Market sickness won't last

If anyones think this can last , then they are nuts.

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...

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.

What are we watching tomorrow?

As we were anticipating yesterday, currencies were leaning to the bullish side, starting with a gap up on EURUSD. During the session they propelled stocks higher.
Here are some charts of two currencies who although not very popular, are playing an important role since they are supporting 2009 rally very clearly ( see weekly chart on the left and compare with SPX). IMO they have reached a ST extreme together with their corresponding year high and year low. That is why I will be watching them closely tomorrow for more clues on the potential exhaustion of this rally. I believe they are going to bounce off today's levels. This should be coupled with lower prices at EURUSD and EURJPY and ultimately support a retracement at stock markets.

AUD/USD
Edit: 2:02 am EST Shorted AUD/USD 0.8565 - stop around 0.8580
stopped at 0.8580

re entered at 0.8623 - stop 0.8640
1st target hit at 0.8606 - shifted stops at BEP -5

stopped for remaining 50% at 0.8628




EUR/NZD
long 2.0709 stop 2.0662
1st target hit at 2.0774 - stops moved at BEP-10
2nd target hit at 2.0834 - then flat for a nice profit :)




Flying to safety continues despite of the rally in stocks. Simultaneous rallys at Gold and Bonds are dificult to interprete in a different way.

Also have a look at German Schatz future , my reference today,

EURUSD gapped up, mixed signs on the rest of currencies openings

Mostly bullish overall perspective.

Money's footsteps 2- Where is it going?

Some of you may remember what we were seeing at German bonds behavior. Finally, the expected move was made yesterday (and continued today) as we can see in the charts below. Also Bund is maintaining its way up. All this is happening while other assets are clearly losing money inflow


The relationship between some bonds and stocks markets was addressed back in May in August where you can see how some bonds were predicting the move down in the past, exactly as they predicted the current move down.
We will continue to watch them for more clues




And a more global Fund: You don't even need to know about technical analysis to see it is uber bullish



As you already know we found some currencies very telling about market strength and specially about investor's risk appetite. One of the currencies that should raise when investors run away from risk is the JPY, conversely this would mean they are leaving other more risky assets like stocks.

Nikkei update

As currencies where indicating, weakness in the opening was expectable. Nikkei euphoric rally took by surprise many traders and cheated some of them. My advice, never trust event driven moves. Trust on our wise friends (currencies and other proven indicators)

Nikkei chart update. Only 2 consecutive daily closes above resistance will invalidate the setup

Currencies: who should I trust in?

Recently there has been some talking about currencies since we experienced a very short term decoupling from Euro and equities which normally go together. Moreover, many traders refer to USD indices to look for clues since in the long run it is inversely correlated with US stock markets. Also JPY played a very important role during last bull market since it was the currency used by carry traders to benefit from the lower Japanese interest rates.
I myself like to watch currencies for confirmations or sometimes early signs of moves in equities but to clarify a little their behavior I pulled these charts out so we can see how these instruments played during the last years and ideally how to take advantages of them in the future.



Close up view:




So, in general I prefer to watch the Euro future (or its correlative at Forex: EURUSD ) for clues. Also EURJPY is very interesting as a leading indicator, I will try to post some charts later.

Euro future setup

Interesting, though risky entry at Euro future.

Too strange

Euro at S2 and Gold tanked , USD ripping up to R2 (we love you Mr Buck) but ES still at 1003 zone. Currencies are docoupling today or something strange is happening

Many Thanks Mr. Buck :)

C' mon Buck! Make bears happy

Is it going to wake up by night??....mysterious critter