Feb 272014
 
 February 27, 2014  Posted by at 5:09 am 5 Responses »

So far, so good. The expected new ATH’s have now been achieved for the SPX and Russell 2000 so the minimum conditions have been met for the advance. However, the structure of the SPX advance does not yet look complete and at least one more push to new highs is required to complete this impulsive rally from 1738. An “ideal world” short trade setup would be a spike to new ATH’s in the SPX towards my 1865/75 sell zone coincident with the USD/JPY completing its ending diagonal wave (c) of (2) around 102.85/103.10. If wishes were horses…

The SPX made new ATH’s as expected on Monday and has since consolidated below resistance. With two consecutive inside days holding support at the 5 ema the market is positioning for a breakout. The EW structure suggests this breakout will likely be up and short-lived as we are in the 5th of a 5th (final wave). Trade and consolidation above the purple trendline would warn of a more bullish potential.

SPX Daily

SPX Daily

The near term SPX chart counts best as a triangle wave iv with a wave v of (5) thrust higher to come to complete the structure. IF this count is correct, the spike to new ATH’s should be quickly reversed. Trade immediately below 1824.58 without making new ATH’s would invalidate this count and suggest wave (5) was complete. Sustained trade above new ATH’s would suggest a more bullish resolution.

SPX 60m

SPX 60m

The Russell 2000 finally made new ATH’s as expected in what appears to be a complete 5 wave structure. Unlike the SPX, the Russell 2000 counts best as complete. I have posted the IWM chart and count below for illustration purposes as my RUT chart has corrupted data. With minimum objectives met (new ATH’s) and a potentially complete impulsive (5 wave) structure, I am alert to a trend reversal here. An impulsive 5 wave decline would warn of further downside.

IWM - iShares Russell 2000 15m

IWM – iShares Russell 2000 15m

The QQQ’s (NDX Powershares) have struggled to make progress since making new highs last week as it pushes up against the broadening trendline. The overlapping nature of this week’s advance warns me that this rally is nearing an end for “at least” a correction. Wednesday’s bearish engulfing candle caught support at the 10 sma but threatens a larger break below this level towards 88.30 initial support.

QQQ Daily

QQQ Daily

The DJT (Trannies) perfectly hit the 74.00 upside target for red C of (2) and reversed lower. Trade back below 71.33 would help confirm the bearish count (preferred) while trade above 74.15 will likely see a push to new highs. Bearish below 74.15

DJ Transport 15m

DJ Transport 15m

The USD/JPY continues it choppy overlapping advance and would look best with a push higher towards 102.85/103.10 to complete wave v of (c) of (2). Expect strong near term support at 101.40 while a break to new lows under 100.75 (critical support) would be very bearish.

USD/JPY 120m

USD/JPY 120m

That’s all for now. Trade safe 🙂

Feb 242014
 
 February 24, 2014  Posted by at 3:26 am Comments Off on Weekend Update February 24th, 2014 – Goal Line Defense

We are getting close to an important juncture in risk markets. Equities, US$, commodities and bonds are all signalling a potential change in trend. This is not a time for complacency.

As posted in my mid-week update, the bears made a goal line stand defending 1850 last week but the bulls still have the ball. There are no signs of a reversal as we await new highs for the SPX as no key support has been broken and we are yet to see a clearly impulsive decline from recent highs. The Russell 2000 which has recently been our lagging risk indicator awaits new highs while the Nasdaq Indices continue to make new highs. While the ever important BKX continues to lag, I will be suspicious of the internal strength of this rally and while new ATH’s will likely be achieved in most indices, I expect the euphoria to be short-lived. No reason for me to be going short here but as we are in the 5th wave of a 5 wave advance, I am alert to potential reversals and rally failures. The European indices are mixed with FTSE and CAC making new highs while the DAX and Eurostoxx lag. The US$ has held critical support but has NOT as yet rallied impulsively to suggest a change in the near term trend.  I will be watching the USD/JPY as it appears to be completing a 3 wave correction to the initial impulsive decline from the 105.50 highs.

The SPX continues to look for new marginal highs above 1850 to potentially complete the 5 wave advance from the 1738 lows. Targets for new highs remain in the 1865/75 region but more importantly, I will be watching for a complete 5 wave advance from the 1738 lows. I will be approaching new highs as a selling opportunity, not a reason to get long. Near term, the 50 sma should provide strong support around 1815.

