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Charts I’m Watching: Sep 3, 2015

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Note: I’ve posted August’s results (+32.44%), available HERE.  I’ve also let the membership promotion run through today’s trading session for anyone who would still like to take advantage.  It’s a 39% savings off the regular annual price (which increases this afternoon) and a 55% savings off a monthly subscription.  Best of all, it locks in your rate for as long as you’re a member.  For more details and to sign up, CLICK HERE.

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Draghi’s comments could be summarized as “all sizzle, no steak.”  They were enough to momentarily boost ES over 20 points — now back down to a mere 9-pt gain.  Importantly, the boost gave USDJPY a chance to reset.  It dropped nearly half a percent with little effect on stocks due to the offsetting ECB effect (and, the fact that the “markets” haven’t yet opened.)2015-09-03 USDJPY 60 0620This was beneficial on two counts.  First, it gives “markets” the opportunity to experience the euphoria of topping 120.11 all over again.  Second, it allows ES to develop a nice little right shoulder in yet another IH&S.  Our decision to go long at 1904.11 on Tuesday is looking better and better.

For all you daredevils out there, here’s your opening!  Long at 1904.11.  And, if you do, good luck sleeping tonight!

continued for members…

2015-09-03 ES 60 0600SPX should likewise test the TL off its recent highs — forming our initial upside targets of the white channel top — anywhere from the purple .382 at 1957.34 to the red .236 at 1963.65  (because we don’t know when it will occur, and whether it might overshoot like yesterday morning.)2015-09-03 SPX 60 0600The initial surge shouldn’t take long, but pushing past it might.  ES’ right shoulder needs more than 1 hour to form.

One other big picture note:  I have consolidated the two rising channels to 2138 into one.  It doesn’t get to 2138 by Sep 14 as the analog suggested, but more like Sep 18 instead.  The reality is it won’t necessarily matter too much.  The BoJ meets on Sep 14-15 and the FOMC meets on Sep 15-16.  Given the timing of their meetings, I think it’s reasonable to delay the payoff just a little.

Assuming the BoJ expands QQE as I have expected, fine.  The analog pays off.  If it doesn’t, then the Fed has an opportunity to do something.  I’ve long maintained there will be no rate increase in September.  Depending on how it’s presented (“we might just have to bring back QE”) it could provide enough of a boost all by itself.

The dates are shown on the chart, as is a purple box around Labor Day, which is a prime opportunity to leapfrog some important resistance — probably the SMA200 wherever it is at the time (currently 2074.)

UPDATE:  9:43 AM

SPX just tagged our 1963.65, slightly exceeding it.  I’ll switch to short here at 1964.24 with targets of 1958.94, followed by 1957.34 and the SMA10 at 1951.94.  I expect the pullback to be modest but possibly take a while — i.e. sideways. Tight stops advised, as the red channel midline is just above at 1969ish and might present too appealing a target.

2015-09-03 SPX 60 0643Note that USDJPY has backtested the larger white channel bottom and is pausing.  It will probably pull back some, giving the sense that it might have lost momentum.  I expect it to regain the channel if/when ES right shoulder is fully baked.2015-09-03 USDJPY 5 0649UPDATE:  10:17 AM

SPX is poking a little higher here on USDJPY’s push toward 120.11.  I expect USDJPY to merely backtest 120.11 this time, but will play along on the long side just in case.  I’m expecting the red channel midline at 1969ish — also the yellow .382 Fib, followed by the white .786 at 1974 and the .886 at 1977.69 (also the purple channel midline.)

2015-09-03 USDJPY 5 0715 2015-09-03 SPX 5 0715UPDATE:  10:28 AM

And, there’s the 1969/.382 tag.  I’ll switch back to the short side again here at 1970.3, probably just long enough for SMAs to catch up.  A backtest of the white channel top at 1962ish would make sense — perhaps about the time the white SMA20 curve crosses it.

2015-09-03 SPX 5 0728USDJPY has reached the white midline, so look to see if it reacts.  I expect it to backtest 120.11.  Obviously, it can accelerate SPX’s climb by popping through that white channel line and, more importantly, the purple one.2015-09-03 USDJPY 5 0728Note that ES has found its way back to the neckline.  If it pops through, then we’re obviously back to the long side right away.2015-09-03 ES 5 0728UPDATE:  10:51 AM

Back to long at 1970.83 for 1974.13 or 1977.69.  USDJPY just poked thru the purple midline, too.

2015-09-03 SPX 5 0751Now that ES’ IH&S is complete, look for it to possibly backtest its neckline.  Otherwise, its next major target is 2000.2015-09-03 ES 5 0751UPDATE:  11:30 AM

Took a brief break and came back to see a decent reaction at the .786.  Judging from the fact that USDJPY is backtesting 120.11, I’m guessing they’re interested in a backtest of the white channel top — currently around 1961.6.  I’d go short here at 1967.99, but with tight stops,  just in case that’s what plays out.

