pebblewriter

Tag: DX

  • The Midnight Hour

    The market is wandering at the moment, trying to establish some tone for the day.  It looks weak at the moment, but in the absence of any fresh news/rumors re the German court ruling and/or QE3, I suspect most traders have already either placed their bets or taken their money off the table.

    One of my favorite charts to watch when the market is drifting is the short-term DX — say 15-min.  Currency markets are deeper and less susceptible to retail influences than equities.  I consider them “the grown-up in the room” and believe their tells are often more accurate.

    A bounce off that little red dashed TL (and white RSI TL) and I’ll likely re-short.  A break, and equities will probably continue higher.  Here’s the 5-min chart:

    Remember, the dollar is still trying to battle back from a deeply oversold condition.  The daily RSI fell out of its channel Friday, but is doing its best to climb back.

    More in a few.

    UPDATE:  10:45 AM

    There’s the break down through the TL — should give stocks a boost.  But, there’s support down below at 79.859-79.901, so I’m not inclined to chase it.  I’m in cash now, and expect to be in cash at the end of the day.

    Random thought for the day:  if Treasury, which is joined at the hip to the Fed, knew that QE3 was coming Thursday, would they be dumping their remaining AIG right now?

    *  *  *  *  *  *  *  *

    The German Constitutional Court is scheduled to deliver their verdict on all things ESM at 0800 CET, 3:00 AM EDT — midnight on my beloved left coast.  Will their love come tumbling down?  We’ll have to wait till the midnight hour.

  • Down the Jackson Hole

    As we anxiously await Bernanke’s big show, the market is putting on a little show — reaching the 1409 target we mentioned yesterday (and then some.)

    If Bernanke disappoints, as nearly everyone now seems to think he will, that should just about do it for this retracement.

    As I’ve posted for the past several days, I’m largely in cash (save for a small speculative short position that’s strangely barely moved this morning, and to which I’m adding at 1410.70.)

    More after Bernanke’s comments.

     

    UPDATE:  12:30 PM

    The EURUSD hit our 1.2617 target this morning.  We first ID’d this level on August 22 [see: Charts I’m Watching], and it looked very touch and go up until this morning’s ramp.

    We could even go a bit higher to tag the 1.618 of the little red Crab Pattern — which is the .886 of the larger yellow Bat Pattern at 1.2666.  Most of the time after EURUSD 60-min RSI peaks, we get another lesser RSI peak that corresponds with a higher price peak (known as negative divergence.)

    But, the daily RSI is still back-testing the channel its been in for over a month (note the negative divergence on the daily) and fell out of on Aug 29.  I see RSI closing at or below the white channel and falling back to find support — initially at the purple channel line before breaking down further.

    A break thru the bottom of the white price channel (currently at 1.2388) will confirm the downside thrust has continued.  Until then, there is plenty of support at the various channel lines.  I don’t see an immediate plunge in value — probably not until the German Constitutional Court ruling on the ESM on Sep 12.

    Note that we’ve officially exceeded the red dashed channel line by a bit.  If we get a reversal today or even in the next few days, this is of little consequence. The channel has been violated temporarily before in its battles with the purple channels.

    UPDATE:  12:45 PM

    The dollar has come very close to hitting our target this morning, falling to 80.96 versus our target range of 80.83-80.88 also discussed on Aug 22 [see: Charts I’m Watching.]  Like the EURUSD, one last thrust lower to complete the tag is possible if the past custom of positive divergence were to repeat.

    The daily RSI has probably broken out of the falling wedge it’s been in since May.  In any case, we’re at or very near the bottom for the dollar.

    Recall that we’re in the final stages of a pullback in a larger uptrend with potential over the next few months to 87.076.  For those with the patience to ride out the inevitable swings, this should be a relatively safe place to earn nearly 10% in a few months.

    I expect prices to snap back into the purple channel and resume their climb; although a dip corresponding to a politically related equity surge is to be expected somewhere along the way.  If/when stocks sell off, we’ll get the greatest move in the dollar.

    If the stock market correction is serious enough, look for the long-awaited threatened QE3 to knock the dollar for a loop.  I wrote extensively about DX yesterday.  For more detail, see Managing Expectations.

     

    UPDATE:  3:00 PM

    The S&P 500 is hanging in there after a pretty wild ride.  SPX closed yesterday at 1399.80, soared to 1410.72 on the opening, fell back to 1398.96, soared again to 1413.09, and has since settled back around the the 1404.64 Fib level — where it’s inching higher.

    The markets were clearly not thrilled with Bernanke’s remarks this morning.  But, I suspect there was a sizable short position at yesterday’s close given Lockhart’s “QE3 is a close call” remarks.  It seems like everyone was thinking the same thing: no QE announcement tomorrow (today.)  In retrospect, it was a great opportunity for a short squeeze.

    In the end, Jackson Hole was a non-event.  Bernanke left the door open for QE3.  Depending on how you parse his words, it might even be slightly more likely.  VIX has settled back down, the dollar didn’t fall off a cliff, and the market is trading roughly where it has been for the past three weeks.

    Count today as the 18th session in a row to trade within 5 points of the fan line from 2007, the 15th to touch it, and the 7th to straddle it.  Clearly, the market is trying to make up its mind whether this is the end of the ride or the beginning of the next leg up.  I’ll spend this weekend trying to sort that out, but in the meantime, some charts are in order.

     

    SPX has formed the early stages of another leg down.  The red channel to the right is the same slope as the larger channel to the left.  If we are heading down, we can expect this channel to broaden; so, the top isn’t necessarily in.   The first peak in the former red channel was exceeded twice before the channel was done forming just the left side of its eventual full width.  We’ll come back to those red channel lines in a moment.

    The dashed yellow line that formed the neckline for the small H&S pattern (indicating 1370) over the past couple of weeks is parallel to a number of other important channel lines — shown above in red.  For the sake of illustration, I’ve changed them all to yellow in the chart below — and added a few more parallel lines.

    It’s easy to see how influential they’ve been over the past several months.  But, in reality, they and their cousins have been influential for years.

    The latest H&S neckline mentioned above stopped a rally in Feb of 1996, touching off three back-to-back Butterfly Patterns in a row that governed the market’s movements for a full seven months.

    The red channels mentioned above guided many of the corrections over the past 20 years.  Most of them were relatively minor, but one stands out from the rest — the crash from 2007.

    There are three more systems of channels I want to chart — along with updating the harmonic picture. But, I’m running out of time before the close.

    I’m going to go ahead and close out my short from this morning before the close here at 1404.50 and reevaluate the next move forward.

    I’ll have lots more charts either later this evening or tomorrow morning — along with a forecast.

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

  • Lemmings and Us

    ORIGINAL POST:  9:30AM

    The dollar and the euro each overshot our short-term targets just a tad, but are resuming the path we mapped out for them last week.

    The EURUSD came very close to a key .886 Fib level, prompting many to wonder “was that it?”  I wasn’t so sure, myself.  The resultant sell-off was pretty convincing, taking out the previous low.  It reversed as we expected it would overnight, and appears to be taking a run at 1.2588.  If it can break that level, it would complete a measured move to the .886 at 1.2617.

    The dollar, meanwhile, bounced hard off the channel midline as expected, and has resumed its decline towards the 1.272/.5000 at 80.83 – 80.88.

    Each of them is at a smaller degree .786 or so, meaning they’re due for a pause here.  And, if they can’t seal the deal with a higher high (euro) or lower low (DX), then the party’s over sooner rather than later.

    But, I’m still operating under the assumption that we’ll get one last push in this corrective wave before things come undone at Jackson Hole.  I have yet to see any serious trial balloons regarding an imminent QE announcement.  While not necessary, I would expect the very political Fed to do so, especially given the diatribe coming out of Tampa this week.

    If DX and EURUSD are only in a corrective wave, can SPX break out to new highs as we wondered last week?

    continued… (more…)

  • Strange Brew

    If you found yourself scratching your head today, you’re not alone.  SPX finally shed a couple of points — the first loss in seven forgettable sessions.  VIX reacted by selling off by 1.04.  Huh?  DX followed suit, settling  0.18 after being down as much as .66 from Friday’s high.  Come again?

    I wrote about VIX last Thursday: “The smaller harmonic patterns point to potentially lower values, so look for a drop to the mid-13s if the move up is contained.”  But, never in my wildest imagination did I anticipate said drop in the absence of a run up in stocks — let alone a drop in stocks!

    Whenever I’m vexed by VIX, I turn to VIXandMore.blogspot.com.  I have no connection with this wonderful blog, but am frequently impressed by the depth of expertise.  If you’d like the full explanation, click on the link above.  But, the short version is that today was VIX roll day, and the two components of VIX (VIN and VIF — really) conspired to significantly depress VIX.  One mystery solved.

    As for the dollar, it broke the rules Friday — up almost .30 on a day when stocks were also up.  So, today was perhaps a make-up call.  The EURUSD is showing strength after completing a Crab pattern (in red, below) last week.  After retracing .618 of the Jun 29 to July 24 drop, the pair threatens to complete a Gartley pattern (in purple.)  The .786 (1.2552)  intersects with a major channel around the end of August.

    BTW, the Gartley needn’t necessarily pan out.  As I noted a couple of weeks ago, there’s a very strong line of resistance at 1.24 that was broken back on July 5.  Closing up above it again could take some doing (or, at least a favorable decision by the German Constitutional Court.)

     

    I have many more charts to post, but am running out of juice.  I’ll leave readers with one last chart that represents the whole lot of them.  The ETF UKX is approaching its Fan Line off the 2007 high as well as the .886 Fib retracement level.

    Last week, it came to within a very manageable 0.7% of tagging both.  Yesterday, it closed off a bit, so it now needs 1.17% more to complete its Bat Pattern at 590.04.  A number of euro zone countries report GDP tomorrow.  If numbers come in at or above expectations, don’t be surprised to see FTSE go up and complete the pattern.

    More in the morning.

     

     

     

     

  • Assimilate or Die: August 13, 2012

    VIX overshot its .886 on Friday, losing .60 in the same way SPX gained 3 points — all in the last few minutes of the session.  Is this price action a signal of a continuing rally, or is it a futures related drop that signals the rally’s last gasp?

