When broad indices such as the S&P 500 can be easily managed via HFT, currency manipulation, etc., capitulation is practically unheard of. The most we can hope for is to recognize that a planned move is about to get underway.
Yesterday, our targets worked out beautifully. Things never got out of control — thanks in large part to the carefully controlled rebound in USDJPY. Note, however, that the well-defined rising purple channel broke down this morning…
… which means that the 15-pt ramp job in ES came undone in the last six hours.
There are two reasons this was permitted. One: in order to relieve the pent-up selling pressure on the euro. Note that it is closing in on our target from two weeks ago, albeit a few days late. In our last update on the euro [see: Staying Alive] we noted:
Yesterday’s dip below the purple channel midline and today’s backtest suggest further downside. I like the idea of it, but the timing suggests a 4th of July low.
The other reason is that once in a while you have to take a step backwards in order to facilitate the next two steps forward.
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