Usual USDJPY-inspired ramp job on no news…

Placement of the latest SPX channel is open to interpretation.  The bullish view…

And, the less bullish view…

Since the banks forced ES up overnight, we’ll assume the purple channel for now.  But, it’s the larger purple channel that needs to break down if the bears are going to get any satisfaction.

The USDJPY H&S that was thwarted, but isn’t quite dead.

Sunday/Monday’s spike above the channel top was quickly reversed.  We’ll keep an eye on today’s.

UPDATE:  9:45 AM

Completed Bat Pattern on ES at 1863..close enough?  We’ll see if the channel top can hold a third time.

Consumer confidence and new home numbers coming up at 10AM EST.

UPDATE:  10:30 AM

Consumer confidence is up, but couldn’t break out.  And, new housing sales (contracts) continue to slump.  Cue the fizzle (news out of China about multiple bank runs won’t help.)

continued for members… (more…)

USDJPY and ES have both see-sawed higher since yesterday’s open.  USDJPY is still trying to decide between channel tops, but either one spells additional downside at 103 or lower.ES is testing a potential channel top, with a potential .786-886 retrace of the drop from 1876.75 — Friday’s Bat Pattern completion.

BOJ’s Kuroda, speaking moments ago at the London School of Economics, suggested that QQE might wind down by the end of this year.  This is most unwelcome news for the most crowded trade on the planet: the yen carry trade.  Many investors were counting on BOJ ramping up QQE when the economy slows in April after the 60% tax increase kicks in.

Highlights:

• Must convince public that 2% inflation is nothing special
• Higher inflation expectations will drive virtuous circle
• Inflation expectations have been rising
• Japan growing above potential growth rate
• Expect moderate recovery, virtuous circle in produciton , spending
• See annual inflation reaching 2% target by end of FY 2014 (Mar 31, 2015)
• No sign of asset bubble in Japan but will monitor carefully
• Will adjust policy if economy weakens
• Holding some assets to maturity a possibility
• Premature to discuss exit…we have options/tools other than selling assets

The yen hasn’t reacted much…yet.

But, ES shed 14.5 points in a hurry, and 10-YR yields accelerated this morning’s divergence with equities.

As we discussed on Mar 11 [see: Sayonara Abenomics] the BOJ is boxed in.  The economy will continue to slow as inflation (especially in food and energy) picks up.  They will eventually panic, of course, and start flooding the markets again with yen.

But, by then, the other side of all those carry trades (equities and fixed income alike) will have rushed for the exits — causing massive unwinds (short covering) and the yen to spike (USDJPY plunge.)  It hasn’t worked out so well for equities in the past…

Don’t look now, but I think the Dow just wrapped up subwave 2 of its third wave (2nd Bat Pattern in a row.)

And, the Nikkei — a splat in search of a ledge — just got its nudge.

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Of course, it might also have been Dallas Fed President Richard Fisher’s comment moments ago that the Fed is “seeing some exhibitions of excessive risk” and has “exhausted the efficacy of QE.”  Gee, do ya’ think?

Happy quadruple witching Friday…should be an interesting day.  No real data to speak of, lousy earnings and retail reports, very toppy market.

USDJPY is right where it was yesterday — either ready to break out on the flag pattern or completely out of gas.

The precision of the alignment with the channel top leads me to believe it’s done, but that would require a sharp reversal at current prices.

The eminis, having ramped overnight or no good reason (as usual) are nudging up against the .886 Fib level.

Momentum is on the bulls’ side, but that’s how it is at important turning points (or, there wouldn’t be any need to turn, right?)  In their favor, an Inverted H&S Pattern and setup for a Butterfly (with the big reversal at the .786.)  Working against them, a rather bearish big picture [see: Eye Candy for Bears.]

The euro continues to backtest the channel midline it broke yesterday.

It’s off to a good start after reversing at the top of three intersecting channels, and is one of the currencies that suggests stocks are due for a serious correction.

