It’s been a tough week for me (Stripey’s passing and more) and I hope you can forgive me if I’m going to be brief today. We are near an inflection point which I however wanted to share before I call it a week:
The hourly spoos are testing the 100-hour SMA again and that’s interesting for many reasons. First we have two NLBLs hanging right above. If we breach those we are lined up for an acceleration higher as we are also painting an inverse H&S formation. So this could get really interesting, especially if it happens after hours. So if you’re bullish here wait for 1407 and Bob’s your uncle.
The daily is supporting what I’m seeing on the hourly. A nice snap back near the 25-day SMA (we never made it all the way to 1380, showing how weak the bears continue to be after three years of punishment) and we are now back right below the daily NLBL at 1405.75. How nicely that lines up with those NLBLs and our inflection point on the hourly!
So that’s basically our inflection point – watch the spoos for a breach of about 1406 – that’s your yellow light – 1407 is our green light. Until that happens of course anything’s possible.
We’re getting a lot of very educational Zero sessions lately which is a good opportunity to get all the noobs up to speed. Yes, you could watch all the old ones – but I who am I kidding – anything older these days is considered an antiquity by you spoiled kids. That’s right – get off my damn lawn!
Not a very exciting session by any measure but a good learning experience if you are not used to handling what I call the ‘slow burn’. Usually you get a small divergence but things could still fall apart – like yesterday. But then things level off – the signal goes quiet – and quiet has not been good to the bears in the past few years. Then VWAP breach – and then instead of the bang you get the slow burn followed by a fast candle stopping everyone out. Can be nasty for stubborn trades who took on short positions near VWAP and are unwilling to be proven wrong. Well, they often accept defeat eventually when they are forced to chase for a bid as things explode higher. Timing is everything and cooking yourself in your own juice of bias and opinions is an expensive hobby – unless of course you are into that German S&M stuff.
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Today I’m going to go Japanese on you guys as Yen setups seem to be on the all you can eat menu. But before we venture to the Forex side here’s a quick reminder of where to expect support should the SPX continue lower today or tomorrow:
1380 still stands as we only dropped to ES 1386.25 today. The fat lady hasn’t sung yet and we just pushed above VWAP – it’s yet unclear if this is a floor attempt or if we’ll see more downside. FYI – the Zero signal is rather weak and I don’t see the bears getting any gold stars for effort here.
That EUR/JPY trade I posted on Tuesday paid off handsomely but we are now bouncing off support. I took positions off the table once we pushed outside both hourly Bollingers. It’s a bit too late to get into a long trade here but wait – all is not lost yet, we have a few more Yen pairs in the running:
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Okay I lied – this one is not Yen related but the AUD/USD is exactly where I would want it and it looks a lot like those Yen setups. Just pushed below its NLSL and perhaps it’ll go down the toilet and if not then we’ll have the hourly to help us turn the trade. So this is what I’m doing – short here with a stop above those hourly NLBLs and that 25-hour SMA near 1.036. If stopped out then I’ll wait for a push above 1.0371 and get on the long train. Easy peasy lemon squeezy.
Next runner up – AUD/JPY – one of our favorites. Painting a very similar setup and we just bounced off the hourly NLBL. Short here with only a few pips of risk. Loving this one. Again flip that sucker around if your stop gets hit – you know the game by now.
USD/JPY – comparable to the EUR/JPY. Not the greatest setup right now but I’m posting it in case things turn lower and you feel like adding another pair if this one drops through 81.96. Do not chase this one up right now!
But we’re not done yet – now let’s take a look at various long term Yen perspectives:
EUR/JPY – we’ve been pushing against both the 100-week SMA as well as the 25-month SMA – thus far we remain below. As you can imagine overcoming these long term resistance would be favorable to the BOJ – not so much to the ECB.
Alright here we have the long term view on the USD/JPY – equally important to the BOJ. And apparently the Japanese are winning this war (by losing it) as both the 100-week SMA and 25-month SMA have been overcome. If this is a retest then whatever may come next could get ugly for ole’ bucky. Think about how that may affect your purchasing power late this year and into 2013 – a rather scary picture if you ask me.
Last but not least here’s Mr. Carry Trade Central – the AUD/JPY. Looking sickly on the weekly but nothing to hang our hats on. However the important 100-day SMA has been overcome and is being retested right now. Again, the BOJ seems to be getting their way as long as long as we stay above 84.44 for the next few days. That would finalize this candle and increase the odds of a push higher slightly.
Bottom Line: The fact that we are sitting on various Yen related inflection points makes me take notice. I cannot yet predict the outcome but give it a few weeks and we should have a clearer look at what awaits not only the Yen but also the Dollar and the Euro on a long term basis. Heck, maybe I’ll have to switch you guys over to Roman gold coins after all 😉
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