Charts I’m Watching: Apr 17, 2014

The SPX target — the .618/.886 combo at 1865 — is pretty clear.

2014-04-14-SPX 60 0620Two minutes before the opening bell, however, ES was hit by some large sell orders in order to shake out the weak bulls.  This was precipitated by a sell-off in USDJPY — shown in purple.

2014-04-14-ESM4 5 0640It obviously caught some traders off-guard, especially considering how effectively they propped up ES in the face of USJPY’s huge losses overnight.

It’s a good reminder of a subject I’ve been meaning to bring up.  Along with all the usual overnight manipulation, market makers have lately taken up the practice of aborting rallies just short of an obvious turning point such as a key Fib level.

Consider yesterday’s improbable rally after Janet Yellen repeated, for the nth time, what she’s been saying for the past several months.  ES rallied 16.25 points into the cash close, only to put the brakes on at 1857, 1.41 points shy of a major .618.

It had been a low-volume ramp job designed to reinforce the importance of continued Fed assistance, so a little more go-juice would have been required little effort.  But, turning points reached during market hours can attract a lot of sellers with big volume.  And, TPTB don’t want those guys getting into the picture when they can do serious harm.

I’ve seen this happen countless times over the past few months.  Often, a target is tagged and we get a reversal in the dead of night, leaving traders with a choice between leaving profits on the table or staying up all night.

Other times, the ramp job runs prices through the turning point, rendering it moot.  This is especially common on weekends and holidays, when there’s a longer gap between sessions and market normalcy is in exceptionally short supply.  It wouldn’t surprise me to see it happen again this weekend.

The latest example is SPX’s most recently completed Head & Shoulders Pattern, the neckline of which was broken during Wednesday night’s ramp job.  A normally reliable pattern, the H&S has lately become an almost certain bear trap.

2014-04-14-SPX HS 0730Either way, it’s an example of just how dangerous and difficult the “markets” have become, when seemingly every move is scripted to keep day traders and swing traders off balance (note the number of breakouts and breakdowns without any follow-through in the past few months.)  As the regular rules break down, it begins to make scalping more appealing than swing trading.


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