Now Reading
EUR/JPY Update
96

EUR/JPY Update

by The MoleJune 15, 2010

We are taking a glance at the daily chart in order to correlate possible implications in equities.

I was at my bank yesterday; there was a short line. Just one lady in front of me. An Asian lady who was trying to exchange yen for dollars. It was obvious she was a little irritated.. .

She asked the teller, ‘Why it change? Yesterday, I get two hunat dolla fo yen. Today I only get hunat eighty? Why it change?’

The teller shrugged his shoulders and said, ‘Fluctuations.’

The Asian lady says, ‘Fluc you white people too!’

Oh, I kid the Japanese 😉 Although I do have to bite my tongue when I see Japanese officials bribe decision makers about the reversal of the whale hunting ban. Seriously…

Alright, let’s get right to it:

Well, that daily chart does not look too rosy for the bears. While there is no guarantee that we’ll make it all the way up to the 80% mark line on my stochastic chances are we are going to push a little higher here – I’d say 115 and some change minimum.

Yes, Son Of Soylent Green turned out to be a stillborn as we breached yesterday’s highs today. For the record – I did not trust yesterday’s down push for a second – I’m sure Zero subscribers remember my comments. We dropped pretty hard and the Zero Lite was barely painting a negative signal. I mentioned that I just could not trust the tape and was not surprised to see the opening gap today. BTW, that is the third time this type of ‘non confirmation pattern’ occurs within the time span of two weeks. I didn’t want to jump to conclusions but three for three is looking like a fractal to me. Anyway, something to keep looking out for in the future – for sure.

So, what’s left is Soylent Orange. How come that if we have a choice between three scenarios the most bullish one usually wins? Tough gig to be a bear – 80% of the time the tape ends up sideways or up – those are the stats my grizzly friends.

I usually don’t count Minute waves intra-day but a possibility here is that we are now in a 5th wave of the C leg of this flat. If we somehow push beyond 1142 then this third wave is sub-dividing and we could go a lot higher.

How high we go is mainly up to the EUR/JPY – so let’s keep watching that. I reckon that the 115 mark on the EUR/JPY would nicely correlate with a 1125 reading on the SPX. No guarantees but a reasonable target at this stage. And yes, we could push much further than that – Minor 2 waves can theoretically correct a significant portion of their prior down wave – just so you know. But let’s all agree not to panic and let at least Soylent Orange unfold as proposed.

FYI – I’m still scanning for good setups (i.e. symbols) but am not finding much I like. Will keep hunting and do a pertinent post if I find anything of interest.

2:25pm EDT: Quick update on the EUR/JPY front – short term we are heavily overbought as a boat load of bear stops have been run.

However, I would be extremely careful shorting the tape right here – one reason is the possibility of my stochastic remaining embedded and curling around for a while. If you insist on picking a top then wait for a breach of the 80% mark on this chart.

The other reason is the signal I’m looking at right now on the hourly Zero – boy oh boy…

2:36pm EDT: I just looked at my VIX chart and was stunned by that massive drop in what is unjustifiably being referred to as ‘volatility’:

Consider this – a near 50% drop on the VIX in the past month. Is the market less ‘volatile’ or risky than it was a month ago? Obviously not – but if nothing else this is a great ploy to punish short term put holders, especially during OPX week.

I keep telling you guys to think long term – and this is another piece of evidence backing up my position. Either that, or you have to be incredibly nimble in this market and call the tops/bottoms accurately. And that’s tough to do right now – plenty of head fakes. Just a week ago it looked like we wouldn’t make it through that center line. Now we are scraping the bottom of the barrel on that Bollinger. And the way things are lining up I think we could be dropping toward the 23/24 mark here.

Cheers,


About The Author
The Mole
Mole created Evil Speculator amidst the chaos of the financial crisis in early August of 2008. His vision for Evil Speculator is a refuge of reason, hands-on trading knowledge, and inspiration for traders of all ages and stripes. You can follow him and his nefarious schemes at various social media waterholes below.
  • DudePlunger

    Thanks for the post mole, it is making my short trigger finger a bit lighter. And so I wait.

  • katzo7

    My early warning indicator just fired off.

  • elliott_surfs

    where to Katzo?

