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It’s Still All About the USDJPY

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After all the drama surrounding the Fed’s 1/4% hike yesterday, the charts still point out one truism.  It’s still all about the yen carry trade and, specifically, the USDJPY.  As long as it’s rising, SPX will have the wind at its back — no matter how little breadth, how sketchy the fundamentals, how many miniscule rate hikes.

2015-12-17 USDJPY v SPX big 0614So, any analysis of the “market’s” next moves starts with a look at what USDJPY is going to do.

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Every time USDJPY has bounced off the bottom of that big white channel from 2012, good things have happened for stocks.2015-12-17 USDJPY v SPX 0614As we discussed Tuesday, the charts suggest it’ll continue to rally up through key resistance over the holidays in order to push SPX through its key resistance.2015-12-17 USDJPY daily CU 06142015-12-17 SPX 60 0614 UPDATE:  9:40 AM

Stocks might run into resistance this morning, as ES is tagging the upper bound of a small megaphone pattern.2015-12-17 ES 60 0614

Look for SPX to backtest its SMA20 and/or SMA200 this morning (2067.58/2062.30.)  I’d short on this move through the purple midline, but be aware that it could bounce at 2067.58.

If it pushes past the SMA200, it could conceivably backtest the purple TL at the bottom of the rising purple channel – also the SMA10 — at 2053.2015-12-17 SPX 5 0639We’ll want to keep an eye on USDJPY, which reversed at the .707 Fib, but pretty clearly has its sights set on the .786 at 122.95 toward the end of the day.  Note that this would represent a breakout of the red TL.2015-12-17 USDJPY 60 0646UPDATE:  9:55 AM

We’re reminded yet again of which end of the dog wags the other.  ES just tagged its SMA200 and is bouncing…2015-12-17 ES 5 0655…so SPX will have to wait its turn.  Why?  How are you going to convince a savvy futures trader trader to sell or short ES at a price slightly higher than the SMA200?  They’ll spoof, or use CL/USDJPY to force it.  But, I’ve also seen them simply give up at times.  2015-12-17 SPX 5 0655Odds are, the final leg down will be driven by CL (which is poised to drop further, anyway, to either 34.17 or 33.62 but at least to close yesterday’s gap.)  A dip to the purple channel bottom would probably do the trick.2015-12-17 CL 60 0655Of course, USDJPY could also make it happen simply by backing off the .707 Fib and backtesting the SMA20 again.

2015-12-17 USDJPY 5 0704

A reminder to members…I will be out of the office today from about 11AM EST on due to travels.  I’ll post up until that time, and lay out expectations for the rest of the day, but won’t be able to post again until late tonight or tomorrow.

UPDATE: 10:20 AM

Just got the SMA200 tag and then some.  I’d switch to long here at 2060.50 only because ES just tagged its SMA10 and channel bottom and appears to be bouncing.

2015-12-17 SPX 5 0720 2015-12-17 ES 5 0720Of course, now both SPX and ES need to punch back up through the SMA200 — which is now overhead resistance.

It’ll help if USDJPY can simply keep rising ahead of its 5-min SMA10 and SMA20.2015-12-17 USDJPY 5 0727 UPDATE:  10:32 AM

SPX pushed through okay, but ES is running into its SMA200 and there are no doubt a few pissed off traders who, having just been stopped out as it fell below, are wary of being whipsawed.  I’d take profits on the long here, and jump back in if/when it punches through.

2015-12-17 SPX 5 07322015-12-17 ES 5 0732UPDATE:  10:48 AM

It looks to me like ES could use a slightly lower low in order to neatly tag its channel bottom.  It makes me wonder if those lower targets for SPX might come into play.  CL certainly suggests so.  I’d short here and look for a bounce at the SMA50, and if not, then the SMA10 as discussed earlier.2015-12-17 CL 5 0747 2015-12-17 ES 5 0747 2015-12-17 SPX 5 0747UPDATE:  10:53 AM

I’d take profits here at the SMA10 and go long with tight stops — objective 2077-2080.  As I mentioned earlier, I have to take off.  But, the channel bottom should hold.

If it doesn’t, there’s additional support at the rising 5-min SMA200 — currently at 2047.  But, since I won’t be here to watch it, I’d just dump it outright if it dips below 2052 or so.2015-12-17 SPX 5 0753USDJPY has a clear path to 122.95 should it decide to take it…2015-12-17 USDJPY 5 0757…and, CL just got a good bounce off the .236 channel line.  Though the prognosis is still bearish, it could put in a nice bounce here.2015-12-17 CL 5 0757 GLTA.

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