Friday we had one of those algo-driven ramp jobs that carried over into the cash markets and just wouldn’t quit.
CL reached our immediate downside target and has bounced, though not cleanly.
While, USDJPY continues its sideways action, basically marking time as per our analog.
We’ll review the analog this morning, taking a look at the big picture and likely turning points between now and then. For our new members, it will be helpful to review the analog, its origin and implications, before continuing. The original posts can be found here:
And, for those wondering what the heck an analog is in the first place, check out:
It takes you through a spectacular analog I came across several years ago that accurately predicted the 21.6% July – October 2011 crash to the day and dollar — giving buy and hold types ample opportunity to protect their holdings and aggressive traders an opportunity to make a killing.
continued for members…
Recall that our current analog is quite different from the 2011 one in that it provides a road map for higher prices. A major Fib level lies at 2138, potentially heavy resistance just above SPX’s current 2115. The Powers That Be need a reliable way to power through or, better yet, leapfrog that resistance.
It starts with the expectation that the BOJ will step up to the plate and further trash the yen in order to keep the yen carry trade alive. They’ve done it in the past and, despite the growing din of protests, will likely do it again.
The decline in the yen (as seen in the rise of USDJPY) is almost totally responsible for stocks’ rise since 2011. We examined this in the second installment of the analog post six weeks ago.
It began in the days following the Fukushima disaster (still nowhere near being resolved, by the way) when it became apparent that borrowing in a rapidly depreciating currency — especially in combination with equities that would be actively propped up by central banks — would practically guarantee profits.
~Sorry, folks, the day got away from me. I’ll continue this thread tomorrow after the daily update.