SPX Daily

SPX Daily

The SPX rally from 1738 remains in 3 waves so far but I expect a continued advance towards 1865/75 while the 50 sma holds downside support. Bears need to hold the line at last week’s 1847.50 highs. While the bulls have been unable to push through to new highs on the SPX, the BTFD’ers have continued to step up on every s/t decline providing strong support.

SPX 60m

SPX 60m

The Russell 2000 continues to look strong in the latter stages of this advance and supports my near term bullish outlook. Impulsive advances and corrective declines define the near term trend as it pushes towards 1185.

Russell 2000 15m

Russell 2000 15m

Ideally, new highs in the RUT and SPX will  NOT be confirmed by new highs in the DJIA, Trannies, BKX and USD/JPY.

The BKX continues to hold 100 sma support and “ideally” will push towards 70.00 to complete its 3 wave counter-trend advance from recent lows. While the red count does allow for new marginal highs, my preferred count indicates the bigger picture rally is complete.

BKX Daily

BKX Daily

The DJT (“Trannies”) are at an important juncture here and one more push towards 74.00 would potentially complete the 3 wave advance from the 70.00 lows (red preferred count).

Dow Jones Transports 15m

Dow Jones Transports 15m

The US$ held near term trendline support as it attempts to form a base to rally from. As discussed last week, critical bullish support remains at 79.00. With weekly BB’s and ATR’s compressing, the US$ is setting up for a fast move from this congestion which aligns with my analysis that we are at an important juncture in the risk markets. I am looking for a strong breakout /breakdown here. The trade is to be long against 79.00 and reverse short below this level.

DXI Weekly

DXI Weekly

The EUR/USD continues to consolidate near recent highs as we await a push towards 1.3800/1.3850 with 1.3893 being the critical line in the sand for the bears. There is no evidence of a change in trend as yet although the advance is clearly waning.

EUR/USD 120m

EUR/USD 120m

The USD/JPY appears to be in the late stages of its counter-trend rally as it bumps along the underside of the broken green 2 – 4 trendline. Trade below the 100 sma will warn that wave 3 down has commenced for this pair. This chart continues to warn of an impending carry trade unwind which is consistent with my thesis of a near term important top for risk assets at hand.

USD/JPY Daily

USD/JPY Daily

The near term count for the USD/JPY has this counter-trend wave (2) rally complete or nearing completion around the 103.00 50% Fib retracement and sell zone. An ideal sell setup would include one more push towards 103.00 for wave v of (c) ending diagonal (red count). Trade below 101.38 would invalidate this count.

USD/JPY 120m

USD/JPY 120m

That’s all for now. Trade safe 🙂

Addendum: The following array of Yen crosses is one of the reasons I’m not particularly bearish right now. While the USD/JPY and NZD/JPY appear to have reversed impulsively lower from recent highs, the same cannot be said for GBP/JPY, EUR/JPY and AUD/JPY. These crosses lead me to believe that further upside remains for global risk assets… Just food for thought.

Yen Crosses 360m

Yen Crosses 360m

 

Feb 192014
 
 February 19, 2014  Posted by at 12:23 am 1 Response »

I’m posting this midweek update as the US$ is now at a key inflection point. There are only two numbers you need to remember if you are bullish US$ – Euro 1.3893; DXI 79.00

The EUR/USD has traded through 1.3740 eliminating the immediately bearish count, opening the door for further strength. While critical resistance for the bears remains at 1.3893, this recent rally has strengthened the bullish potential. Trade above 1.3893 opens the door to a push higher towards 1.45 for this pair. Should the DXI ALSO break 79.00, this would likely lead a accelerated US$ weakness towards 75.00 – We are approaching critical levels in the key US$ pairs here. The commodity complex is gaining from this US$ weakness with Crude Oil and PM’s leading the charge higher. The equity markets are ignoring this US$ weakness for now but should we get an accelerated decline, I suspect equities will be dragged down along with the US$.

The weekly EUR/USD chart below shows strong trendline resistance around 1.3850 while trade above critical resistance of 1.3893 will likely trigger a push towards 1.450 (red trendline). Trade back below 1.3475 would be immediately bearish.

EUR/USD Weekly

EUR/USD Weekly

The near term chart of the EUR/USD shows clear points of ruin for the bearish case. Trade above 1.3893 is the final line in the sand. The bearish Euro count is not dead, just substantially weakened at this point. With trade now above 1.374, the bearish count suggests a larger expanded flat wave [c] which will likely push higher towards 1.3850 but MUST NOT exceed the prior swing high.

EUR/USD 120m

EUR/USD 120m

The weekly DXI chart which I have been updating in my weekly posts continues to hold critical support above 79.00. The BB’s and ATR’s continue to compress warning of a potential breakout/breakdown in the US$. The “structure” favors a breakdown but while the 79.00 support level holds, the strong bullish potential cannot be ignored. Trade above 81.50 will likely trigger an accelerated advance. This is effectively a mirror image of the Euro chart.

DXI Weekly

DXI Weekly

The near term DXI chart illustrates the importance of the 79.00 swing low. The red bullish count is invalidated below 79.00 and would likely lead to an accelerated 3rd wave decline. As current momentum is to the downside, bulls should await a clear 5 wave impulsive rally and 3 wave decline on a s/t (15m chart) to signify a potential change in trend. Bulls and bears have clear points of ruin here.

DXI 240m

DXI 240m

Finally, the weak US$ has strengthened commodity prices across the board with CL breaking through my critical resistance level for the bearish case. Similarly, Silver has continued to strengthen following last week’s base building breakout.

SPX micro count suggests wave (iii) complete or near complete with (iv) and (v) to come to complete wave (5) up. Bearish red alt count still alive but low probability. Near term support at 1827 (5 ema) and 1812 (previous 4th and 50 sma)

SPX 15m

SPX 15m

Feb 172014
 
 February 17, 2014  Posted by at 3:09 am 6 Responses »

Last week saw the running of the bulls as the bears were caught short and equity markets rallied strongly through all near term resistance levels. The NDX and SOX led all markets higher confirming last week’s suspicions that the decline was indeed a 3 wave corrective structure. Last week’s post title “It’s a crap-shoot but watch the US$” described my positioning in the market – flat, awaiting clear signals warning, “If we turn down immediately from these levels impulsively, then the bears pick up the ball, otherwise, the bulls have a chance to push to new highs” and “A strong close above the 50 sma will call into question the bearish count.”. While I did not participate on the upside, the Elliott Wave structure never triggered a sell signal since bottoming and rebounding strongly from my 1738 downside support. Instead, the SPX blew through the 50 sma before a slight pause and retest then headed higher once again. Importantly, the Russell 2000 cleared 1145 on the upside which eliminated the potential for a nested decline and locked in a 3 wave decline from the highs. This is not bearish. Front-running a bull market can be expensive if short. I let price override conviction at all times. My trading plan required a clearly impulsive 5 wave decline on a shorter timeframe (eg., 5 min chart) and subsequent 3 wave counter-trend rally of similar degree to short this market for a potential trend change. We have not yet seen such a sell setup in this strong rally.

One thing that does bother me about this rally is the fragmented nature of leaders and laggards where the semiconductor stocks are leading while transports and banks are lagging. Either the laggards need to play catch-up in the very near term, or they risk dragging the broader indices lower.

Leaders v's Laggards

Leaders v’s Laggards

The SPX rallied to within 9pts of new all time highs on Friday and appears to have broken its near term correlation with the USD/JPY. The US$ has greatly underperformed in recent weeks warning that all is not well in the state of Denmark. While the SPX “could” still fail to make new ATH’s, the momentum remains with the bulls while the 50 sma holds. Elliott Wave is a probabilistic trading tool with clear points of ruin and when combined with other traditional forms of technical analysis and tape reading it is extremely valuable to a trader. The green bullish count included in last week’s update of a potential expanded flat 4th wave while lower probability appears the more likely count with new highs on deck.  I will be closely watching price reactions / follow-through around new ATH’s which should coincide with RSI/MACD divergence on the daily charts. The “next best” count can be seen below. Trade above 1905 would invalidate this count which has this wave higher as a 5th and final wave as wave circle iii would be the shortest wave which is a fundamental rule violation. Trade above 1905 suggests even greater bullish potential.

SPX Daily

SPX Daily

On a near term basis, momentum divergences are appearing at these levels but we are yet to see a clear 5 wave reversal. This remains a strong rally and until PROVEN otherwise, the bulls have the ball.

