays and pointing out some likely downside targets. While China, Iraq et al are making the headlines this morning, the biggest problem is that USDJPY’s recent slump just became more of a rout.
We noted two weeks ago that the rising white channel broke down — followed in short order by the only TL that might have salvaged trend. Now, its only potential salvation is completion of a Bat Pattern to the .886 at 118.70 that I didn’t expect to occur for another couple of weeks.
While CL is ramping as fast as it can, this is the scenario TPTB have been fearing: no catalyst for the algos.
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Several websites I read yesterday referred to stocks’ last minute decline as a “flash crash.” Nothing could be further from the truth.
First, a flash crash shouldn’t apply to a decline that went exactly where it should have and, in fact, was predicted in advance. From yesterday’s post Still Waiting:
I believe the SMA50 at 2064.65 is the primary target, probably when the 5-min SMA200 crosses it sometime later this morning.
Second, a decline shouldn’t be referred to as a flash crash if it was planned and carefully executed by mechanisms we’ve been watching play out on a regular basis all year long.
USDJPY — which was ramped higher all day long in order to prop up stocks, dropped through support in the final hour. They could easily have waited until after the close to let it settle lower. For whatever reason, they didn’t. So, the decline happened in the closing minutes.
Bottom line, while SPX has failed on several occasions to take advantage of opportunities to break out, it isn’t because it can’t. CL, USDJPY, TNX and EURUSD are still fully capable of forcing stocks higher.
It’s because TPTB have made certain choices that delayed a breakout. The grand plan will be made clear to us muppets when they’re good and ready.
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Name Your Own Price
A reminder…we’re running a special kind of membership special at this time. Contribute to Pass the Word Ministry or any another organization focusing on homelessness and earn a discount of $5 for every $1 you contribute (up to $1,250.)
Just purchase a regular Annual Membership at the regular price and then forward me confirmation of your charitable contribution [pebblescribe at gmail dot com.] In return, I’ll rebate you $5 for every $1 you contribute, up to $1,250.
That’s a $1,750 membership for as little as $500. We’ll even convert it into a Charter Annual Membership and lock in your price for as long as you’re a member.
And, for anyone who contributes $500 or more or who refers a new annual member, I’ll throw in a free hour of one-on-one coaching on technical analysis/charting.
* * * * *
We’re still waiting on CL to break out – or not – of the falling channel it’s been in since early October. As we noted yesterday [see: Drumroll Please]:
Now, for the 4th time in almost 3 months, it is again threatening to break out of the well-formed channel it’s been in ever since. Whether or not it breaks out will tell us a lot about what to expect from the overall markets.
It almost did yesterday. CL popped up above the channel top an hour into the session, then spent most of the afternoon above it before dropping back through right after the cash session closed.
Classic head fake in a broken and heavily manipulated market. What else is new? 
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NYA’s chart looks perfectly normal and perfectly bullish — as long as you don’t look too closely. If you do, you’ll see that the rising red wedge delivered higher, not lower, prices. (It was a good thing, though, as it prevented formation of a very bearish H&S Pattern.)
The rise into May 2015 completed an obvious Inverted Head & Shoulders Pattern that promised much higher prices — but, never played out. Instead, a 15.5% plunge almost killed off the rally from 2009.
Likewise, the breakout we correctly forecast back in October [see: Oct 25 Update on NYSE] failed to hold. What is it with NYSE and bullish patterns, and will the latest breakout last?
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The tops between June and August were nicely aligned (the white TL below.) So, when NYA busted through them in late October, it seemed like the purple channel top would be the next stop. Instead, we got a series of lower highs that forced a redraw of the TL (in red.) 
It’s not the end of the world, but it does make one question what would otherwise appear to be obvious paths forward. I’ve inserted a falling red channel that fits sorta well. If it’s drawn correctly, then NYA should face resistance at about 10,410 — top of the red channel.
After that, resistance appears to be centered around the red .618 at 10588 and .786. at 10881. At that point, NYA would have an opportunity to really break out.
If, on the other hand, 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 the combination of the purple .886, white .786 and white 1.272 at 9040. It would allow NYA to put in a higher low that’s in line with the falling red channel bottom.
The H&S came within a few points of completing on Sep 29. The rise since then was clearly designed to avoid it playing out.
Stay tuned.
XLF followed up a bizarre August with a rather tame September – December. That is to say, prices have moved pretty much as expected. Unfortunately, the chart isn’t very clear about the next steps.
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