pebblewriter

Tag: DX

  • The Morning After

    What a disaster for Boehner & Co. last night.   Did we really need another warring faction?  What are we — Greece!? Wait, don’t answer that!  The markets will not take kindly to this additional complication.

    Today’s theme song: Maureen McGovern’s song from the 1972 Poseidon Adventure.   Don’t laugh, it won an Academy Award!

    What sold me were the movie clips that Brendan Thompson matched up to the song on YouTube.  Perfect metaphor for our current situation.

    It opens with Larry Kudlow studying the charts: “obviously a buying opportunity!” as the bulls party like it’s 1999 with Bernanke (Hackman) leading the cheering.

    0:18 – In a cameo, Yours Truly sounded the warning, but it was left on the cutting room floor.

    0:30 – Things are suddenly not on an even keel.  Quick, call the Plunge Protection Team!

    0:47 – Boehner’s motion is “tabled.”

    1:06 – Things have stabilized; experts encourage investors to “hold on.”

    1:12 – Bernanke leaps into action.  It’s a crappy job, but he’s just the man “in the end.”

    1:16 – A private conference between Merkel and Draghi:  “I thought we were in trouble!”

    1:18 – Harry Reid restrains a screaming Eric Cantor: “This is what they wanted all along!” as Pelosi dives over the cliff.

    1:30 Boehner makes another brief appearance.

    1:53 – Pelosi caucuses with one of the last remaining moderate Republicans. Together, they hatch a risky plan — find a political middle ground that will preserve the country’s future.

    2:16 – Obama is there to announce that disaster has been averted, since…

    2:18 – Everything’s fine, now that Helicopter Ben has arrived.

    In terms of the current markets, I’d put us somewhere around the 0:35 mark.  Enjoy!

     

    Note: has to be opened on YouTube due to copyright considerations.

    *  *  *  *  *  *  *  *  *  *  *  *

    All I can say is “thank God for Congress.”  They make life so much more…predictable.  While the PPT swings into action, trying to clean up the mess, Boehner reiterates just how far apart the two (how many?) parties remain.  Thanks to the failed House action last night, we now know just how divided are the Republican ranks.

    First test: the channel up from 1343, which coincides with a Crab Pattern completion — not to mention a nauseating diatribe from the MSM as to why this is a buying opportunity.   I remain short from 1447 on the 18th [see: CIW – 1:10PM Update.]

    SPX would have tagged the .618 at 1425.68, but that would have been a pretty obvious breakdown of the channel.

    DX completed the small Crab Pattern we’ve been tracking.  Expect a pause, but not much more.  The currency markets are harder to control than the equity.

    I think it’s safe to say our forecast continues to be on track.  Downside targets coming up.

    continued for members… (more…)

  • Still Groovy: Dec 19, 2012

    A quick plug: for anyone doing any last minute holiday shopping, I recently found a wonderful online shop that carries very cool shabby chic, french country and vintage decorative goodies.  After looking everywhere, I snagged some vintage champagne flutes at a very reasonable price.  I also understand the proprietor lost a loved one in the Sandy Hook shooting. Take a peek: here.

    *  *  *  *  *  *  *  *

    This Just In!!!

    The Orange One delivers a 60-second pep-talk on his cordial and highly productive talks with President Obama.

    ORIGINAL POST:  3:00 AM

    I have a confession to make.  Two weeks ago, I plagiarized the title and intro of the post: Stay Groovy.  Okay, so technically I plagiarized myself.  I originally used it the morning of June 1, 2011 on the old Blogger site to describe a situation that seemed pretty dicey.

    On May 31, after 3 straight daily gains, SPX had tacked on an additional 1.1% and appeared to break out of a well-formed channel.  Rumor was the Greece debt crisis was nearly resolved (glad we don’t have to worry about that anymore) and financials partied like it was 1999.  From the CNBC daily recap:

      

    Most everyone, it seemed, was suddenly bullish.  Truth be told, even I still had one foot in the bullish camp, wondering if SPX still might go up and tag the .786 of the 1576-666 crash at 1381.50.

    I posted the following commentary:

    There are plenty of tripwires ahead in the economic data due out this week.  Will they blow up the market, or simply result in another QE airstrike?   May as well call your bookie and bet on whether QE3 is coming….While I think there’s some upside potentially to the 1380 level, I wouldn’t bet the farm — especially from these levels.  I remain much more concerned about the downside.  Stay groovy.

