Charts I’m Watching: Jul 23, 2014

The Fed is pumping $4.5-5.75 into the “markets” today and tomorrow — making it easy for stocks to ignore war, earnings, inflation, interest rates, etc.  The past two days have been almost carbon copies of one another:

  1. sharp dip on the opening on bearish news to head-fake any bears left standing
  2. relentless algo-driven melt-up for several hours (USDJPY and VIX based)
  3. strong sell-off near the close to head-fake weak bulls into selling
  4. ramp job overnight to punish them for selling


2014-07-23-ES 5 0600

As usual lately, the reversals are coming at seemingly random spots.  But, a closer examination reveals what I believe is a calculated attempt to punish traders.   They’ll put the brakes on just short of Fib levels, blow through back tests, reverse before reaching established trend lines, and sell off immediately after making new highs — which leaves those of us who rely on chart patterns or technical analysis grasping for straws.

For a while, they were targeting only bears.  Now, it’s grown to include anyone who doesn’t simply buy every dip and hold long overnight.  The answer is simple: buy every dip and always hold long, right?  That strategy has certainly paid off better than trying to exploit any downside moves. The chart below shows just how treacherous trading has been for the past month.

The purple grid, including a completed IH&S Pattern that never failed at the neckline, was a total head-fake to bulls and bears alike.  It remains to be seen whether the red IH&S, also completed, will play out or whether we’ll churn some more.  The larger channels, BTW, have become almost meaningless lately.

2014-07-23-ES 4hr 0600

History tells us that a crack in the markets is a question of “when” and not “if.”  In the past, whenever bearish capitulation was complete, TPTB have allowed (or engineered) a strong downturn that flushed buy-the-dippers into oblivion — the better to induce the Fed into continuing the gravy train.  Will this time be any different?

I will be out most of the day tending to family health matters.  Any prayers would be much appreciated.

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USDJPY reacted at the falling TL we discussed yesterday, but immediately rebounded to push stocks higher.  It plummeted overnight, when it didn’t matter to ES, and will probably rally up through its moving averages again today in order to facilitate the continuing melt-up.

2014-07-23-USDJPY 60 0600




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