Fedspeak: Jul 31, 2013

Currencies are looking for some action, and so far it looks like dollar strengthening — not necessarily good for stocks.  I’ll start off short SPX today, preferably at 1690.89 or 1691.96.

The EURUSD’s RW looks like it might be breaking down, though I’d rather the .886 had been tagged first.

The dollar is hinting at a breakout, but that .886 would have been nice.

And, the USDJPY is still looking very susceptible here, though it hasn’t yet broken through the purple midline.

Given all this, we’ll pay close attention to our stops, as SPX might not yet be done.

UPDATE:  9:31 AM

SPX just tagged the latest .886 as we discussed yesterday.   Full short here at 1692.17, stops at 1693.20.

ES tagged the top of its rising triangle on the 60 min chart, but the red channel remains busted for now.

It could climb back in, so we’ll stay on our toes — particularly when the Fed comments are released.  If not, the purple channel charted below might be the red channel’s replacement.

We got yet another rosy employment report (albeit from ADP), which adds fuel to the taper argument.  The GDP beat also gives cover to any stimulus reduction.

Chicago PMI, though at 52.3 was a slight increase from last month’s 51.6, came up short of the 54.0 the Street expected.  New orders, employment and employment all fell, while prices paid increased.

For those who missed it, ECRI put out a great piece on the longer-term trends in the US and other developed economies.  Check it out, along with the Lakshman Achuthan interview on Bloomberg.

From ECRI:

Notably, the U.S. and other major developed economies have experienced slower growth in the last five years (blue bars, front row) than Japan experienced in its lost decades (red bar).

UPDATE:  10:26 AM

SPX just pushed through the prior high and should go up to tag the larger pattern .786 at 1693.91 or the .886 at 1696.19.  I’ll take an interim long position here, but don’t expect too much from it.  Core short still in place, stops at 1693ish.

UPDATE:  10:37 AM

That should about do it for this move.  Closing the interim long here at 1696.25, back to full short. Stops at 1699ish, as we probably can’t get this close to 1700 without bagging it (probably a job for another interim long if/when…)  So, a double top within a double top?

Next stop should be at least a backtest of the grey neckline around 1691.28.

UPDATE:  12:45 PM

SPX has followed through nicely, just reaching the .500 of the latest move up and the .618 of the drop from 1693 to 1682.  It’s also the midline of a small channel (red) that I think might provide the bulls with the opportunity to take a stand.

I’ll take a long position here, but am more than happy to rejoin the short side if prices slip below 1689.

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It’s not often I get the chance to plug a future competitor.  As some of you know, my son Kyle is helping me out this summer.  He will graduate in December with an Economics major and Personal Financial Planning minor from Texas Tech University in lovely Lubbock, TX.

In addition to performing many rather thankless duties for me, he has spent a fair amount of time learning the ropes of charting and technical analysis.  I asked him his opinion on AAPL the other day, and am pleased to present his analysis.  FWIW, I think he did a very nice job.

I hope to lure him back after he graduates for more of the same.  Though, he seems pretty excited about the financial planning field.  Those of you in the biz who would like to chat with this bright young lad about his career plans, feel free to drop me a line.

Click HERE to read the report.

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UPDATE:  2:04 PM

No change to Fed policy.

SPX just back tested the broken channel, a bearish development if it holds.   I’ll try a tentative short position here at 1693.64, stops at 1695.

UPDATE:  2:18 PM

SPX just back tested the top of the falling red channel — a bullish development if it holds.  Covering my short and trying a long position here at 1687.

My bias is that the broken red channel will ultimately prove more important and the bears will win out.  But, TPTB have a very strong interest in propping portraying this as a positive announcement.  I imagine they’ll throw a bunch of freshly printed sawbucks at it as usual.

But, I’ll have a hard time getting excited about further upside unless SPX can break back into the rising red channel — call it 1695.  Apparently, investors are having the same reaction, as SPX has again stalled back at its lower bound.

Back to the short side unless it can break through. Of course, if it does, there’s the 1698.78 high, the 1696.19 .886, and the psychologically important 1700 to contend with.  Stay tuned.

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