    Here are the vitals from the end of the day, May 31, 2011:

    • SPX nearing the Fib 61.8% retracement from the 1370 top, still down 1.9%
    • every bank stock shown above gapped up on the day
    • an established channel had been broken in a way that surprised vis-à-vis 2007

    Turns out that the channel in question could be interpreted two different ways.  The red channel was indeed broken, but the purple one was still intact, thank you very much…

     

    …which meant that the channel break-out everyone expected was quickly and painfully reversed.

    “Okay” you say, “lots of nice information.  But, why do I care?”  Let’s examine yesterday’s vitals:

    • SPX reached the Fib 78.6% retracement from the 1474 top, still down 1.8%
    • every bank stock shown above (except HBC) gapped up on the day
    • an established channel was broken in a way that surprised vis-à-vis 2011

    Reaching the 78.6% Fib retracement yesterday wasn’t a huge surprise — after all, S&P upgraded Greece (at least we don’t have to worry about that anymore.)

    Like May 31, 2011, every bank stock (except HBC) gapped up on the day.  But, although SPX is up over 100 points (nearly 7.5%), most of the banks are still sitting at or below their May 31, 2011 price levels.

    BAC and WFC are the exceptions, but they are rapidly running out of real estate.  Most of the other charts look something like the following:

    How about the broken channnel?  Until last week, the red channel was apparently in control.  SPX pushed up through it, then back-tested and took off.

    But, suppose it’s the white channel that really matters?  Suppose the fiscal cliff solution (that seemingly everyone expects) never materializes, or housing starts are horrid, or the euro zone suddenly lands back on our collective radar?  Suppose DX and EURUSD both complete their Bat Patterns tonight or tomorrow?  Suppose the recent break-out…wasn’t?

    When I start asking rhetorical questions in the middle of the night, it’s probably time to turn in.  I’ll leave readers with one last chart that anyone who’s been following our analog might find interesting.

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  • Charts I’m Watching: Dec 12, 2012

    In widespread anticipation of the Fed broadening its accommodative stance, the dollar poked down through its proposed (white) channel overnight.

    While the EURUSD is back-testing its recently broken rising channel.

    With expectations high that the Fed and Congress (some of you might have heard recent talk about the so-called “fiscal cliff”) will deliver, the cost of any disappointment could be very high indeed.

    The Fed is expected to replace the upcoming expiration of Operation Twist with new bond purchases, bringing the monthly total to $85 billion (including MBS.)  Whether QE was worthwhile or not is a question for future history books.

    But, there’s no question that each round has resulted in diminishing returns for the market — witness QE3’s paltry 40-pt gain on SPX.  Unfortunately for the Fed, they were up against a worthy foe — a well-established Bat Pattern that snuffed out the rally as we expected [see: The World According to Ben.]

    After the subsequent 130-pt decline, SPX is almost back to its pre-QE3 price level. I find it interesting that, yesterday, 60-min RSI tagged the top of the channel line formed from that brief rally.  It’s all the more interesting that it did so in the form of a back test of the channel that contained the rally from 1343 — and failed to break the previous (Nov 2) high of 1434.27.

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  • Charts I’m Watching: Dec 11, 2012

    Today marks the 6th session since we shorted at 1423 [see: Without a Net] in anticipation of a strong downdraft.

    The first wave down since then was a respectable 25 points, hitting just below our initial 1400 target.  Wave 2 has since rebounded a little over a Fibonacci 88.6%, but is definitely taking its time.  With the bump up in the futures overnight, there’s even a possibility SPX will go up and tag the actual .618 at 1424.41 as discussed yesterday ( it hit 1423.73 on Dec 3.)

    The markets remain frozen in fiscal cliff headlights, and thus our forecast is becoming stretched.  I’m not overly concerned about this, as it has occurred in each of our previous analogs. I think it has to do with recognition of the pattern, and the efforts being made to avoid a similar outcome.

    The slope of the white channel could potentially be shifted, as illustrated by the above chart.  But, it would take a break out to reach the next higher Fib levels.

    A sustained move up through SPX 1325 would signal a Gartley Pattern to the .786 (1446) or Bat Pattern to the .886 (1459.)  In that event, I’m fully prepared to switch sides and take a stab at re-shorting at those higher levels.

    But, indications are that our primary forecast is about to be realized. The dollar, for instance, has tagged the bottom of the channel after completing a 61.8% retrace of the 1st of a wave 3 higher.  If it can hold the channel, the next move up should be explosive.

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  • Without a Net

    The toughest moments for those of us who chart publicly are those right after calling a significant top or bottom.  There are some instances when pretty much everyone and their mother can see a turn coming.  Other times, it feels like you’re sailing through the air, frantically searching for the catcher and hoping he hasn’t chosen this moment to take an unannounced coffee break.