SPX 60m

SPX 60m

As mentioned previously, the Russell 2000 has “locked in” a 3 wave decline from ATH’s suggesting new highs ahead for this index.

Russell 2000 15m

Russell 2000 15m

To the FX markets and the US$ continues to be under pressure against all pairs.

Given the AUD/USD penchant for expanded flats, I thought it timely to post the following chart. The 3 waves into the 0.8658 low suggests a temporary low with wave b of an expanded flat. It now appears to be in wave v of c terminating above the wave a high of 0.9087 (which is the expectation for an expanded flat). Expect strong resistance in the 0.91-0.92 range and I will be alert for a trend reversal from this sell-zone.

AUD/USD Daily

AUD/USD Daily

The EUR/USD is pushing the upper boundaries for the immediately bearish count. As mentioned last week, trade above 1.3740 would suggest a push back above 1.39 and potentially much higher. The better risk/reward trade is to be short the Euro against this key level.

EUR/USD 120m

EUR/USD 120m

The DXI is now at critical support and must remain above 79.00 to avoid a flush down towards 75.00 and below. There is strong trendline and sma support right here for the US$ where the bulls must “hold the line”…

DXI Weekly

DXI Weekly

The USD/JPY continues to trade heavy despite the strength of risk assets and remains below last week’s highs. While a push higher towards 103.00/103.50 cannot be ruled out, the trend is now down while it remains below 105.50.

USD/JPY Daily

USD/JPY Daily

To commodities and Crude Oil appears to have completed it’s rally from 91.47 to 101.38 (basis March) culminating with a triangle thrust 5th wave. CL now appears to have formed a H&S on a near term basis with a 99.40 neckline.

CLH4 60m

CLH4 60m

As mentioned last week, I was looking for a breakout in Silver on trade above 20.67 following an extended basing period. On Friday, Silver broke higher and traded up 5% on the day. I give credit to Richard Weissman of @TradeLikeCasino for alerting me to this potential setup. So far, so good…

Silver Daily

Silver Daily

Championships are won with great defense…

That’s all for now. Trade safe 🙂

Feb 092014
 
 February 9, 2014  Posted by at 8:18 am Comments Off on Weekend Update: February 9th, 2014 – “It’s a crap-shoot” but watch the US$

Last weekend, I proposed a 5th wave decline for the SPX with first support at 1738 following a break of 1760 which we achieved on Monday. So far so good as the low for the decline was 1737.92 LOL.  That was the easy part. Since then, we have witnessed a strong impulsive rally from support immediately into an important resistance area which was NOT confirmed by higher bond yields or stronger US$. I trade based on price evidence and at the moment we have conflicting signals from the various equity market indices as to the nature of the decline (impulsive or corrective). The SPX and DJIA look like clear impulsive declines, while the higher beta indices (NDX and Russell 2000) appear to be corrective zigzags in 3 waves. Hence, the near term dilemma for bulls and bears. It’s a crap-shoot right here and at these times it is often best to wait for more price information. If we turn down immediately from these levels impulsively, then the bears pick up the ball, otherwise, the bulls have a chance to push to new highs.   My preferred count is that we are in wave (c) of an expanded flat for SPX and NDX while the DJIA and RUT appear to be ending double zigzag rallies off the recent lows with new lows to come. The bulls have not left the building…

SPX – With the 5 wave impulsive decline for wave 1 / A complete at 1738, we could then expect a 3 wave corrective counter-trend rally for wave 2 / B terminating at the 0.50 – 0.618 Fib retracement.  The rally from the 1738 lows is impulsive and is either ALL of wave (c) of 2 expanded flat correction (black preferred count) or wave (a) of a potential zigzag correction (red count) with wave (b) and (c) of 2 to come. Alternatively, the bull market is back (green) and the 5 wave decline completed wave C of a flat correction and we head directly to new highs (lower probability but the potential cannot be ignored).

The rally has now entered my proposed sell zone in the 1798 – 1810 area with a cluster of measured resistance levels including: previous 4th wave extreme (1798), 0.618 Fib retracement (1808) and 50 day sma (1809). What matters now is the nature of any near term decline whether in 5 waves (impulsive) or 3 (corrective). The market’s reaction to this resistance zone will provide additional clues as to the bigger picture path forward. I prefer the expanded flat wave (c) option due to the overlapping and choppy nature of Wednesday’s marginal new low (not a clear 5 wave decline) and the expansiveness of the resulting impulsive rally. This count implies a decline in 5 waves immediately below 1738 for either wave C of (4) or 3 of (1). This strong rally is also consistent with bear market counter-trend moves.

SPX 15m

SPX 15m

The daily SPX chart below highlights the strength of the rally after catching trendline support at 1738. A strong close above the 50 sma will call into question the bearish count. That’s why we need to focus on the near term count and in particular, the structure of the initial decline from this resistance zone.

SPX Daily

SPX Daily

The DJIA also completed a 5 wave impulsive decline into Wednesday’s lows, but unlike the SPX, there appears to be no (b) wave low. The rally has been far more muted as it has only retraced 0.382 of its decline. The DJIA has been lagging for some time, and this has not changed, which tells me the nature of the market has not changed. I expect this counter-trend rally to be short lived as DJIA weakness continues. Once again, the nature and structure of the next near term decline will provide important clues going forward. I do not expect the DJIA to make new highs.

DJIA 15m

DJIA 15m

The higher beta indices such as the NDX and Russell 2000 do not look as impulsive on the recent decline but instead appear to have completed double zigzag declines. In particular, the NDX has outperformed all other indices while the Russell 2000 has lagged. In a strong advance towards new highs, I would expect the Russell 2000 to lead the advance and risk-on trade, not lag.

The NDX “looks” like a clear 5-3-5 zigzag corrective decline (green bullish count). However, it can also be counted as a bearish impulsive decline (black count) followed by an expanded flat correction. This rally “feels” like the C wave of an expanded flat so that remains my preferred option. This count is invalidated at new highs.

Nasdaq 100 15m

Nasdaq 100 15m

As mentioned previously, the Russell 2000 has declined in 2 impulsive waves completing either an A-B-C correction for wave (4) (green bullish count) OR a series of nested declines defined by [i],[ii], (i), (ii)… The rally from the lows has been weak and not particularly impulsive. Any reversal lower from these levels would be very bearish. The bearish (black) count is invalidated above 1145 and would “lock-in” a 3 wave decline suggesting new highs ahead. Trade back below 1082 will likely result in an accelerated selloff… we have clear points of ruin

Russell 2000 10m

Russell 2000 10m

To the FX markets…

The DXI is compressing for a very fast break out of the current range. With weekly BB’s tightening and ATR at 5 year lows, pressure is building for a resolution. 79.00 remains critical support for the US$ bulls and a break of this level targets 75 and below. Technically, the US$ has failed to make new swing highs (failed to confirm the Euro’s new lows), coupled with negative RSI divergence and potential MACD zero line reversal. The US$ is at a critical juncture with Yellen making her first public appearance as Fed Chairperson, 3 weeks of heavy US debt issuance/funding and another debt ceiling debate on deck. The timing is about right and the setup is there… this could be an exciting week.

DXI Weekly

DXI Weekly

The EUR/USD declined below 1.3507 as expected and the subsequent rally appears corrective. However, the EUR/USD is setup for a 3rd wave move in either direction. This coincides with the DXI at critical levels. I am looking to trade a break of either long above the 1.3737 prior swing high (red line) or short below 1.3477 (blue line) targeting a nested 3rd wave move.

EUR/USD 60m

EUR/USD 60m

The potential weak US$ theme would also translate into a 3rd wave decline in USD/JPY associated with the carry trade unwind. The near term count shows a complete leading diagonal decline for wave 1 and corrective counter-trend rally under way. While the potential exists for a deeper counter-trend rally, it is not required.

USD/JPY Daily

USD/JPY Daily

Consistent with the potential weak US$ theme are the precious metals which appear to be forming a strong base awaiting a breakout. Silver in particular has remained in a narrow trading range between $18.72 and $20.67. A close outside of this range will likely lead to a follow through acceleration in that direction.

Silver Daily

Silver Daily

In summary, the equity bulls have staged a strong comeback but that was not unexpected. On balance of probabilities however, I do not believe that this is the start of the next bull wave to new highs. The US$ risk here is too great to ignore and I expect the equity markets will follow accordingly. This is not a time for complacency as I expect greater volatility ahead for these markets.