  • Wave_Surfer

    It is taking me a long time to digest all of the information in Moles 10 charts.
    Although I am not done yet, I would like to thank Mole for being willing to share the charts. I find them very convincing. What I like is it seems to have a good balance of the bullish and bearish spirits fighting instead of just pointing hard in 1 direction.

    It reminds me of a line I say to myself all the time to try to keep myself balanced. “The market goes up and the market goes down, but most of the time it goes up and down.”

    In other words, it is a Rare DECADE where we have a month like October 2008, so while it feels great and can be a life changer to hit that kind of month well, it is good to remember that even in big bear markets October 2008 is rather rare and even in bear markets the market can spend the majority of its time having very little net movement.

    Even if we are in a powerful bear market and we want to hit the big slide when it happens (that is what long term puts bought while the vix is low is for), the majority of time it is either doing a movement or retracing 62% of that movement.<grin>

    I wonder what it would look like if you showed a graph of the market in the last 3 or 5 years and simply deleted 4 to 6 weeks of the most violent part of wave 3. What would a graph of 59 of the last 60 months look like? As time goes on, I am becoming more of a fan of having cheap, long term puts bought while the vix is very low, and then using more conservative spreads for the intermediate moves. You could even leg out and leg back in spreads for short term moves, to help lock in some profits.

    Anyway, I just wanted to thank Mole again for sharing the graphs. It is taking me a couple hours to get all that I want to get from them, but it is worth it.
    Thanks

  • Bob the Horse

    I have just cut my long position in half here (estoxx @ 2745), esu0 around 1107.

  • http://chartsandthat.blogspot.com/ ultra

    LOL

  • n2thezonez

    I'm gonna close out my long position prior to the close. I got whipsawed last week by holding a winning short position overnight (I think it was Wed overnight into gap up Thurs). I'm not going to expose myself on this one.

  • raised_by_wolves

    Update on copper futures. They broke that channel line to the upside. What you'd expect in an uptrend 😉

    Here's Achilles last stand . . .

    http://content.screencast.com/users/raised_by_w

  • EvilTrader

    negative divergences @Spy intraday frames 10,15,30 mins and 1 hour.

    Lets see how it play out.

  • elliott_surfs

    this market is one major divergence in the ass =

  • Bob the Horse

    I've been running this for over a month now so a few more days won't hurt!

  • http://evilspeculator.com molecool

    Please reload this page for short term update!

  • http://evilspeculator.com molecool

    Word!

  • Bob the Horse

    FWIW, I think the chances are HOD is in. I am just giving myself some room to buy on a dip tomorrow

  • http://evilspeculator.com molecool

    Hey, thanks! I received very little commentary on the 12 charts I posted over the weekend and was a bit disappointed, quite frankly. I felt that there was some really interesting information there.

    Then again, the crowd who is most prolific here is most likely to be more short term oriented. The long term traders may comment and it gets lost in the daily gyrations.

  • Bob the Horse

    I thought there was some very good content there. But you can lead a horse to water . . . . People look for content that agrees with their bias, all else is discounted.

  • http://evilspeculator.com molecool

    Where is everyone? Silly, as soon as the market rallies everyone walks away. Do people still assume that this is merely a purely blog?

    Alright, if nobody wants to play I'll kick back for the day – heaven knows I need a break 😉

  • ds2

    Mole – your earlier post was correct. It is A LOT of info (Too Much?). I still need to go back and read it again. I could spend an hour or two digesting that.

  • captainboom

    It's fireworks season, and I have no time to absorb and comment. Barely trading at all. I liken it to xmas coming, and I'm Santa…

  • DudePlunger

    What do you mean, merely a purely blog? You mean a bearish blog?

    And I'm sitting here watching this move higher, and watching Brazil vs. North Korea.

  • http://www.marketfeel.com/ MarketFeel

    we're all here. just watching the show. blew my little mind with your stuff over the weekend

  • EvilTrader

    go brazil !

    North Koreans can nuke themselves.

  • sela84

    i thought it will 2:0 for Brasil till now but looks like Korean are though to crack 🙂

  • n2thezonez

    I tend to think they send'em out at the HOD. Bulls really can't afford to squander this opportunity

  • ricebowl

    It appears I was wrong about the 11:30 HOD. Look at volume, though. It looks like it's about to have a heart attack.