    As of the close on Friday, VIX had gone just about as far as it could in the latest falling wedge.  Any lower and the pattern would be broken, and the falling wedge is as reliable a chart pattern as they come.  Just look at the rally at the bottom of the last wedge.

    continued… (more…)

  • Update on the Dollar: July 24, 2012

    There is significant negative divergence on the dollar on both a daily and weekly basis.

    DX is also very close to completing those harmonic patterns it hasn’t already completed.

    It’s approaching the .707 of the largest (yellow) pattern, tagged the 1.272 of the next largest (purple) pattern, tagged the 1.618 of the red pattern, nearing the 1.618 of the pale blue pattern and the 1.272 of the smallest Butterfly pattern, seen in the chart below.

    DX is also approaching the price level of the last rising wedge apex — which is the next best thing to an actual back test to the RW itself.  No guarantees — because the dollar is suddenly the asset everyone wants to own — even if it costs money to do so.

    I have a bunch of charts to post this morning.  Check back around 10 AM EDT.

  • Charts I’m Watching: July 23, 2012

    Looks like I jumped the gun Friday, getting back in too early after scoring 15 points on the downside.  We have a substantial cushion, being up 626 points/45% since inception on March 22, but I really hate giving any of it back on a off-hours dump like this.

    As I posted Friday:

    If you didn’t get short ahead of time, the likely downside of this push is the small channel bound at around 1364.  I don’t think it would be worth jumping in at this point.  Of course, if we break 1360, it’s a different story.

    Having a stop at 1360 doesn’t help much when the market gaps open down 20 points.  So, we’ll focus on where we’re likely to end up today.

    While the upper bound of our rising wedge has been pretty clear, the bottom has so far refused to present a crystal clear picture.  Whether or not to include which tails has left the exact slope muddled, which means it’s difficult to anticipate the probable low this morning.

    There is a trend line (yellow, dashed) in the daily RSI that indicates a bottom is already in, but it’s not a TL or channel line I’ve been following, so it warrants further study.

    It caught the tumbles on Apr 10 (-28.25), June 11 (-42.25), June 25 (-24), July 12 (-19.75) and is thus skilled at putting a stop to big drops.  It has just been tagged this morning. (more…)

  • Update on the Dollar: July 17, 2012

    We’ve been keeping a close eye on the US dollar, which as a safe haven, continues to move inversely to equities.  I remember reading Aftershock a couple of years ago.  It made the very convincing argument that the US dollar would be destroyed by disastrous fiscal policy and runaway debt.

    The advice was to dump everything into euros and ride out the coming storm.  Needless to say, this otherwise terrific book demonstrated the risk of putting any investment advice into writing — a fear I battle on a daily basis.

    DX has been in a huge falling channel for years — a fact many dollar bears have duly noted.

    Since 2005, however, the major direction within the channel has been a slightly downward sloping sideways movement (the white channel lines.)  We’re currently working on our third thrust up within that system — shown by the small purple channel over the past 2 years.

    continued… (more…)

  • Update on EURUSD: July 6, 2012

    The euro is again hanging by a thread.  Recall it already broke down from and is back-testing a big channel (solid red, below) that dates back to 1997.  Its weekly RSI, however, looks like it could have some life left in it.

    First, I should make clear that I think the euro zone is toast.  The only thing holding it together right now is Germany’s indecision as to whether it’ll save money in the long run by going its own way.

    But, one of these days, investors will turn their attention back to the US dollar.  When that happens, there’s a fair chance that the American problems will be judged to be every bit as serious as the EZ’s.  In the end, it’s a dirty shirt contest and either currency could take first prize — especially if everything starts melting down — stocks, bonds, metals alike.

    With that said, let’s look at the charts.  (more…)

  • Forecast Revision

    Note:  only six charter memberships are left as of EOD Thursday.  I’ll keep this going until they’re gone.  Congratulations to E.J., P.B. and T.J. for locking in today’s annual rate for the life of the site.

    * * * * * * * *

    Well, we got the rebound we were expecting…although it was a little unnerving.  As I posted at 10:30 yesterday — with SPX down 16 points at 1315:

    We had a similar dip the day before Q1 ended, too.  March 29 opened at 1405, dipped to 1391, and closed at 1403.  Money managers like to end quarters on an up note whenever possible.  This feels like a fake out.

    Sure enough, by late in the day we had rebounded to within 2 points of the opening, just like on March 29.  More importantly, we were right back on track with our forecast (the solid yellow line.)

    Likewise, the dollar caught up to our forecast (solid yellow line) in one fell swoop.  I was getting a little nervous, watching the growing divergence over the past few days.  The previous H&S was in danger of being busted; and, although we kept one foot on the long-term channel line, we were moving further and further away from the presumed right shoulder target.  No more.

     

    The pattern over the past 10 sessions suggests we’ll top out this morning at 1357.28.  That’s a Bat pattern retracement from the June 19 1363 high.  I’m also altering our forecast going forward.

    continued…

    (more…)