Today’s post will be brief, as we’re experiencing our first winter storm on the central California coast and the power just went out.
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As we expected, USDJPY reacted at the large, rising white channel’s midline — reversing higher and dragging S&P500 futures along. From yesterday’s 3:50 PM update:
USDJPY did, indeed, seek out the white channel midline — tagging it at the red .886 (117.70 vs our 117.75 target.) We should see support here, meaning a potential bounce for SPX as well.
A few minutes ago, however, it reached small scale trend line resistance (red, dashed) and will need to push through in order for equities to bounce much higher.
SPX closed at a low point yesterday, which over the past year has generally been a head fake. Indeed, futures are currently pointing 8 points higher — a move that will continue if and only if USDJPY can push through the above-mentioned resistance. It should.
In yesterday’s post “A Tipping Point,” we discussed the need for yields to rise in order for the rally to continue. ZN (10-yr note price) reversed at the same time as USDJPY and is this morning trying to decide whether to continue the decline (which results in higher yields.)
Like USDJPY, it needs to break through in order for the rally to continue.
UPDATE: 4:50 PM
Pretty impressive run up to the red TL as expected. The reaction there was almost as impressive, giving up more than half of the earlier gains. I’ll post more in the morning, but here’s a little food for thought re USDJPY.
The floor we talked about yesterday has been established (the red, dashed line below.) Now, we’ll see if it can hold.