Charts I’m Watching: Jan 29, 2013

Currencies are relatively quiet this morning in the midst of a slew of earnings and economic data. The dollar looks like it could hit our downside target of 79.50 – 79.59 from Jan 25 [see: Update on DX] this morning if the yellow channel holds, but note that its midline intersects with the bottom of the white channel (support) just below current levels.

EURUSD looks like a lock to tag the 1.618 at 1.3490 we’ve been tracking the past few days.

This e-mini chart caught my eye this morning…

With the overnight slide of 8 points, the e-minis give the impression of a broken channel and back test.   Now, it might be one of those dips from which we quickly recover as occurred on the 16th.  But, for those playing the intra-day moves, this bears watching.

This ES channel equates to the small purple channel within the larger white one on SPX.  So, as yesterday, watch the channel midline for signs of something more significant.  It’s currently around 1498.30.

The 15-min RSI should see a bounce at the red trend line if the trend is to remain on track.

As we discussed yesterday, there is a great deal of economic data due out this week.  But, all pale in comparison to the FOMC announcements following their two-day meeting getting underway right about now.

Last we heard, dissension was growing over how and when to throttle back on QE.  The language that alarmed the Dow 20,000 crowd:

While almost all members thought that the asset purchase program begun in September had been effective and supportive of growth, they also generally saw that the benefits of ongoing purchases were uncertain and that the potential costs could rise as the size of the balance sheet increased. Various members stressed the importance of a continuing assessment of labor market developments and reviews of the program’s efficacy and costs at upcoming FOMC meetings. In considering the outlook for the labor market and the broader economy, a few members expressed the view that ongoing asset purchases would likely be warranted until about the end of 2013, while a few others emphasized the need for considerable policy accommodation but did not state a specific time frame or total for purchases. Several others thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet. One member viewed any additional purchases as unwarranted.

Needless to say, an increase in hawkish rhetoric could really do a number on this rally.

Odds are we’ll see another day like yesterday, with market makers shuckin’ and jivin’ to try and convince us a larger move is underway — the better to shake loose some of our hard-earned money.  But, I unless we see a huge miss on economic data or earnings, I don’t expect any fireworks until Bernanke steps up to the microphone (though much of the juicy stuff will have to wait for the minutes to be released.)

UPDATE:  10:00 AM

The Conference Board’s Consumer Confidence Index came in well below expectations: 58.6 vs expectations of 65 and Dec 2012’s 66.7.  Most of the rise in pessimism was the result of worsening job market conditions.  Those expecting more jobs in the months ahead dropped from 17.9% to 14.3%. Twenty-seven percent expect fewer jobs — unchanged from last month.  A full 22.9% (up from 19.1%) expect their incomes to decline. tracks the data and puts it in a nifty little chart (reflects data through December.)  There are a lot of potential interpretations here, but to me it comes down to “expectations coming back in line with reality.”

And, though I don’t have the time to construct a chart, I’m pretty sure that expectations — the yellow line — have tagged the top of a descending broadening wedge (megaphone) while present conditions have formed a garden variety falling channel.  Both appear to be at or near their upper bounds, meaning a breakout or a fall is imminent.

Global Economic Intersection posted an interesting article last month that showed the relationship between consumer confidence and past recessions.  Definitely worth a read for those who pay attention to such things.


So far, the market is pretty much shaking it off, with a dip to the white channel midline the extent of the reaction.  If the midline holds yet again, there’s a good chance we’ll hit our upside target later today or tomorrow.

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