2015-09-03 SPX 5 0830If it lasts until 1:45 or so, it could tag the white .618 at 1958.94.  But, that would require USDJPY to dip below (or at least threaten to) 120.11.

BTW, note that CL has tagged its SMA50 and is retreating — possibly another backtest of the white channel midline.  It’s another headwind for SPX to worry about at this time.2015-09-03 CL daily 0830UPDATE:  12:43 PM

SPX just reached the white .618 at 1958.94.  I’ll switch to long here at 1958.57, looking for the purple midline next. It’ll intersect with the white .886 at 1983.17 around 1:45.

2015-09-03 SPX 5 0942If this move doesn’t hold, the next lower support is the SMA10 at 1951.94.  I’d keep the stops tight on this one unless USDJPY signals a strong rebound.

UPDATE:  1:00 PM

Not a very strong bounce, and USDJPY is faltering again.2015-09-03 USDJPY 5 1000

I’d resume the short on any sustained push below 1958, with stops at 1959.  Target would be the SMA10 at 1951.94 — also the purple channel .236 line.  The whole move could take a minute or two, so be prepared for a very quick rebound there.

2015-09-03 SPX 5 1000UPDATE:  1:08 PM

Shorted as per above, back to long here at 1951.94.  Tight stops in case 1948.28 is the actual target.

2015-09-03SPX 5 1008Note that with this move, ES has reached the area that I thought would make for a nice right shoulder in this morning’s initial post.  That’s the original “S.”

2015-09-03 ES 5 1013USDJPY still isn’t taking off, so I’d watch this long position carefully.  Could be there’s more in store, such as the white .500 at 1948.28.  And, given how things have gone lately, there’s definitely the possibility that it closes below the white channel top as a headfake to shell-shocked bulls.

UPDATE:  1:33 PM

Looking a lot like yesterday, with a whole lot of upside, a decline into midday.  Will we get the bump higher at the end of the day?  2015-09-03 SPX 5 1033Not if USDJPY doesn’t stop farting around.  BoJ would like to divorce the USDJPY from SPX goings-on.  Can’t be done.  USDJPY is declining for a reason, which is that they want a lower tag and/or to fake out longs for the next leg up.

If it dips below the purple bottom, then that 1948.28 tag is a real possibility.  We’re just getting pretty far away from 2138… 2015-09-03 USDJPY 5 1033If USDJPY doesn’t rally, watch for CL (leverage for Japan) to spike again.  One way or the other, BoJ will have to play ball or suffer the consequences.  https://pebblewriter.com/an-offer-japan-cant-refuse/

2015-09-03 CL 60 1041UPDATE:  2:11 PM

Back to long here at 1948.28.  At this point, SPX is up only 4 points on the day.  CL about to tag white midline on backtest.

2015-09-03 SPX 5 1110UPDATE:  2:45 PM

SPX back to the bottom of the white channel and the .618 — just as USDJPY has retagged 120.11.  Could get a downturn here (50:50), so will try a short position again, tight stops in case this is the breakout.

2015-09-03 SPX 5 11442015-09-03 USDJPY 5 1146We’re going into the final hour soon.  Yesterday, all the action happened in the last 5 minutes (almost 10 points.)  Suspecting the same will happen today, with USDJPY holding back, then popping above 120.11 either just before or even after the cash close.

BTW, I’ve adjusted the IH&S neckline on ES, which if it completes around midnight, will target 2052.38.

UPDATE:  3:00 PM

SPX just backtested the SMA100 (yellow) so I’d go long again here and leave it unless we see another downturn.

2015-09-03 USDJPY 5 1158I have to keep reminding myself that, although the goal and timeframe is pretty clear, the purpose of the analog is to force BoJ’s hand.  Has that been done?  I don’t know.  But, this isn’t necessarily going to be like the typical snapback, everybody’s happy, rally.

It could very well involve more BoJ gnashing of teeth.

UPDATE:  3:09 PM

If the SMA10 doesn’t hold this time, it’s back to short for another 5-6 point headfake.2015-09-03 SPX 5 1209I have a sneaking suspicion it won’t, and that SPX will head down and close instead at 1940.  Getting ready to short…

UPDATE:  3:29 PM

Just pushed below.  Back to short side at 1952.45 for a headfake at 1940ish.  Stops at the SMA10 again if the move fails.

2015-09-03 SPX 5 1228Pretty sure one way or the other SPX will make a strong move in the last few minutes.  Could be down to 1940, or back up to 1958.

Would want to be long overnight if you’re able to hedge or monitor your position.  This will leave a bearish candle on the day.  Though I like the SMA200 at 1939.98, the purple channel bottom is just below at 1934ish.  Could also work.

UPDATE:  3:47 PM

USDJPY popping, so it’s back to long here.  Again, I’d stay long overnight if you can hedge or monitor overnight.  But, my batting average is no better than .600 on overnight calls, lately, so take that with a big grain of salt.  Stops at 1947ish.2015-09-03 SPX 5 1246

 

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