"Time bomb" was set up at payrolls numbers

Some people may think numbers were not that bad given the "positive" reaction SPX and other markets showed. After all UE rate is still at 9.7%. But we need to point out two important things:

• From the fundamentals POV, this charts shed some light about how "benign" this crisis is being.

• From the technical POV we can see that some very important markets reacted very negatively (showing clear risk aversion) just after data was released.

Resulting divergence btw SPX and other markets just add more evidence about the exhaustion of this bullish move. WE may see higher highs on Monday (ES1182-4 is likely), even a gap up, but I insist: red scenario is more valid then ever; moreover, when they pull the rug there will be no time to react if you had not prepared your plan in advance.


GL

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...

Review II

Let's continue with some reviews.

Very interesting set up at the Dow. Thoug many are wating for 10000+, there are some concerns to bear in mind.


Regarding currecies, our RSI setup is giving signal again:

Just two weeks ago....

Before posting about next week, I 'd like to recap some charts and articles posted before just to get a more comprehensive view and eventually pull some insight out of them now that we can see the outcome.

You might remember some market internals studies we were addressing, particularly this chart about NYHL as a leading indicator during divergences.
Take a look at the updated one below. SPX has lost approx 5% after making only a marginal high since then




Regarding currencies as indicators, we were posting this chart among similar others.

Look at the updated ones below:






Also regarding currencies, the most directly related to SPX was at those moments USD (recently they have been less connected). This was our view on USD 2 weeks ago:

Please, see updated chart below:

Sunday guess work - Currencies telling the tale

Here is an interesting chart which may help to explain why I am always pounding at the currencies stuff despite of trading mostly stocks and futs:

What is the pattern here?



Also here:





and here...

EURUSD Wedge and key levels

Both EURJPY and USDJPY just gapped down

This foretells a weak opening for futures

Trapped??? Don't be

Were you one of the traders that got trapped by last fake bearish moves from SPX? Not only the infamous HS pattern from late June but many other times the indices give us fake signals just to trap everyone and run in the opposite direction. What to do? As usual: look for confimations at other relevant sources. In this case we can see how the EURUSD action did NOT coupled with the bearish move at SPX thus alerting us about the trap.

Enjoy:

The new Carry Trade?

I couldn't avoid linking current coupling between SP500 and USD and the similar coupling between SP500 and JPY until 2006-7 which made Carry Trade so popular and we described earlier. At those moments large investors borrowed JPY due to its minimal interest rate to buy stocks, therefore rising prices. It was a great business except when the JPY dropped. I used to watch EURJPY and USDJPY specially AH to get valuable clues about next session's behavior at stocks markets . We might be having the same phenomenon now with the USD whose low interest rates are making it attractive for those purposes.
Now matter what the ultimate cause is, we can be sure that this coupling is working, thus making EURUSD pair a must-watch for any trader. Fortunately now we have two clear levels to watch for the short term prognosis:

Just for Karen - edited EOD wrap up

EOD wrap up

The opening of this and other currencies is what suggested me more upside for stocks today. During the session they continued to put bullish pressure in stock markets. Unfortunately I didn't put enough attention on this factor and only played longs during the morning (some excessive bearishness invaded me in the afternoon :)). I myself overlooked the importance of this message which together with Crude Oil was the driver today.






Watch it, is at crux :)
at 11:10 EST

Regression day II - Completing the move

As we recently posted , many instruments have broken its mid term regression channels. We spoke about the technical relevance of that fact and also described at the charts commentary that after the 1st step (channel breakdown) 2 more steps normally follows to complete the move :

• 2- Retest the channel or any relevant resistance
• 3 - Break down again

This is what we saw today at many instruments (see updated charts below)


EURJPY


EURUSD


S&P100


ES





Another perfect example at QM (oil future)



Conclusion:

The various indications we were observing about more weakness in the bulls run have been confirmed today in various equities sectors as well as oil and gold. We see this move as the beginning of a pullback inside a bullish main trend. To believe this pullback has become some serious mid term bearish trend we need to see a daily close below ES990, which was very close today but is yet to be seen. There are quite a few technical arguments for the bears but need to gain consistence during next week for us to officially turn the mid term trend to bearish.

Daily wrap up - "Regression" day

We finally went back to some bearish dynamics today after a number of the signs of weakness we have been observing matured. As an interesting technical hint, many of them broke their rising Regression Channels, which is meaningful from the mathematical point of view by itself, but moreover since it happened the same day to many of the instruments whose performance we believe is linked
We think this is a pullback which can eventually become a mid term trend change if ES makes a daily close below 990. In any case the main trend underlaying is still bullish.
The plan for today is stay on the sidelines and wait for a confirmation of this move after FOMC anounces.

ES


EURJPY



EURUSD



SP100

Daily wrap up

Today we had another shallow day at the stocks markets. Most indices couldn't make new highs and the overbought condition and thick resistances discouraged bulls to push higher. See the NASDAQ chart below to see what happened with the "toppy" levels (2016) we were talking about.



Worst performers were real estate, industrials, financials and techs. The sector showing relative strength was health care.
Oil moved sideways today and I still expect some retracement in the short term.
Euro didn't retrace from the last leg down as expected. This should be seen as a continuation of its direct relation with equities indices. Last Friday it detached going down hard while indices rallied so I expected some correction on Euro which didn't happen . Instead they seem to start walking together again (will post some charts about currencies correlation later to clarify this popular issue).
Meanwhile, keep an eye on EURUSD trendline (see chart). After a fake break of bearish trendline and topping at previous high (white line) it is just holding on the edge of its mid term bullish channel.



EURJPY and Gold also showed weakness.
Bond prices did recover some of the huge Friday's drop.


Regarding market internals, I continue to watch them to assess the strength of this bullish trend. Though main internals are still strong, some incipient signs of exhaustion could be found:

Weekly wrap up

I am seeing overall strength at equities markets thus played mostly from the long side.

We did have some surprises like late sell offs and weakness at EURUSD and Techs.
Another factor to watch is bonds behavior (see chart). They plunged on Friday after weakening for several days. As we can see they have been rising since March hand in hand with equities so if this correlation is about to continue we should see one of this two: a quick recovery in bonds (unlikely) or a bearish move in equities.



Sum up: Main trend is still bullish. I believe up trend will continue in the short term. A good accomplishment for bulls would be a daily close above ES1008. Anyway, some signs require attention as they can be early indicators of a meaningful pullback in the short term ( EURUSD, Semis, Bonds).

Edit: Oil performance can also give us some clues. I will post some charts on it shortly.

Bulls best friend

Ok after a super bullish day when ES reached 1000 pts. is time to see some causes. Regardless of the intrinsic strength of equities, one factor cannot be overlooked: weak USD propelled this rally just when it was going exhaust. Accordingly, its counterpart, the Euro future, gave a lot of fun to some fellows traders (congrats Canuk and EminiAddict!)
Here is the EURUSD chart and some reasons to believe there is more room to rise after some consolidation. Enjoy

Bulls best friend: