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Currencies Continue to Rule

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The big story around here yesterday was NKD, which nailed our downside target and dutifully recovered into the close — only to fall back below it in the after hours as USDJPY dipped even further.

It provided great guidance for a short position that delivered some nice gains, and for the long position after the bounce.2015-09-23 NKD 60 0612With USDJPY back above its .618, futures are back in the green.  Even the EURUSD had a nice bounce. But, are “markets” really out of the woods?

continued for members…USDJPY’s daily chart…2015-09-23 USDJPY daily 0612 …looks a lot more solid than the 60-min, which suggests a sharp break one way or the other.2015-09-23 USDJPY 60 0612I try to stay away from predicting triangle breaks, but my guess is we’ll see more downside pressure on NKD as discussed yesterday.  It’s just not clear whether or not it will happen today or tomorrow.

I’ll leave yesterday’s SPX targets in place for now, and wait to see which way USDJPY breaks.  My presumption is that we should be short, as the purple channel is still broken, and the small, white falling wedge seems to be playing out.2015-09-23 SPX 60 0612The initial downside target is the white .236 at 1924, with lots of targets below that if USDJPY permits.  Upside targets include the red channel midline at around 1950, the SMA20 at 1955, the SMA10 at 1964 and the broken purple channel bottom backtest at 1983ish.Screen Shot 2015-09-23 at 6.37.30 AMToday’s wildcard: CL.  Crude inventories are due out at 10:30.  And, as we discussed yesterday, CL’s in a position to break big either way.2015-09-23 CL 60 0634The close-up:2015-09-23 CL 5 0635UPDATE:  9:51 AM

Should get a bounce off the purple TL here.  Would switch back to long, but with tight trailing stops.  If it’s just going to retest the falling wedge top, that’s only up at 1942.50 — barely worth the effort.

If, on the other hand, it breaks out then we’ll have something worth playing with the red midline at 1948ish and those SMAs at 1955 and 1963.2015-09-23 SPX 5 0651Here’s a view that better represents the possibilities at this point.  Careful here at 1941.75.2015-09-23 SPX 5 0659UPDATE:  10:01 AM

Decision time for SPX.  I’m guessing a head fake, then lower.  USDJPY is coming up on the top of its triangle.2015-09-23 SPX 5 0701UPDATE:  10:06 AM

USDJPY just popped.  It’s a 5-min bar, but it happened in less than 1 second.  Gotta love thse currency manipulators.  So far, SPX and NKd are unimpressed – barely budging.  Perhaps they’re worried about head fakes, too.2015-09-23 USDJPY 5 0705SPX squirted through the wedge top and is backtesting it, but it wasn’t much of a squirt.  With crude data coming out in a few, I’d tighten up those stops.

UPDATE:  10:37 AM

SPX is approaching the red midline.  I’d hazard a short here, but CL is making noises about a breakout.  The problem is the breakout should run out of steam at 47.60 or so.2015-09-23 CL 5 0737 Still lots of juicy targets up above.  I’ll hold on and see if the algos can come to the rescue.  5-min SMA10 almost here. 2015-09-23 SPX 5 0737BTW, VIX has broken through TL support with CL and USDJPY’s help, and seems intent on completing a Gartley down around 19.18 later today.2015-09-23 VIX 15 0748In sum, this has the feel of a well-engineered, algo-fueled rally.  Kudos to the Masters of the Currency Universe.  Next stop should be 1955.

But, keep an eye on USDJPY, which has nearly retraced .886 of its drop from Monday’s highs.  If the ultimate direction is lower, 120.53 would be the logical spot for a reversal — leaving algo duty to CL.2015-09-23 USDJPY 60 0754

I have to step out for an hour or so.  The 5-min SMA10 (red line) is our guide to stops on our long position (and to consider initiating shorts), and I’d take profits when/if SPX reaches 1955.

More later.

UPDATE:  11:16 AM

Saw what was happening and had to duck back in here… 

SPX broke below the SMA10 as CL reversed and USDJPY hit that .886.  Hope the sell signal was clear to everyone…

2015-09-23 USDJPY 5 0815 2015-09-23 CL 5 0815 2015-09-23 SPX 5 0815The big questions are whether USDJPY’s broken TL (and 120.11 below that) will hold, and whether CL’s TL will hold.  If so, SPX should backtest the broken white TL – no more. Call it 1938.40.  If not, look for 1925.