  • ricebowl

    When the market rallies, everyone is dumbstruck. “How can it be rallying? WTF! PPT is pushing it up!” Thus no comments.

    I'd bet that you could turn activity on the blog into an indicator like the put/call ratio.

  • http://www.mylifemytrade.com MyLifeMyTrade

    Market seldom repeats moves on back-to-back days… I am surprised that moves from 10 days ago have been repeated verbatim this week.

    In fact you can expect that if today morning was LIKE yesterday morning… then today afternoon will be EXACT OPPOSITE of yesterday. This is how most participants get fucked. Of course, one needs to keep the context (bearish/bullish) in mind.

    If we gap down tomorrow, expect that gap will not be filled because that is what happened 2 days ago.

  • Darkthirty

    When the PPT starts pushing down….I'll be bullish

  • http://www.mylifemytrade.com MyLifeMyTrade

    Someone mentioned there is an open gap on SPX near 1115.. may be that gets filled

  • gsavli

    here's my comment: retarded market.

  • psycho_puppies

    This is the last wave count chart I can see. http://evilspeculator.com/wp-content/uploads/20… The good news is we are close to topping solyent orange the bad news is I'm sure mole has more colors in his box of crayons.

  • Wave_Surfer

    true.
    I think Tim actually does that some a couple of different ways.
    I think he can get a graph of daily page views and it is a decent sentiment measure. He also tracks the snarkiness versus praise he gets.
    It is almost like how we treat our Presidents.
    The markets move up and down, and people take it out on anybody and everybody!

    If the market moves down, then praise bear blogs, ghost town in bull blogs, the President's approval rating decreases and all corporate people are evil, shorters and speculators are evil and they all need to be stopped!

    If the market moves up, then praise bull blogs, ghost town in bear blogs, the President's approval rating increases, corporate people are probably evil but I am too busy to attack them today.

    Isn't it amazing how many people and types of people are held accountable for market movement ! ?

  • http://www.mylifemytrade.com MyLifeMyTrade

    Or may be we are just getting the long awaited divergence on ZL

  • Bob the Horse

    There is just no interest in generating P&L. I am increasingly coming to the view that participating in these blogs is a waste of time. The one thing that keeps me going is that Evil Spec is the only one providing reasonable content. Weirdly when Mole was focused on his systems, the community was much more constructive. Now he is focused on trading, the community just wants to hear the short side.

  • http://chartsandthat.blogspot.com/ ultra

    Watching the footie too. Just having a quick check now it's half time before I go stick the kettle on.

  • http://www.marketfeel.com/ MarketFeel

    1110 is the level to watch
    I suspect alot of bear stops there.

  • Wave_Surfer

    Ya.
    1130 to 1150 is a really safe bet at this point IMHO.

  • http://evilspeculator.com molecool

    Sorry – I 'miscorrected' that one – LOL 🙂

  • n2thezonez

    I think it is an importan level as well, as it sits above the 1105-1109 cluster of resistance:

    1105 – Prior SPX high
    1107 – .5 retrace of the 1173-1040 move
    1108 – 200 day MA on SPX
    1109 – .382 retrace of the 1219-1040 move

  • http://www.mylifemytrade.com MyLifeMyTrade

    IMO 1110 ESM0 was where the stops must have been.. We are past that by a good amount.

  • ricebowl

    We're sitting approx. on the upper bollinger on the daily. This is usually a good place to open a swing short position.

  • Wave_Surfer

    It is 1113 and climbing now, right?

  • http://www.marketfeel.com/ MarketFeel

    trick will be to watch to see if it is a bull trap or not
    I am raising cash and going cautious after being lucky enough to be heavily long based on the cummulative breadth

  • http://www.mylifemytrade.com MyLifeMyTrade

    So we finally have the bearish divergence.. Lets see what does it bring today and tomorrow.

  • http://www.marketfeel.com/ MarketFeel

    first bull counter move in a new bear market generally retraces 50% or more

  • Tooncez

    Well, but, ummm…. the context is that the zl is above 4

  • http://www.mylifemytrade.com MyLifeMyTrade

    The key assumption here is “bear market” 🙂

  • spudthorpe

    Negative divergence on the ZL (strongly positive signal, but still a negative divergence). Also we just hit trendline resistance at 1111 ES and (nearly) filled a major open gap. We are also ridiculously overbought on all time frames. If technical analysis means anything, we ought to get at least a pullback here.