The two previous reversals at the yellow channel top produced SPX declines of 47.2% and 21.6%.  The other two declines through the yellow midline produced declines of 16.4% and 10.9%.    From today’s high of 1884, similar declines would translate into:

• 47.2%……SPX   994
• 21.6%……SPX 1476
• 16.4%……SPX 1574
• 10.9%……SPX 1678

There are many potential targets for EURUSD.  A mild downside case might be the white .382 at 1.3147 (also the red channel midline.)  A bigger decline could target one of the purple Fib retracements: the .618 at 1.2776, .786 at 1.2453 or .886 at 1.2260.  If the previous low at 1.20 doesn’t hold… well, it’s’ a long way to the bottom a la 2008.

A smattering of my favorite bearish charts.  Enjoy!

We start with the well-formed megaphone pattern on DJIA… …and, its doppelganger on the S&P 500 from the 70’s.

SPX (the thin purple line) raced ahead of DJIA at the top in 2000…

…and, again over the past few months.

The USDJPY recently reached the channel top that spelled stock declines of 22%, 35% and 57%.  Again, the S&P500 is shown as the thin, purple line.

The two prior tags on the EURUSD’s channel from 2008-2014 signaled declines of 47% and 21%.  We just tagged it a third time.

And, three previous tags on the 10-YR bond’s major trend line since 2007 have touched off plunges of 52%, 15% and 20%.  The minor TL between Feb 2011 and Sep 2012 signaled two additional corrections of 9.9% and 8.9%.

The latest breadth thrust pattern on the monthly SPX chart shows a startling resemblance to those from the 2000 and 2007 tops.

And, last, my favorite bearish chart.  What would happen if 1973 were to replay?  Hint, the white dot is only half the damage.Safe trading!

The website is undergoing some maintenance today.  If this site acts up, I’ll use pebblewriter.blogspot.com until the issues are resolved…

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USDJPY has either completed its run or has formed a flag pattern that signals higher.

ES had a nice move yesterday, but needs to move south of the rising white channel in order to confirm our downside case.  In the absence of a move lower, we should get a retrace of the 1823 lows, ideally to the purple .786 at 1832.92.

UPDATE:  12:20 PM

We’ve retraced .786 of yesterday’s plunge, a reasonable place for a reversal and retest of the downside.  The .886 at 1864.59, however, would provide another tag of the purple channel top.

Note the divergence with USDJPY.

In watching the USDJPY, it makes sense to keep an eye on the Nikkei.  It’s in trouble, having broken down and backtested a long-term channel…

…as well as the 200-day moving average.

It’s most of the way through a H&S Pattern that indicates 11381  — the large scale .618 — if the 13,891 and then 13,196 don’t hold.  There is also good channel support at 13196 (the purple .786) from both the grey and purple midlines.

The increased sales tax kicks in on April 1 (from 5 to 8%), which can hardly be expected to boost consumer spending which, along with consumer confidence, is sagging badly…

…a logical reaction to soaring food and energy prices [for more on the macro picture, see: Sayonara Abenomics.]

Sideways on the USDJPY overnight…

…a victory of sorts for the e-minis, which have inched higher.

Interestingly, SPX itself already reached the .786 yesterday.

I presume this means another leg up 1873 or 1880 for ES.  But, of course, that depends to a large extent on what Yellen has to say later today.

E-minis are off their ramp session highs after having retraced .786 of last Thursday/Friday’s losses.

The USDJPY rally largely fizzled — with 101.20 safely defended for now.

UPDATE: 9:55 AM

Better look at the daily ES chart…

We’re getting an USDJPY-driven overnight ramp…

…with a 10-pt bar at 1am just because.

It’s probably worth keeping an eye on EURUSD today…

…as well as the 10-yr, which is still flirting with a dip below the red channel midline.

It’s one of the indicators I’ve been studying that challenges the notion that the unrest in Ukraine, Venezuela, Southeast Asia and MENA, the faltering growth story in China, Japan’s continuing implosion, spiking food and energy prices around the world, and the Fed tapering are a positive backdrop for equities prices.

Note how the reversals off the lower dashed yellow TL have coincided with SPX declines of 20.1, 9.9 and 8.9%.  Most recently, TNX failed to retake the upper TL which also has an impressive story to tell (declines of 52, 15.4 and 20.1%.)