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Welcome to the dollar days of summer, where it’s all about currency… well, and the oil that’s washing up on the beach.
The dollar put in a dramatic reversal last week, backtesting the channel midline again, but in a more dramatic fashion this time. It certainly appears to be coiling for a move to complete the Gartley Pattern at 99.533.
Could it have anything to do with the USDJPY, which TPTB are diligently trying to drive above the red channel midline? In the absence (yet) of an official QQE expansion announcement or even hint, will it take?
CL sure makes it look like they’re paving the way for the yen’s next leg down. Remember, cheaper oil makes a cheaper yen tolerable to the BOJ, which has the global equities market on its arthritic shoulders via the yen carry trade.
It all fits nicely with our analog, which suggests a turning point in about 10 days. Our targets remain unchanged from last week.
continued for members…
Upside targets for SPX still include the .786 at 2112.52, the .886 at 2124.92 and the purple IH&S neckline at 2137-2140, which we expect to hit around Aug 13.
Downside support consists of the jumble of moving averages between 2096.91 and 2100.4, chief among them the SMA100 (yellow.) The lot of them are highlighted by the purple rectangle. A backtest is badly needed at this point, so we’ll probably see one this morning.
SPX needs to kill some time between now and Aug 13. So, if the SMAs don’t hold, look for support from the channel midlines gathered around 2080, and the SMA200, now at 2069.47.
The bullish case remains a test of the IH&S neckline on Aug 13 followed by some retrenchment which eventually resolves to the upside when the BOJ takes action.
The bearish case remains a completion of the Butterfly Pattern to the white 1.272 at 2019.87 — justified by the retreat from the purple channel midline and white channel .272 line at 2112.
UPDATE: 9:48 AM
UPDATE: 10:31 AM
UPDATE: 12:35 PM
The culprit is CL, which failed to hold the 1.272/midline combo. There was no harmonic rationale for a bounce at the 1.272 (no .786 reversal along the way), but it was a likely interim stop.
Unless it bounces back by the end of the day, CL appears headed for the 1.618 at 40.57. Interestingly, the timetable seems consistent with our Aug 13 analog target.
UPDATE: 3:44 PM
SPX reached our next lower target at 2090 and bounced up to backtest the SMA100.
USDJPY is still below the red midline, and CL closed below the white midline and the 1.272. Both are bearish signals, so odds are SPX has further to go on the downside. The usual caveat applies: don’t hold short overnight unless you can hedge or at least keep abreast of developments.