  • raised_by_wolves

    $TRAN update shows all the resistance I had draw is now support . . .

    http://content.screencast.com/users/raised_by_w

  • http://www.marketfeel.com/ MarketFeel

    I just trade what I see. I don't make any assumptions. If I dont see confirmation after a bull run that we are in a bear market I will go along. For this week I like to use option interest as a guide. Levitt does a really good one http://leavittbrothers.com/blog/?p=3132

  • psycho_puppies

    Just playing with fib levels on stock charts…. Quick question for e-wavers… if 666 – 1576 was a wave 2 and retraced 62% to 1219 then we should probably expect this wave 2 to do the same and stop at 62 % …1150 ish…

  • equity_momo

    Great trade Bob. Respect for riding that.

  • Wave_Surfer

    The smaller level wave 2 does not have to be the same really.
    However, wave 2s are very famous for rewinding the majority of wave 1.
    During Primary wave 1, we were in a bear market for an entire year and most people didn't even know it! 1,2,1,2 with both wave 2s retracing the majority of the movement meant that a year after it started and truthfully, we were barely down at all!

    Considering that 38% retracement was passed a while ago and with wave 2s so often retracing so much of wave 1, then ya.. that is why I said a few minutes ago that S&P going to 1130 to 1150 (50% and 61.8% retracement) is a pretty darn safe bet.

    Note: Wave 2s are famous for retracing a LOT, another level that gets hit sometimes is 78%+!

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    I had the impression that II's of wave 3s tended retrace less than the 2's of the higher degree…….But I could be wrong…anyone else have thoughts?

  • psycho_puppies

    Thanks for the reply… 1150 will be good enought for me.

  • Wave_Surfer

    Each wave is its own animal.
    But like Primary wave 1 back in 2007,8, there was a 1,2,1,2 where wave 2 erased most of the gains of wave 1 and then again the same thing happened with the smaller level wave 2. After a year of a bear market, we had hardly any net down at all!

    So, again, they are independent.
    Sometimes you can have multiple wave 2s erasing 62% or even 78.6% or even more of a wave 1 and have another wave 2 erase 62% or more. Or maybe the lower level wave 2 will retrace very little and maybe just do 23% or 38%. I don't think there is much of connection between various wave 2s.

    I would say, that it does seem that more than half of wave 2s do 50% or more.

  • http://www.flickr.com/photos/dabasia/sets/ Croozer

    OK, thanks for correcting me and educating me……will keep that in mind…..

  • Wave_Surfer

    My personal thought now is that this wave 2 will want to retrace most of wave 1 to really cleanse off most of the fear.

    I think 1150 is most likely.
    and
    I actually think 1180 is as likely as 1130.

    If it spike a little above 1180, imagine how discourage and gun shy bears will be and how complacent and filled with hubris and greed bulls will be! Just the recipe for a proper big wave 3 of 3!

    If I was to put percentages on it, I would say something like
    1130 – 20%
    1150 – 55%
    1180 – 25%

    Actually, as final 'screw you' maybe give a 5% chance for a wave 2 top that goes above 1180 but still below 1220. Steal a few percent from the other scenarios to make room for that 5%.

    On other hand, now that I have 'gone on record' and stuck my neck out, no doubt, I will be as wrong as can be!

  • http://evilspeculator.com molecool

    Yeah, that's pretty strong – and it happened too late in the session…

  • DudePlunger

    I went short 1109.75 at the close. If we fall lower, I plan on bidding 1 or even 2 /NQ's down below as a hedge. And then we will see where the market stands and plan accordingly.

  • http://thetickerstreet.blogspot.com/ TickerStreet

    Fluc you asians! Lol

    Mole, why were you in the foreign exchange line? Are you trying to flee the country? Lol

  • http://evilspeculator.com molecool

    Zero subs – check out the daily Zero chart!

  • http://evilspeculator.com molecool

    Maybe I have a lot of Asian readers – could account for the slow traffic today 😉

  • psycho_puppies

    I'm not going to quit my day job. LOL

  • MDX

    Mole, a little explanation please for the noobs? I see absence of divergence..and?

