It’s one thing when the Fed hits the pause button. It’s quite another when China, holder of $3.1 trillion in foreign-exchange reserves, hints that they might be a little overinvested. Bloomberg reports that China is reconsidering its commitment to funding the US debt addiction.
And, that has stock and bond futures searching for a new equilibrium. For starters, USDJPY plunged to our next downside target overnight.
ES came within 9 points of our downside target for it. And, EURUSD’s slide was halted at a backtest as we discussed yesterday. DXY is clinging stubbornly to the channel bottom reached last week. But, it remains to be seen whether or not it’ll hold.
continued for members…
USDJPY, w/ targets:
And, DXY…still making up its mind.
ES is about to break down through the bounce TL it’s been working on all morning. A reminder, our target is a backtest of the 2.24 at 2728.79. Interesting that it didn’t kiss the SMA5 200 one last time on attempted bounceback.
If ES’ 2.24 produces a bounce, SPX should be able to maintain the smaller rising white channel. If it doesn’t, then the larger white midline is the next support at around 2730, followed by the SMA10 at 2709.93 and its own 2.24 at 2703.62.
TNX gapped up this morning, extending yesterday’s push through the TL and nearing the neckline of a fairly large IH&S at 27ish.
And, VIX jumped up and tagged its SMA200. For those still sitting with a long position at 9.33, this is the easy money — a second chance for those who wished they’d sold last week. For diehard bears, the most likely upside target is 13.93 (ideally Wednesday, Jan 17) with a reach target of 16.13. If it breaks 16.13, things would get really messy for stocks.
Likewise for gold. We reverted to long on GC when it pushed back above the important yellow dotted TL at 1251. It has tagged each of the successively higher Fib fan lines, seemingly running out of steam at the .886 (1324ish.)
This morning, it pushed back above that line, but was quickly swatted back down. If DXY doesn’t break down, this may be as good as it gets for gold bugs. If DXY drops through the .886 at 91.483, then GC might finally get a shot at 1377-1380. Again, the easy money has been made. From here on, it’s a matter of how much control the Fed wishes to exert.