Currencies and stock's bounce is probably done

We were signaling a bounce at currencies. It took place already and drove stocks higher in last session as expected. It filled ES gap but now we think market will resume the bearish trend.

In any case the less probable scenario will be a run up to 1128 ES area.

Bounce for currencies (integrated)

Some currencies aproaching a bouncing point

We are seeing some of the currencies we use as market proxys just aproaching a bouncing point. After breaking down recently, they may be seting up for a bounce which is bullish for stocks.

AFter it broke down...

Daily wrap up 09-24

SP500 future wrap up:



As you may recall, we were studying some patterns at AUDJPY and used it as an indicator. Here is the update:



Dow update:

Thoughts for next week

After reviewing market internals indicators we can easily see this last week's rally ran on sound support. Last week rises have been coupled by increases in most instruments. The fact that this rally has gone too long and too fast, though maybe is true to the common sense, is not tradable at all. Nevertheless, we think the time for a pullback is very close so we have to be alert and watching the correct indicators to avoid losses and the long side and ideally catch a nice short entry when the market turns. So our job for next week is
1) not to fade the rally until clear signs are shown.
2) Actively look for indications of pullback not only in price but also it corresponding moves at market internals, currencies and bonds.
In regards of this last task, we found this chart of NYHL which is quite interesting, particularly if next week continues to the down side.

NYHL










Also see here an update of this previous study:

AUD - JPY ratio (not Forex)



As always, close surveillance on USD. If any pullback is to come to stocks markets, it should start at the USD. Here are some signs I have found:




close up view:

I hate to say it but.... they told us.

We have been talking about AUDJPY and EURJPY quite frequently since they were enlightening some worrying shades in this crazy-bull rally. It seems that on friday close they were already confirming moves. See these charts of them separated to see each performance and tell me if you can see what I was seeing: such a strong JPY (risk aversion currency) can't be foretelling much more upside in stocks.


See the picture EURJPY was showing on Friday (which is confirmed so far be Monday gap down). These signsamong others were negating the posibilities of ES surpassing 1043 on Friday, that is why we shorted that level.





JPY weekly view:


JPY daily view:




Same message coming from a weak AUD.



But there was more on friday. Remeber out junction point? There were two apparently decoupling (commodities and stock indices) instruments. My guess is that there is no sucha a decoupling but a leading move at commodities that may be signaling the way down for the rest of the market. Despite the huge rally last week these indices couldn't close above resistance and gap...


Commodities ETF, inflation corrected


One thing that does not match with these bearish ST scenario is credit markets still showing appetite for H yields. So keep an eye on it.

Indicators update

We have seen another irrational exuberance day today. Risk appetite was all over the place mainly commanded by a sky rocketing EURUSD (weakening dollar).
We also saw higher demand for High Yield bonds, Small Caps and Crude oil. All pointing the same direction.
Overall we can expect more risk appetite and dip-buying activity (yep , they never get enough) in theory but I sense (just a feeling) the game can change for a while very soon. Nevertheless we should trade over facts only, not gut feelings.

Aside of that, and with the purpose of enlightening the unobvious I found these charts quite worrying. Just for us to keep an eye on them tomorrow:


AUD/JPY update, as we were saying recently, the VST top continues to develop indicating risk avertion on these pair



Though most bonds markets rallied yesterday, TNX tanked strangely, same story on 5yr T bonds. As of now is just a heads up. Let's watch it.
Also see how EURJPY stayed below resistance despite rally on stocks....

Today and tomorrow (09-09-09 :))

Today:
Here I leave you a pic of today's (09-08-09) intraday chart and the potential ST top Karen and I played. Of course is nothing without confirmation but the pic is inspirational :)



Tomorrow: Among other indicators, I like AUDJPY structure for ST clues



Ande be extra careful : 9-9-9 is an ugly number for a date...