UPDATE:  11:35 AM

There’s the TL backtest.  USDJPY and CL have positively tanked, but have both reached potential support.  I suppose the safe position is to go long here with very tight stops, but I think we’d be switching back pretty soon.  There’s probably more downside for anyone who feels like rolling the dice.

2015-09-23 SPX 5 0834CL appears likely to test 45.45, and USDJPY no doubt has a backtest of 120.11 in mind.2015-09-23 CL 5 0837 2015-09-23 USDJPY 5 0837UPDATE:  12:06 PM

CL broke previous lows, just tagged TL support.  2015-09-23 CL 15 0906But, USDJPY hanging with 120.11.2015-09-23 USDJPY 5 0906Faced with conflicting signals, SPX falling only slightly.2015-09-23 SPX 5 0906Notice what happens, however, when we remove the falling wedge top and replace it with a line parallel to the wedge’s bottom.  That’s a falling channel, and it points straight toward our 1885 target (yellow) on Friday morning.2015-09-23 USDJPY 5 0908With a proper channel drawn in, it looks like our 1924 target and maybe even our 1906 could be hit today.  It all depends on USDJPY, which just backtested the broken triangle bottom.2015-09-23 SPX 5 0916UPDATE:  1:45 PM

SPX is about to tag the top of our little white channel — obviously a line in the sand in terms of lower prices today.  2015-09-23 SPX 5 1045It’s completely at the mercy of USDJPY, which keeps acting like it’s going to jump back above the broken triangle bound — but, never quite makes it.

2015-09-23 USDJPY 5 1045 There’s a real risk that it does, and that SPX pops up and tags the SMA200 at 1948.  So, set your stops accordingly.  However, my hunch remains that we see lower prices, with 1924 around 2:45 being a good possibility.

UPDATE:  2:08 PM

SPX departed the channel.  Should remain long for the red midline and SMA200 at 1947.68.  Unclear whether or not it will backtest the broken channel top first.

2015-09-23 USDJPY 5 1108USDJPY carrying the water all by itself today, and doing a good job of making up for CL – still in the dumps.2015-09-23 SPX 5 1108In case you’re wondering, this is an example of chart patterns utterly failing in the face of predatory USDJPY manipulation.  The pop up through the channel top was motivated entirely by a momentary spike in USDJPY which, after the damage was done, dropped right back down to where it was.

The kicker is that USDJPY could and probably will ride right along, on top of the triangle bottom, into the close, and then drop down to do whatever it’s going to do.  If there is more downside ahead, say tomorrow, then bears will only get a chance to play it if they’re willing to ignore this recovery and risk holding short overnight.

It occurs to me that I might have drawn the channel too bearishly, so I’ll give it my best bullish tilt and see whether it’s able to guide prices lower into the close.

I’ll try reverting to short here and see what develops.

2015-09-23 SPX 5 1126UPDATE:  3:23 PM

If I’m wrong about the downside, there’s a potential IH&S setting up on ES.  2015-09-23 ES 5 1221It’s sloppy, and doesn’t have an equivalent in SPX, but it’s worth watching — especially for anyone who’s thinking about shorting overnight to pick up 1906 in the morning.2015-09-23 SPX 5 1221 USDJPY just broke out of a little TL it’s been obeying since early this morning.  But, running into that triangle again – not to mention the SMA100. 2015-09-23 USDJPY 5 1221If SPX is going to reach 1924 before the close, it had better get going tut de suite.  Still too close to call, and I’d feel much better if SPX had tagged the 5-min SMA200 today.  But, beggars can’t be choosers…

Short makes more sense overnight for those who can hedge.  NKD couldn’t break out today, and looks like it has more downside to come.

2015-09-23 NKD 5 1221UPDATE: 3:37 PM

FWIW, USDJPY just tried to break out, rising above the triangle upper bound for a sec.  All it’s done so far is establish a well-formed flag pattern, so SPX didn’t play along.  The problem for USDJPY tricksters is no one believes it’s going to stay up there.  And, they don’t want to get stuck chasing something that’ll fade overnight.2015-09-23 USDJPY 5 1235 2015-09-23 SPX 5 1235As before, a rise above the channel top (1941.25) would be cause to sell, but the immediate potential would only be to the SMA200 at 1944.55 – so it could easily be a headfake.

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