Trump Falls in Line

Trump, who rode to the White House on promises to fix healthcare, avoid foreign wars, embrace Russia, dis NATO, label China a currency manipulator, rebuild infrastructure, slash taxes and upend the Federal Reserve is well on his way to reverting to the same stance as nearly every other mainstream politician in recent memory.

Yesterday, he declared that the US dollar was too high. And, after criticizing Yellen for artificially depressing interest rates to aid the (then) incumbent, it turns out he’s a fan of them (and, her.) Could it be that with all those ex-Goldman bankers running around the White House, someone sat him down and explained that he, too, could benefit from low rates?

USDJPY dropped right to our next downside target a full week ahead of schedule, but not without a bit of theatrics. Tuesday’s drop through the yellow line of support at 110.15 yielded, as expected, a drop to the falling white channel bottom. What happened next speaks to the continuing manipulation of USDJPY which, in turn, manipulates equity prices. The initial breakout above the yellow TL busted a rapidly falling channel in eminis. From there, USDJPY bounced back and forth in a series of headfakes above the purple trend line and below the red in order to fine tune equities.The primary purpose, of course, was to delay hitting the SMA200 until after the close — so as to avoid the rapid selloff that would otherwise have occurred. Mission accomplished. The yellow arrows below indicate where downtrends were interrupted.

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Nevertheless, our downside targets remain intact, with the 1.618/.786 Fib combination at 2334.26-2335.34 being the most logical next stop.

However, VIX still has the purple TL available to it should stocks need a bump.

And, CL got a nice bounce off its .707 Fib after dropping back through the .786 yesterday. And, of course, USDJPY has now reached firm support.

As we mentioned in our last update on USDJPY, there are a number of lower targets available to us. But, the SMA200 has traditionally been strong support for USDJPY. And, it fits nicely with the midline of the yellow channel I recently added.UPDATE: 9:51 AM

VIX is falling at a pretty good clip, leading me to believe it’ll power SPX above the purple TL. I’d go long on any push up through it (2343ish.)

UPDATE: 9:54 AM

SPX pushed through on VIX’s drop through the white TL. Oddly, though, VIX is hanging around the TL — as USDJPY is doing with its yellow TL. I’d like to think this will get up to the SMA5 200 at 2349ish, but there’s a chance it’s just a headfake. Watch your stops and be short on any drop back through the purple TL. ES suggests a head fake — perhaps unintentional. On a low volume day, with the big bosses already barbecuing in the Hamptons, it might be tough for the less experienced, junior guys left behind to gauge how hard to monkey-hammer VIX.Note that ES made a lower low today, while SPX did not (at least, yet.)

UPDATE: 10:08 AM

SPX stopped short of the SMA5 200 (as it did yesterday.) USDJPY and VIX are playing around with those TLs, and CL with the .786 Fib. It appears the goal is to pin SPX at the SMA5 100 until the SMA5 10/20 arrive.

I’m going to take a brief break. Keep an eye on those stops, with the key levels being the SMA5 200 and the purple TL at 2344.

UPDATE: 10:36 AM

I’m back, and it looks like things are on hold — likely a delay so that the drop down to 2334 is a backtest to the falling red channel rather than within it. It makes for an easier bounce. If that’s the case, it could be another 1 1/2 hours before it happens.

I have no desire to get whipsawed as it bounces back and forth, so I’ll leave you with the same advice as above: short on any decline through the purple TL (now 2344) and sell (or at least place stops at) the SMA5 200 (now 2348.58.)

I’ve put a couple of alerts on my charts and will be back if anything interesting happens. Otherwise, I’m going to work on some other charts.

UPDATE: 11:06 AM

Just tagged the SMA5 200, so it’s back to short with tight stops at 2348.26.UPDATE: 12:05 PM

SPX is making its move, right on time.Just need to get ES down past its SMA5 200, VIX up past the white TL, USDJPY down to or past the red TL…and, we should hit our target. Just got a note from a reader…what happens if it falls below 2334.26? I don’t expect it to, but if it does the next levels of support are the .886 at 2328.65 and the intersection of the two falling white channels at 2325ish — which could be at the close or Monday morning.But, I’d plan on taking profits at 2334-2335 and see what happens.

And, as always, be on the lookout for VIX, CL or USDJPY to swoop in and rescue SPX. At this point, they could fashion a nifty IH&S Pattern out of it.

And, one other note: the intersection of the two white midlines at 2340 could produce a bounce. It correlates with TL support on ES. So, be a little extra cautious if/when we reach it. Again, not expecting it — as any delay makes the red channel backtest a little lower price-wise.

UPDATE: 12:25 PM

The intersection that could produce a bounce… Again, I don’t think it’ll amount to much, as it would produce a lower low on the red channel backtest. But, it’s entirely possible that it’ll wait here for the SMA5 10 to catch down.Even VIX is uncertain…UPDATE: 12:41 PM

ES just reached its white TL. A drop to the midline would get SPX to 2334-2335. A drop to the red dot at the .786 would get SPX to 2333.75ish. I’d plan on covering once we get to 2335, but will look for signs of a reversal first.

UPDATE: 12:54 PM

I have to step away for 10-15 minutes, but will return asap.

UPDATE: 1:09 PM

There’s the 1.618. I’d cover here, but be prepared to re-short if it comes back for more. VIX and ES suggest it will.

UPDATE: 1:13 PM

Not much reaction from VIX or USDJPY yet. So, I’ll assume there’s more to come. We’d want to see VIX back above the SMA5 200 at 15.75 and USDJPY stay below the SMA5 200 at 109.02 in conjunction with SPX’s drop through 2335.UPDATE: 1:30 PM

If it doesn’t reverse here, it’ll have another chance at the white midline when the SMA5 20 arrives at, say, 2339.50 – 2340.UPDATE: 1:45 PM

With the SMA5 20 having reached the bounce’s highs, I’d be willing to try a short position here. Looks like VIX is slipping above the SMA5 200. Tight stops are advised.UPDATE: 1:48 PM

Here’s the .786. I’d hold short, as VIX doesn’t look done. Having second thoughts. ES is coming up on its .786 at 2330 — also a TL of support. I think I’d cover again, but be ready to short.

UPDATE: 2:09 PM

Thought we might get a reversal here as USDJPY is backtesting its red TL and CL is backtesting its red TL at the same time that SPX is testing the SMA5 20. VIX is still slipping, though. So, have to be cautious. Keep stops where you’re comfortable. For me, that would mean the white channel midline around 2339.15. It should be apparent when TPTB are ready to effect a full-scale rescue. USDJPY should jump back above the yellow TL. VIX should drop through the white TL. CL should pop up above the red TL. And, SPX should be back above the white midline. We won’t necessarily get all those things at once. But, if we do, it’s probably time to be long.

ES is in good position to pop up and backtest its white TL and SMA5 200 at 2338, which would be 2341 or so for SPX. I’d not want to be along for the ride, as it puts SPX back on top of resistance.

UPDATE: 2:25 PM

I’m going to cover the short here. ES has me nervous, and CL just popped above the red TL. If VIX plunges through the white TL, it’ll be hard for SPX to decline much. In short, we’re very close to all the conditions that should allow the bounce to continue. UPDATE: 2:54 PM

Looks like it’s rolling over. I’d take one last shot at shorting here. With ample headline risk over a 3-day weekend (4 in Europe) there might be more selling pressure than the algos can handle over the next hour or so. But, it could clearly go either way.USDJPY is positioned to reverse or push through the red TL. Ditto with VIX and its white TL. UPDATE: 3:20 PM