    The first wave down after any significant top is just plain fun.  It worked!  Sit back, bask in the glory, etc.  Then comes the corrective wave.  Heart-in-throat time.  You know it’s going to retrace some of that first wave down, but how much?  Most chartists develop sweaty palms around 61.8%.  Your stomach starts churning at 78.6%.  At 88.6%, time for your favorite vice.  And, God help us if it’s a double top.

    Following an analog is generally the worst.  Virtually no one else sees it coming, and there is a long list of reasons you’re probably wrong.  Taking a tour around the net last night, that certainly seems to be the case now.  The euro is soaring, the dollar is tanking, and the market has spurted 80 points in two weeks — only 50 points from a five-year high.

    It’s made even worse if the first wave down didn’t break out/down of whatever chart pattern it was in.  Yesterday’s reversal was impressive — going from up almost 8 points to down 8.But, we never quite reached my 1424.41 target — coming up .68 short — not to mention the Inverted H&S target.

    And, we haven’t yet broken down from the rising wedge. A re-test of the high is officially on the table until that happens — hence the importance of using stops.

    Once the wedge is broken, the next support is usually either an important Fib level or a morphing of the wedge into a channel.  In this case, we have strong horizontal and Fib support at 1400.  If we convert the wedge to a channel, it has a mid-line currently around 1402 and a channel bottom around 1390.

    A rising channel would be bullish, of course.  And, I haven’t a bullish bone in my body right now.  We draw it, though, because we have to try to get inside the head of all the bulls out there and figure out where they’re likely to jump in and buy.  Channel mid-lines and bottoms, as well as important Fib levels, definitely qualify.

    UPDATE:  11:35 AM

    Nice reversal off this morning’s highs again, turning a 4-pt gain into a 4.5-pt loss where SPX bounced off the 10-day SMA (in red below, currently 1405.37.)  The SMA 20 (white) is down around 1392 and, like the 50 (blue, 1419), is due to continue falling. Fifty sessions ago was Sep 20, two sessions post the Sep 14 high of 1474.  So, all else being equal, the SMA 50 should start coming down as those higher components to the moving average roll off.

    The 200-day moving average (thicker red) is down at 1385, so it’ll be a while before the 50/200 cross.  And, we are officially back below the 100-day (thicker yellow) at 1410.59.  Look for the 50/100 cross in the next few days.

    The next battles involving moving averages will likely come at 1380, involving the SMA 200 and the SMA 20 at the intersection of the bottom of the rising white channel and the top of the falling red channel.  The 50% retracement of the 1343 to 1423 rally is at 1383.54, which intersects with both channels on Thursday.

    So, we’ll keep an eye out for a significant bounce Thursday at 1383ish.  Remember, the .786 of the 1576 – 666 crash is right there at 1381.50.  And, bulls will want to limit this “correction’s” downside to the next Fib level lower — on the way to new highs, of course.

    The EURUSD, in the meantime, has reached Sunday’s upside target of the .886 at 1.3084 and has completed a fairly decent looking rising wedge of its own.

    UPDATE:  12:10 PM

    The dollar has reached the bottom of the white channel we charted Sunday [see: DX Update], just beyond a .618 retrace of the move up from 78.725.  It appears to be basing for a move higher.

    I’m expecting a 5% move by around the end of the year.   What does that mean for stocks?

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  • DX Update: Dec 2, 2012

    The US dollar remains in a rising channel within long-term channels that point to very different outcomes.

    The rising white channel intersects just ahead with the larger falling white channel upper bound, the rising red channel mid-line and the 75% bound of the falling purple channel.

    Whether the red or purple channel carries the day will depend largely on whether the ECB or the Fed can deflate its currency the fastest.

    But, the intermediate-term picture is clear:  if DX can hold the white channel, the next move should be much higher.

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  • Charts I’m Watching: Nov 26, 2012

    MEMBERSHIP NOTE:  I have set up a Twitter Account (@pebblewriter). I will endeavor to tweet important intra-day alerts within a few minutes of posting them in these pages.  I believe you can arrange to be notified of any updates by text or email.  Alerts will contain a link that directs followers to the pertinent post.  I’m new to this, so bear with me as I get the hang of it.

    Also, last call to take advantage of the Hurricane Sandy membership promotion [details HERE.]  Donations of $100 or more to the relief effort  will earn you $200 off the cost of an annual membership.  It’s a great chance to do well by doing good.

