Why Things Are So Out of Whack…This Week

The BoJ, which has been the most egregious manipulator of markets for years now, has a problem. All it would take to solve it is about 60 points on the NKD. This is a very screwed up chart, in so many ways — not the least of which is that it has no basis in fundamentals. The election of a protectionist president in the US was supposed to benefit Japan how, exactly?

But, as in the US, the narrative was adapted to fit the objective. Also, as in the US, Apr 17’s VIX smackdown prevented the next logical step — a simple 50% retracement to tag the rapidly rising SMA200 at 17940. The NKD remains the poster child for broken, heavily manipulated markets.

Beginning on Dec 20, 2016, NKD has tagged the .786 Fib at 19669 eight times and come close a couple of dozen more. There have been five near breakouts since the Jan 9 high of 19745 — only 0.38% above the .786. Are we really supposed to believe the BoJ can’t engineer a 0.38% rally?

The reality is that can do it any time they like. The timing just hasn’t been right — begging the question: is it now?

continued for members…

Going around the horn…VIX was halted at the overhead resistance we discussed yesterday, and never could break out. Still hasn’t.

USDJPY, on the other hand, keeps chugging along. It has resistance at the SMA100 and white channel top at 113.245.ES has broken out…again. Will this one stick?And, thanks to VIX’s last second swan dive yesterday, SPX is in the same boat — though with the purple channel midline at 2390.70 to contend with. We still have plenty of downside targets from which to choose. But, between VIX and USDJPY, will we ever see them? It remains to be seen. If SPX can break out of the yellow channel at 2392.60ish, then new highs seem inevitable.

UPDATE: 10:15 AM

We’ve spent the past two weeks waiting for things to break down. The Fib situation is all fouled up. The channel situation is a mess. The only thing really keeping SPX’s hopes alive for new highs is VIX — which is a total crap shoot. We keep getting breakouts which can’t hold, dips that don’t hold, and gaps galore. The basic problem is there has been very little good news to push stocks to new highs, but TPTB need to keep things close enough so that after the French election results are released they’ll have the justification they need, and no trouble in accomplishing, those highs.And, should LePen win against all odds (or war break out in Korea, etc.), then they’ll have plenty of cushion for whatever downturn might occur.

I’d be prepared to jump on any dips below support such as the little red TL that has caught this morning’s dip. But, otherwise, I think it’s probably a great time to stay in cash.

Everyone likes big scores. I certainly do. But, I see little value in positioning for a big move that has, so far, been completely prevented from occurring.

Bottom line, I don’t think this is a great time to be a hero.

UPDATE: 10:56 AM

Back to the red TL — but, still a breakout of the little white channel. No joy, unless it breaks down and VIX breaks out past its SMA5 200 and, more importantly, the overhead resistance at 11.17. UPDATE: 12:00 PM

More of the same…but, possibly a drop here. I’d try shorting with extremely tight stops. If it can get past the SMA5 100, then 2376-2377 is a possibility. And, if 2376.57 is taken out, then 2370.86 still looks good.UPDATE: 12:20 PM

Progress report. Watch out for VIX 11.21 — the bottom of the yellow channel — and SPX’s SMA10 at 2379.53. We could get a bounce here unless VIX breaks out. Also, note that USDJPY has reached the bottom of the little white channel.From the looks of the DXY chart, it’s trying desperately to hang on. Does anyone still believe the Fed will raise rates again?UPDATE: 1:02 PM

This might be about the extent of the bounce. I’d revert to short here with tight stops in case VIX isn’t quite done. For now, its finding support at the SMA5 200. Obviously, if SPX pops up above the red TL or the neckline at 2388.20, it would seriously damage the downside case for now. UPDATE: 1:32 PM

Making a little headway, but VIX’s action isn’t very encouraging. All it would take is a drop through the little red TL. I’m stepping away for a meeting across town, and probably won’t be back until after the close. I’d keep a tight reign on this short, and dump it if SPX pushes back above the neckline. In the meantime, 2377 and 2370 remain the downside targets. Take what you can get (and don’t be a hero!)