pebblewriter

Tag: EURUSD

  • 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.

    continued for members…

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  • EURUSD Update: Nov 20, 2012

    Good morning, all.  The markets should get no help from across the pond today.  Though Moodys’ downgrade of France was not exactly news, it should serve to remind investors of the structural issues facing the euro-mess.

    The EURUSD completed a well-formed Gartley Pattern early this morning, reacting off the .786 of the latest move down.  More importantly, though, the pair is bumping up against three significant channel lines.  The Gartley is visible here as the small pattern in purple.

    The dashed, yellow line is the midline of one channel, and the solid purple line is the 25% line of another channel.  They’re both easier to see from further out, and are basically two different ways of viewing the rally from this past July (which happens to exactly parallel the last one from earlier in the year.)

    Note that the pair has also come back to its Point X of a recently completed Crab Pattern that came up a little short of the 1.618 (or overshot the 1.272.)  It’s the small red pattern on the above charts.

    The third channel I referred to above is the daily RSI channel.  The pair broke down from the rising purple channel around Nov 1 while establishing another falling white channel parallel to the last one from Feb-May.

    It’s now back-testing the purple channel — which should ultimately provide resistance that should send the pair down by no later than December 5.  Note this time frame fits with the intersecting price channels as well.

    Bottom line, while the rally could extend a little further after this interim resistance, the next big leg is down.  My money’s on the white .886 at 1.2169 around the end of the year in a plunge reminiscent of the May 2012 move.

    In the meantime, keep an eye on the rising wedge and RSI channels on the 60-min chart.  While the wedge hasn’t yet broken, the yellow RSI channel has.  After a back-test, there is  downside exposure with the falling white channel.

    The Big Picture:

    EURUSD completed a Bat Pattern (purple D) at its .886 in July — also the bottom of the falling purple channel.  This was also a Crab Pattern completion (the small purple grid.)  Many times Bat Patterns go on to become Crabs, meaning the ultimate target of this decline could be .9982.  But, my intermediate-term target is 1.10-1.13 by May of 2013.

    • bottom of the big red channel
    • intersection of the red and purple channels
    • white Crab Pattern completion at 1.618 (1.1342)
    • .618 tag of largest white pattern
    • bottom of large rising yellow and purple channels

     

     

     

     

  • Here Comes the Boom

    ORIGINAL POST:  4:10 AM

    I posted this chart early Friday morning, knowing full well that in order for EURUSD to follow our forecast… equities might not.

    Thanks to the miracle of after-hours trading, the EURUSD has kindly tagged our target “c?” and has rebounded — all without a nasty hit to equities prices which look to open in the green in a few hours.

    UPDATE:  9:35 AM

    We remain long from Friday at 1426.  But, tight stops are recommended here since the potential remains for an intra-day tag of the 1.618 at 1422.43 before the rebound gets going in earnest.

    This is a minor harmonic level compared to the .618 tag of 1426.34 Friday, but it would put a period on the downside since 1470 on the 5th.  For a full discussion, see the 11:35 update to Friday’s Charts I’m Watching.

    Watch for a reversal off the small white channel or the yellow channel line just above.  If SPX can break out of and successfully back-test the white channel, we should see some very healthy gains over the next few days.

    Some well-defined trigger points on the 15-min RSI — the white channel mid-line that’s currently being back-tested at and the dashed, red TL showing this morning’s trajectory.  If both were to hold, it would be very positive for this rally.

    If both break, look for support at the bottom of the white channel — probably our 1422.43 mark.  Such a move would be healthy for SPX, as it would clear out much of the immediate harmonic-based downside.

    A somewhat analogous situation exists for AAPL at its .618 of 621.6.  The low of 623.55 on the 9th was close enough, but bagging the actual .618 would establish a more solid foundation for either a retracement to a Point C (if the top is in) or the Butterfly that began in April to play out to 719.

    Either way, it clears the way for a 50+ point rebound.  But, holding the 620 level is key.  As regular readers know, I don’t typically play individual stocks.  I don’t like the event risk.  But, we occasionally chart AAPL just as a bellwether.

    There’s even a nice little Butterfly Pattern that points the way.

    UPDATE:  11:25 AM

    SPX has broken out of its price channel, and the 15-min RSI is very close to confirming.  Looking for a break of the yellow, dashed TL.

    I’ll post some upside targets shortly.

     

    UPDATE:  1:30 PM

    We got the breakout we were expecting, and SPX has paused here at the intersection of three different channel lines as well as the .786 of the last harmonic pattern down.  It strikes me that this is a good time to review our various targets and to handicap each in terms of its likelihood.

    If we’re lucky, we’ll be able to extend the month’s already nice gains (≈ 9%.)  If not, it’s a great opportunity to go on record and embarrass myself.

    continued for members…

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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.

    continued… (more…)

  • 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.

     

     

     

     

  • 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…)

  • EURUSD Update: June 28, 2012

    While many others are dissecting the tussle in Brussels for hints as to the union’s future, I thought it would be a good time to revisit the euro’s chart.

    Our last forecast [June 10: Currents, See?]  forecast a run up to 1.28ish by June 15, followed by a dip to 1.25 and return to 1.2875 around mid-July.

    With the pair at 1.2638 after the latest “Spain is fixed” rumor, I posted:

    “I suspect the euphoria over the Spanish bailout will be relatively short-lived.  After all, putting the rest of the eurozone in harm’s way seems like a better way to get them downgraded than it does Spain upgraded.”

    Sure enough, the ramp fell apart and the pair was trading at 1.2441 by the next day.  It took the stuffing out of the next leg up, leaving it a little short of our 1.28 target at 1.2746.  Likewise, the next leg down was a little deeper than expected.

    As I write this, the Brussels bunch is just sitting down to cappuccino, positioning and posturing for the battle ahead.   In the end, I expect the Germans will come through for their less fortunate neighbors — kicking and screaming, of course.   Yes, it sucks for them.   But, I don’t see that they have a choice.  It’s a situation only the Borg could appreciate.

    Considering the likely sturm and drang, it’ll be a sheer miracle if the markets behave as I anticipate.  But, let’s take a look anyway.

    continued…

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