Equities are still in a very precarious position. The usual pre-open ramp job flopped and the red channel integrity is beginning to look strained. Still, with seven stick saves now at 1820-1823, we have to wonder if it’ll be allowed to get started on the next wave down.
Depending on which falling channel it’s following, USDJPY has either run out of steam or is positioning itself for a run back to 105.27. I wouldn’t chase it, as the red .886 should hold — at least for now.
UPDATE: 10:00 AM
ISM’s services survey is out this morning. Note the contraction in new orders, inventories, and order backlogs. The only category which is growing faster is employment. Oops.
Speaking of “oops,” check out the move in gold between 10:12 and 10:14 this morning. Fat finger, or simply a loss of well-defined support? Trading was halted, and we’ve all been advised to move along… nothing to see, here.
continued for members…
UPDATE: 11:00 AM
Nice reversal for USDJPY back inside the grey channel and below the falling white channel midline.
Looking pretty negative for equities… but, remember, there’s support for SPX at the previous 1.272 at 1823.42. So, even if this falls apart, it might not plunge like gold did.
UPDATE: 11:50 AM
1823.73 on SPX, probably good enough.
USDJPY tagged the white .786 and should be ready to make a run higher if it’s going to take a stab at a deeper retrace on the purple scale — either the .786 at 105.13 or .886 at 105.27.
As I see it, there are two major ways to interpret the recent highs. SPX was supposed to reach its 1.272 at 1823, which it did. But, ES had a 1.272 way up at 1837. Instead of running up overnight or over a weekend — and, it had plenty of opportunities over the holidays — ES did so in broad daylight. It topped out at 1846.50 on Dec 31 after a week-long forced march on non-existent volume.
This ramp brought SPX along for the ride, out in the open, where it overshot its 1.272 by a relatively large margin of 26 points. Those of us who anticipated the reversal at the 1,823 had to make a decision regarding the overshoot: play it safe by staying relatively neutral or play along with it and risk a sudden downdraft.
In the end, I chose to play it safe — even though my gut (accurately) told me what was likely to happen. Now, because every new revelation brings with it a new challenge, we have to interpret the meaning of the overshoot.
In a bull market, whistling merrily past a major Fib level confirms the upside. The worst that usually happens is a backtest of the Fib level: in this case 1823. And, that’s exactly what we’re about to get.
In a topping market, whistling 20 points past a major Fib level means the downturn will be that much more savage. Time will tell.