  • amokta

    Great 1115 is done. P3 can begin tomorrow – if only trading was as easy as writing a short-term Hochberg update

  • DudePlunger

    Gameplan overnight—
    Short /ES from 1109.75, Stop @ 1120.
    Bidding /NQ 1880.

    Where do I think the market is going to go? I think we'll pullback to 1100, beyond that no idea. But here are scenarios and why I'm placing trades the way I am.

    1. Soylent Orange finished today, get ready for hell for the next few weeks. I'll see the weakness tomorrow, and add 1 or 2 more /ES (while holding my 1880 /NQ hedge.)
    2. Soylent Orange is not finished. We pullback, I get my 1880 /NQ long, we dabble around, I pick up another /NQ to be neutral, and then I pick up yet another /NQ if we break today's highs. An initial short position turns into a long, that I will ride as far as the market goes.
    3. No pullback, I'm stopped out overnight, $500 loss.

  • DudePlunger

    The reason I am playing both sides like this is because I want to get away from the single entry, directional style of trading. I do OK in it, but I feel I can be much more profitable if I manage spreads properly.

    Note- I have attempted spreads before and have blown all of them. Yes, that is correct, I have fucked up every single spread I have ever attempted. Do I think this time is different? I think I've learned my lessons, I think I understand now that you need to buy at support and sell at resistance, and never get naked because you anticipate something the market should do, but react to what the market does do.

    As always, I will post all my trades. If any of you guys have any suggestions or thoughts, I'd love to hear them. Thanks.

  • Graphite

    He pointed to the possible Nasdaq Composite gap fill at 2307 … even said the “running flat” was a rare EW outcome. If any _traders_ were caught unprepared for rallying today it was not his fault.

  • amokta

    true – but they keep being so sure

  • Tooncez

    If I understand correctly, you are doing opposite trades on NQ to hedge ES. I'm new to futures but I assume that NQ has a higher 'beta'. Do you care about that when hedging?

  • http://www.mylifemytrade.com MyLifeMyTrade

    NQ has higher beta… but smaller delta.

  • DudePlunger

    What MLMT is exactly correct. Take a look at today's move for instance:
    /ES Open: 1093. Close: 1109.25. Range=16.25pts or $812.50
    /NQ Open: 1855.25. Close: 1893.75. Range= 38.50pts or $770.

    Today the /NQ was on a percentage basis stronger than the /ES, and yet the /ES still had a wider real $$$ range.

    I've watched the two interact since fall '08, and I'd say the ratio comes out to about $1.60-1. (ES-/NQ)

  • jigdaddy

    any word from Mr. Market? nice call on your part btw!!

  • http://evilspeculator.com molecool

    MDX – I put a comment on the chart – that's what I'm referring to. It's not all about divergences, mate 😉

  • katzo7

    MLMT, I was the one who posted that 1115 gap. And there also was a huge EW target there too on multiple time frames. I had to work most of the afternoon so, fortunately for me, did not watch much of this. But what kept on cycling through my head is my teacher saying “don't play the EW4.”

    http://www.screencast.com/users/katzo7/folders/

    I am glad I stayed away from this. Again EW4s are killers, they rob from both sides very efficiently. We are ending this exactly where it should be, at or about 115 ES. Or is it the end? I am not putting a penny into this market until some important trend line is broken, I want answers.

    http://www.screencast.com/users/katzo7/folders/

  • katzo7

    ES 1105 could be hard to get through.

  • DudePlunger

    I changed my trade to bid /NQ at 1890. 1880 is pretty far away, and I'd like to be light short at these levels, not 100% short.

  • katzo7

    I get a gap down tomorrow.

  • jacksoo

    do you think we get back above 1109 in AH katz?

  • katzo7

    this is pretty damn strange.

    http://www.screencast.com/users/katzo7/folders/

  • katzo7

    EWs say 1112.75 to 1115, doesn't mean it will happen but that is a pure EW5 end wave.

  • jacksoo

    Thx katz

  • jesterx

    There seems to be confused bulls and bears….but I think the charts are behaving themselves for now anyway.

    http://www.forecastfortomorrow.com/news/2010/06

  • http://trading-to-win.blogspot.com/ DavidDT

    where is everybooty?

  • http://trading-to-win.blogspot.com/ DavidDT

    It is always sunny in Phila …Trading to Win – the only balanced slightly bearish blog with strong bullish smell!

