Futures are up a few points…
…while, USDJPY is going sideways.
The latest out of Japan is the BOJ deciding to hold easing at current levels (60-70 trillion yen or $590-690 billion.) This surprised many, given that exports have fallen off a cliff on the eve of a 60% consumption tax increase (from 5 to 8% on Apr 1.)
For more on the importance of this development, please see: Sayonara Abenomics.
The eminis are down 4.50, off the lows of late last night after reacting to the sideways channel’s midline.
USDJPY reacted nicely at the .618 on Friday, but bounced back after heavy intervention very early this morning.
USDJPY popped to the .618 with this morning’s jobs report. It also represents the midline of the red subchannel. It appears to me to qualify as a completed corrective wave — though I can’t discount the possibility of the white .786 at 104.43.
The bigger picture still shows the lopsided nature of the yellow channel’s action. The length of the 2nd wave has probably taken the white .618/1.618 combo (86.58) off the table as the worst case scenario for the next leg down. The .500/1.272 combo at 90.50 looks much more likely — with a time frame of mid-late April.
The white .886 at 95.11 would be somewhat more likely — assuming the yellow midline can be broken. The purple .618 at 100.17 still looks like the immediate downside target — probably around Mar 11-13.
The key, IMO, will be the Dow. It popped, along with everything else this morning, but tagged its well-formed channel’s midline and promptly hit the brakes.
We’ll keep an eye on it.
The Nikkei 225 is testing its SMA50.
The USDJPY, which busted out but fell back yesterday, has busted out again — only to run into its own SMA50 at the .500 Fib.
And the fans algos go wild…
UPDATE: 1:55 PM
Bat Pattern completes on DJIA. It makes for a good top, especially in conjunction with SPX at 1.272 for a Butterfly — if there’s such thing as a reversal anymore. The key will be getting back below DJIA 16,300.
The big picture shows that the logical next step would be to retest 14,198 — and, soon. But, logic seems to be in very short supply in this market.
Why the focus on the Dow? Unlike SPX, the long-term chart is pretty straight-forward.
GLTA.
USDJPY got caught up in the low-volume bot action yesterday, but — unlike SPX — is still shy of an .886 retrace of the drop from Feb 21 (102.82) and, of course, still south of the .382 retrace of the Jan 2 highs at 105.43.
SPX is in its own world, closing in on the 1.272 extension of the drop from Jan 15.
While the Dow is still south of its .886…
…as are the transports — despite the obvious IH&S. Confirmation of the non-breakout?
And, the Nikkei continues to falter way down at its .382.
“Just kidding,” says Vlad the Impaler. Apparently, the Russians love their markets too. The eminis have already forgiven and forgotten.
Will the currencies? We’re back to watching 102 on USDJPY.
The bounce at the purple .786 we discussed yesterday is pretty much exactly the same as at the .618. If the falling red channel fails, the intersection of the red TL and white channel top (at the red .618: 102.10ish) looks like the next resistance. 102.20 would be a .618 retrace from the Feb 21 highs.
BOJ’s Kuroda commented on the yen carry trade yesterday in testimony before a parliamentary committee (WSJ article.) The pair has failed to make any progress since the BOJ switched gears two weeks ago, focusing on promoting lending rather than simply pumping more yen into the system via bond purchases (marketwatch article.)
Similarly, the Dow has failed to reach even the .886 retracement of its drop from Dec 31 to Feb 5. Today, it’s backtesting the purple acceleration channel at the .886 retrace of yesterday’s plunge — no doubt an important decision point.
USDJPY has retraced .786 of its bounce off 100.76, completing a Gartley Pattern. A decent bounce will will set up the yellow channel midline tag we’ve been discussing at the purple 1.272 for a Butterfly Pattern completion at 100.18.
Although, remember that Butterflies can extend to the 1.618 as well (99.46) which would mesh nicely with the white .500 at 99.60 (if I’m not mistaken, this could work as the 5th of the 1st wave down.) And, if the .786 bounce isn’t all that substantial, the target remains the same: the .618 bounce sets up a Crab Pattern at the 1.618 just fine.
USDJPY is back below the TL, but having a very hard time letting go.
As well-defined as the yellow channel is (the white, not so much), there have been numerous slips beyond the midline over the past few years since Abe created it.
But, the immediate challenge will be surviving the backtest sure to arrive with the pre-opening ramp…
UPDATE: 10:00 AM
Looks like a slight bump in Michigan Sentiment (81.6 vs 81.5) expected is worth more than the GDP miss (2.4% vs 2.6% expected) and existing home sales miss (0.1% vs 0.8% expected.) Preposterous. Of course, USDJPY broke through the TL again.
And, even more preposterous, EURJPY spiked (though it tagged a tasty .886.)
At least DJIA finally tagged the .786, which it came up just short of earlier in the week. It’s backtesting the well-formed channel — which, in the real world, should provide resistance. But, this is a fairy-tale, make-believe world where unicorns soar through the sky farting rainbow-colored good news and bad news (Ukraine, Argentina, China, housing, GDP, retail sales, etc.) simply doesn’t exist.
The Bernanke put redux.
Ditto for ES, but at ludicrous levels.
continued…
I’ve been watching the THBJPY as an indicator of our EM thesis playing out. It’s been a pretty good measure of risk appetite (aka Abe’s ability to trash the yen and send hot money scurrying into peripheral markets.)
Like USDJPY, it has rolled over but is being propped up. The latest stick save came moments ago.
It’s tough to do when the Nikkei is under the kind of pressure it is to complete the right shoulder of its H&S Pattern…
…not to mention the pressure the yen faces since the EURJPY channel broke down.
And, yes, that’s a backtest of the .618 fib of the 2008 to 2012 plunge from 169 to 93. But, I digress…
THBJPY’s small, white rising channel is trying to hold back a very serious plunge to 2.8 or lower. Since the rising purple channel broke down around New Years (when most equity markets topped out) the falling white channel has been in charge — but, ran into the midline of the rising white channel for a third time.
It looks like a bit of a standoff until you look at the moving averages. The SMA50 (blue) fell below the SMA100 (yellow) in July 2012 and the SMA200 (thick red) in Sept 2012. It bounced back above the SMA100 in November, but crossed back below on Tuesday.
At present, it’s a very bearish alignment of the 20, 50, 100 and 200 — with the SMA10 threatening to roll over. The last time even the 10, 20 and 50 were in perfect alignment and plunged below the 100, the THBJPY dropped 12%. This time, they’re below the 100 and the 200 — which, to my eyes, is rolling over big time.
A similar move would take the pair down near the purple .618 at 2.80. But, of course, it depends on how many fingers the BOJ can come up with. At present, they’re plugging holes in JGBs (witness yesterday’s bought auction of 40 years at 1.75%), USD (another stick save at 1.20 today for USDJPY), bhat, won, ringgit, rupiah, rupee, Thai and Singapore dollars, etc. Debt:GDP was around 244% at YE2013.
While Abe is doing all he can to trash the yen, events around the world are conspiring against him. All those yen he created flooded into other economies, which are now rolling over (Thailand, Singapore, Philippines, etc.) As risks elsewhere rise, that hot money flows back into the yen — now a safe haven.yen
The afore-mentioned euro weakness will add to the challenge — as will the Chinese recent decision to join the beggar-thy-neighbor game. Remember, China and Japan are each other’s biggest trading partners. As the Renminbi slumps, it will also pressure the yen higher.
Stay tuned…