    Last, as posted a few days ago, monthly memberships have been discontinued.  Monthly members who convert to Annual Membership are eligible for a rebate of their most recent monthly payment.  New pricing for all membership categories goes into effect at the end of the month.

     

    ORIGINAL POST:  9:20 AM

    Here’s where we left off Friday.  I’m not thrilled with the idea of adjusting channel lines to fit with an overshoot of a target.  Looks a bit hinky on the 60-min chart…

    …even if it fits fine on the daily.

    But, here’s the chart that really convinced me to stay short (from 1404, 10:30 EST in members’ section) over the weekend, even though SPX slightly exceeded my original stop of 1407.  Remember, this is a short-term trade only.  Our core position remains long.

    The RSI ran into the upper bound of a well-formed channel (yellow) at the end of the day.  So, it’s either break-out or break-down time – regardless of what price was saying.

    And, in the 60-min time frame…

    Meanwhile, the dollar was breaking out of a week-old 60-min RSI channel and appears to be setting up for a back-test of the broken channel and recently broken moving averages (10-day = 80.88, 20 = 80.78, 200 = 80.9).

    UPDATE:  11:30 AM

    SPX broke down through the important 1400 price level, and is likely on its way to completing a proper B-wave for this corrective wave on its way higher.  Friday, I updated the primary forecast to reflect a significant sell-off into the middle of the week, followed by a strong recovery.

    This scenario is in play if we reach the low 1380s in the next day or two — something that seemed unlikely on Friday, but would seem less so if we traded down through the SMA 200.

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  • Charts I’m Watching: Nov 23, 2012

    ORIGINAL POST 9:25 AM

    SPX seems intent on reaching the next Fib level — the .618 of the 1433-1343 plunge at 1398.99 — before embarking on a significant B wave lower.

    But, the top of the new purple channel that’s been guiding us lower since mid-September is up above at 1401-1403, so there’s every chance in the world that SPX will stretch to reach it.  Plus, 1400 is just too tempting a target.   Reversals are attracted to round numbers like moths to a flame.

    The neckline of the H&S that completed back on the 7th is up at 1406ish and would mean a break out of the channel, so I’ll make that a secondary target and would look for a quick retreat back into the channel.  Since the market’s aim here is to give the “appearance” of setting up a Bat Pattern that targets the .886 at 1459.56, a reversal anywhere between the .larger pattern’s .382 at 1393 and .500 at 1408 would suffice.

    SPX just smacked into a bunch of channel lines in this area, and we should see a strong reaction before moving much higher.  But, as we discussed Monday, the general trend remains higher to our forecast target.  Any shorting here would be a short-term trade in conjunction with a long core position.

    DX is closing in on the highest of our proposed Point C’s posted on Monday — the .382 of the 78.725 to 81.515 run since the Sep 14 low.  This is also a .618 of the more recent 79.72-81.515 spurt and a channel line, so a reversal should be imminent.  Remember, the overall trend is higher into the end of the year.

    We’re looking for either a B subwave higher in the C leg (or the main B leg higher itself) of an A-B-C move lower to find a Point C for the Bat Pattern completion up at 83.06 to 83.62.  It could be significant, but it’s a counter-wave in a counter-wave, so don’t get too hung up on nailing it precisely.

    The EURUSD is closing in on the .618 retracement of its recent drop from 1.3138 to 1.2660 — as well as an important channel line.  Look for a reversal around 1.2956 to coincide with SPX’s channel tag discussed above.

    UPDATE:  10:30 AM

    SPX just reached the upper bound of the channel discussed above.  I’m trying a short position here at 1404, with stops around 1407.  Again, general trend remains higher. Targets and charts in a moment.

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  • Charts I’m Watching: Sep 25, 2012

    ORIGINAL POST:  9:00 AM

    EURUSD running out of steam… Would love to short around 1.2971.

    DX finding support for continued push higher…stands a very good chance of breaking out of the channel today or tomorrow…  I’m an aggressive buyer at 79.33.

    e-minis hitting resistance…

    Fading this rally unless we break out of the triangle… currently ranges from 1454-1464 with apex of 1459 on Friday.  Decent chance we’ll tag the upper bound at 1463-1464 before reversing…

    More after the open.

    UPDATE:  10:20 AM

    Ideal spot for reversal: the .786 and white channel bound at 1463.86.

    UPDATE:  10:40 AM

    EURUSD in the final throws — looking for a butterfly completion at the top of the channel in a rising wedge. Should get a reversal between now and 1:00 PM EDT, ideally at 1.2970.  Immediate potential to the bottom of the channel — currently around 1.28.