  • Clint

    Where do they see us heading near term over there ? 1150 ? 1200 ? Do tell !

  • yudhisthira

    That was going to be my question. Is this the wrong thread?
    “Once more to 1120,” I say.

  • yudhisthira

    Touchdown Jesus burned.
    http://www.wdtn.com/dpp/on_air/sunrise/giant-je

    Gotta be a contrary indicator.

  • elliott_surfs

    easier to count waves using indicators?
    http://screencast.com/t/YmYwYzY5ZjUt

  • chronographics

    Us Bonds still IMNSHO dont show down side impulsive move. Some support here at lower levels. The Bonds dont always move lockstep with the Equities like the EURJPY of late, so we could see the indices move up somewhat while the Bonds just move sideways. If this happens then it would be a clear signal to me that this is a minor wave 2 to the upside in ES and I would be looking for a bearish setup to get short. IF Bond Prices fall I would be far more concerned with the Bearish Equity outlook.
    http://screencast.com/t/OWVhMzMyOD

    EURJPY the price action relative to the Osc movement still shows that the upside is still vulnerable – look at the moves up in the osc with resulting price moves against the down moves, this is almost always a give away as to the next larger trend. http://screencast.com/t/NzIzNzI0MTQt
    We could well see 114 on the upside which ties in nicely with the new trend channel I have redrawn.

  • Long_John_Silver

    This site is good for clearing the brain of residual 'hopium'

  • Long_John_Silver

    That's a reality, but what's the cure? Btw, I fervently hope you won't stop participating – ljs

  • Long_John_Silver

    Thanks for your candor & for transparency – I'm sure you'll get comments as you post, people here follow you closely, including yrs truly – ljs

  • Bob the Horse

    I'll update you on my thoughts. First, my comment from June 10th:

    Target Practice
    I am checking in occasionally. I have nothing much to add. Still long estoxx from 2450 on May 7th. Target 2800. I don't know if I will short there but I know I will not short before there. I am being quiet because:
    a) I am trying to prevent any shorter time horizon thoughts messing with my core position;
    b) this is a big piece of meat I am aiming for , i.e.14% move but it's probably counter-trend so it's hard to hang on to. I prefer keeping my own counsel at these times – immersing myself in a msg board in which everyone else has the opposite position just makes it confrontational which is of no help to me.
    c) I have been burying myself in fundamental research because my core belief is that equities are driven by the momentum of nominal GDP. Charts capture the historical perception of that and put numbers on it but there is an edge to be gained from macro analysis as you can predict how these perceptions will evolve. Contrary to what the CNBC talking-heads are now saying, a lot of my analysis says this market is going up a lot because the US economy is going to accelerate in the second half of this year, i.e. the exact polar opposite of the H2 slowdown that is the current consensus. But not everything I look at is bullish – maybe 90% so I am keeping an open mind. At the very least, I want to see some of what I see reflected in equities before I would risk getting short. That means 2800 which would be around 1150ish I would guess on S&P. But Estoxx is more important – Europe is the driver, S&P will be where it will be.

    Eurostoxx is now trading 2733. I cut my long position in half last night @2745 as posted. I am buying that back again NOW @2733.

    My target of 2800 still holds. I will go short between 2805 and 2820. The interesting thing is that S&P will be around 1120/25 – nowhere near the 1150 (or even 1180) it looked like it could be at one stage. As I have noted quite often, the Eurostoxx is what matters in this environment, not the S&P. But the divergence is as ever interesting. The Eurostoxx started to fall in Jan this year but S&P went on to new highs in April. Equally, Eurostoxx bottomed on the flash crash day but S&P went on to make new lows in June. As ever that is telling us something and to me, it means that this European crisis is transitioning into a global growth problem – that is why S&P is now under-performing after previously out-performing.

    Anyway, 2800 remains the IT target. From there we can switch to S&P targets (because it is now global growth, not Europe that concerns us) of 1007 and then my LT target of 920. I am still doing some work on how this move should evolve – it is possible that we merely trade a big range (1125 to 1007) for a while which will be destructive to put holders looking for the big one. If I think this will be impulsive I will use Puts, if not then just futures.

    If we get a material breach of 2820 then this roadmap is wrong and it is just a roaring bull market – expect new highs.

  • jacksoo

    nice post Bob good to see you around again