Don’t Fight the BoJ

I know what you’re thinking: it’s “don’t fight the Fed.” While that’s generally true, too, the Bank of Japan is the central bank which most conspicuously wears its balance sheet on its sleeve. When my charts are a farrago of bearish indicators, but the Nikkei pushes up through resistance? I’ve learned to ignore the indicators and become bullish.

Conversely, when the narrative is incredibly bullish but the NKD slips below important support, it’s time to short. For those who haven’t been paying attention, that’s where we are right now. We’ve had a few hints over the past week or so, but the NKD suggests there’s more to come. US stocks just haven’t gotten the message yet.

continued for members…

SPX gave a hint yesterday by closing below the latest TL of support.

But, the ongoing collapse in CL/RB should nudge things along to the downside until SPX reaches one of these levels of support. I expect a test of the white channel bottom in the next week or so (the yellow dot at 3393.52) which would be a drop from the top of about 14.8% and would backtest the Feb 2020 highs.To get here, of course, SPX would have to drop through the SMA200, which is no small feat. So, we’ll list the support as (1) the SMA100 and purple TL at 3742ish, (2) the SMA200 and .236 Fib at 3560ish, and (3) the aforementioned 3393.

If the rising white channel breaks down, of course, it opens up plenty of other possibilities such as the yellow midline currently around 3162 (but a better target when it has risen to 3186 around May 10), the 2.618 Fib at 3047, and the white .618 at 2876. I continue to be focused on VIX and this chart, which suggests a gradual drop to 16ish by the end of the year as opposed to a quick drop right now.Seen on VIX charts…

Other indicators which suggest more downside for stocks include DXY, which is breaking out again……because EURUSD very noticeably didn’t bounce at its SMA200. And, USDJPY has yet to break out. As to RB and CL – there’s more downside ahead. I’ve updated and cleaned up the charts a bit. Note that both should see a bearish 10/20 cross in the next session or two. Note also that GC and SI are still settling lower as SI nears its SMA200 backtest.GC is still positioned well for a bounce, but it will be difficult to get one underway as long as SI continues to soften. Last, TNX continues to settle lower and is positioned for a rather sizeable drop – especially if/when CL collapses below support.More later…