    The dollar is similarly working towards a Crab Pattern completion at the lower bound of its channel — while in a falling wedge.  Idealized reversal would be at 79.334 between 12-2 PM EDT.   Immediate potential to the top of the two channels (small purple and larger red) around 80.06.

    SPX is completing a rising wedge at the upper (white) channel bound — harmonic targets for 1.618/.886/.786  patterns between 1463.32-1463.86.

    UPDATE:  11:20 AM

    Any minute now…

    UPDATE:  12:00 PM

    Each of this morning’s targets was reached.  Should get some back tests, but the next move is down.

    The rising wedge on SPX broke down and it just broke through the support I was worried about — the lower bound of a larger rising wedge (purple.)

    The EURUSD rising wedge broke down, peaking within .0002 of our 1.2971 target.

    DX broke out of its falling wedge higher than I anticipated, at 79.375 rather than 79.334.  I have redrawn the channel to reflect the new bottom — ditching the after-hours plunge on the 21st.

    SPX and DJIA should turn negative on the day very soon.

    I hope everyone was able to make a few bucks this morning.  Downside targets coming up in a few minutes…

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  • What a Wonderful World

    ORIGINAL POST:  4:15 AM

    Whether driven by fundamental constitutional considerations or a keen awareness of the implications for their pensions, the German Constitutional Court granted the German government conditional approval to throw good money after bad.  How conditional?

    Germany’s ESM share will initially be capped at EUR 190 billion.  As Germany is the only ESM participant with any meaningful extra cash laying around, this action turns Draghi’s bazooka into more of a pellet gun.  It limits the ESM’s “unlimited purchases” of sovereign bonds.  And, it waters down Draghi’s “whatever it takes” pledge to “whatever we can dig out from behind the sofa cushions.”

    The markets immediately ramped on the news, but I suspect it’s only a matter of time before less bullish implications fully sink in.

    The dollar sank slightly beyond our immediate target of 79.859, reaching 79.78 at the low so far.  The next lower level of support is a .786 at 79.30 – 79.43.

    The EURUSD tagged 1.2905, the 1.272 of the smaller of our two harmonic patterns.

    There is substantial resistance at 1.2938, and then 1.3046.

    More later this morning, including implications for stocks going into the FOMC announcements this afternoon.

    UPDATE: 10:45 AM

    The GCC’s decision practically guarantees more legal wrangling down the road.  Thus, the ESM’s efficacy will most certainly be procedurally hampered.  But, the larger issue is its size/composition.

    As currently laid out, the fund will amount to EUR 700 bn.  Consider, however, who’s putting up the lucre and when it arrives.

    As Mish reported in June, the EUR 700 bn is funded in 5 annual payments.  For 2012, there should be EUR 140 bn with which to beat back the bond vigilantes.  However, several of the supposed contributors on the list are also likely contributees.

    How much can we expect from the likes of Ireland, Greece, Portugal and Spain?  Subtract their EUR 25 bn 2012 share, and the ESM is left with EUR 115 bn.  How long will that last, given that Spain, itself, is estimated to require upwards of EUR 300 bn?

    Another fun fact: according to recent polls, 54% of Germans are none too happy about forking over hard-earned euros to support their spendthrift neighbors.  Angela Merkel, who’s tied her political career to the preservation of the euro, is up for election next year.

    Her party, the Christian Democrats, is already in the cross hairs, having lost control of  Germany’s most populous state — North Rhine-Westphalia — to the Social Democrats in May.  How well can she defend the ESM/ESFS’s actions when she’s watching from the sidelines?

    More in a few.

    UPDATE:  11:15 AM

    Can’t escape the irony of the Libyan embassy attack, juxtaposed against the iPhone 5 announcement.  While the risk of war in MENA escalates further (finger pointing at Gadhafi and Al Qaeda, there must be an Iranian connection) the financial world will celebrate the introduction of another shiny new toy.  I wonder which will get more air time…

    UPDATE:  11:30

    So far, the market is reacting as we discussed earlier: not exactly ecstatic with the GCC news.  SPX made it as high as 1439.15 before beginning a slow fizzle to almost breakeven.  It’s currently up 4 and change.

    While waiting for the red-hatted ones to make their appearance last night, I had time to do a total reset on SPX.   Every month or so, I erase all patterns on my charts and start with a fresh slate — just to see if I come up with the same conclusions.

    Bear with me while I work through some fascinating long-term charts that have much to say about the market’s immediate future.

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