Problems, problems, problems. Oil rebounded nicely though the quarter end, but is creating inflation problems. USDJPY also rallied, but a cheaper yen is not what the Japanese need right now. After 3 tags of a long-term channel way below its averages over the past few years, VIX has dipped below it 18 times in the past 67 sessions. People are starting to talk.
Fed presidents, perennially optimistic about the economy, are talking up the possibility of up to three more rate hikes in 2017 — not exactly good news for a nation already maxed out on its credit cards with equities at all-time highs.
Is there an easy way out?
continued for members…I’m spending the next day or two looking at big picture issues: currencies, inflation, interest rates and commodity prices. I just finished the AUDUSD, which offered some interesting insights into the USD and equities in general. I hope to post EURUSD and USDJPY later this afternoon.
In the meantime, this is where we stand. Having broken down back below its yellow channel top, ES has backtested and is trying to hold its purple channel top.
It spent five days backtesting a little H&S neckline (into the quarter end) before falling to test the yellow channel .786 line and a potential falling white channel midline. It has support down at the purple channel top at 2318.
If it drops through 2318, it has potential to finally backtest the 1.618 at 2291. The SMA100 should be up that level in the next couple of weeks.
If it holds this morning’s lows, however, we could see it back to 2370 as early as Wednesday. SPX certainly supports that view.
It’s currently testing the yellow channel top above which it broke out (again) last week. While the .618 at 2340 would make a nice target, it’s clearly fixated on holding the yellow channel top and retaining its breakout status.
I would look for a bounce here. If it drops through, our 2340 target looks excellent.
Having achieved its goal of propping SPX up through Q1, CL’s rising red channel finally broke down. But, I’m no longer looking for a big drop, as March inflation is already baked in and April shouldn’t be much of a problem.
USDJPY, which broke off its falling channel even though it had the SMA200 in sight, is back in the hunt. They way I see it, it’ll tag it sometime in the next six weeks — probably at 107-108 in the next few days or in mid-May. And, if things get ugly, there’s a possibility of a 105.33 tag in July.
If it wants or needs to “fix” the market, the .618/.786 combo awaits at 120.11 sometime around Apr 25. But, for now, USDJPY has dropped through and is backtesting the rising red channel midline and the falling white channel midline. It would need to push up through 112 to be of much use to the PPT.
I need to jump on a conference call, will post more in an hour or so.
UPDATE: 3:05 PM
ES and SPX are both still bouncing, but haven’t yet broken out. SPX, for instance, is sitting just above its SMA10 at 2354.80. USDJPY still looks weak, as does CL. But, neither is really breaking down. As long as SPX remains above its SMA10, I’d expect it to at least backtest the white midline (2361.50ish) and, potentially, the red channel top at 2375.50ish. 