I have attached the latest Liquidity Schedule for the remainder of February.  This has changed dramatically. Treasury has announced an additional $50 bln in funding requirements this week culminating in a $112 bln liquidity drain for the remainder of February which will likely be negative for risk assets.

Updated February Liquidity Schedule

Updated February Liquidity Schedule

Trade safe 🙂

Feb 022014
 
 February 2, 2014  Posted by at 4:54 am 4 Responses »

Pre-emptive Bear Warning…this post may offend some bulls 

SPX appears to have completed its 5 wave decline but has been unable to rally convincingly from the 100 sma. However, support is support until broken. For the first time in a long time, I have a number of indicators and chart patterns warning of an imminent selloff in risk assets coupled with the unwinding of the Yen carry trade. The chart setup is there and we have clear points of ruin where the trade is wrong. The setup I am looking at in particular is a running flat with a failed wave (c) (where it doesn’t exceed wave (a)). This is a strong sell setup as long as the SPX does not exceed Friday’s highs. The risk is defined above 1794. If we trade below 1760 before exceeding Friday’s HOD, this is NOT a dip that should be bought as it projects a decline through the 100 sma towards the 200. Keep in mind that my initial price target for this correction remains at 1650.

SPX at important crossroads but bears have the ball… I have attempted to outline the many potential options and key triggers in order of probability:

Option 1 – Immediately bearish (black preferred): Rare Running Flat (3-3-5) that terminated at Friday’s high (1794.17). While rare, this is a strong sell setup aligned with a potential nested waterfall decline in the Yen crosses and in particular a clear break of the 101.75 USD/JPY lows. This immediate bearish condition will be invalidated with trade back above Friday’s HOD but confirmed by a strong decline below 1760. Clear points of ruin. Key support levels 1760, 1738, 1706 (200 sma) and 1650 (measured objective).

Option 2 – Buy Setup (blue): Triangle 4th wave that continues to trade within the bounds of waves a and b, finally giving way to a 5th wave thrust towards 1760. Count invalidated above wave a high of 1798.77 or below wave b 1772.26

Option 3 – Sell Setup (red): Trade above wave (a) high of 1798.77 projects towards the 1810-1817 wave (c) of 2 and 50 day sma resistance. This would be the ideal sell setup for a trade towards 1737 and below and potential H&S top with a measured decline to 1688.

Option 4 – Immediately bullish (green): Assumes wave (4) is complete and we trade straight to new highs for the SPX. Close above the 50 sma and 5 ema will add confidence to the bullish case.

My inter-market analysis suggests Option 1 is the most likely if, as I expect,  USD/JPY 101.75 breaks convincingly in a 3rd wave impulsive decline signalling the start of the USD/JPY carry trade unwind.

SPX 15m

SPX 15m

SPX daily chart below highlights key areas of trendline and sma support for this market. Note how the 5ema, 10/20/50 sma’s have now all rolled over at the same time. This did not occur at all during the entire 2013 rally.

SPX Daily

SPX Daily

I have included the following ES daily chart for this entire rally since October 2011 as it illustrates how perfectly the market tagged the upper bounds of the long term trend channel and then reversed lower impulsively. Note the purple trendline break and near term trendline support around 1750.

ES Daily Continuation

ES Daily Continuation

The Yen carry trade has been highly profitable for hedge funds and banks but the following charts clearly illustrate the “potential” for a sharp unwind of these highly leveraged positions. There is “nothing but air” under most of these pairs and risk is to the downside.

Yen Carry Trade

Yen Carry Trade

I have been tweeting the following USD/JPY daily chart for the last week coupled with the song “Don’t go chasing waterfalls”. A break of this trendline will likely result in this pair returning to the origin of the triangle (97.00) very quickly. That is a decline of 500 pips which is for a minimum expected move if this 2 year rally is indeed over.

USD/JPY Daily

USD/JPY Daily

The near term chart illustrates the “nested” nature of impulsive declines in this pair. Impulsive down and corrective up, which implies an accelerated 3rd wave decline on trade below 101.75. The near term chart also illustrates that the market knows this major trendline is important given it has found support 3 times but has rallied less convincingly each time. Like the SPX, trade below 101.75 prior to trading above Friday’s HOD suggests significant downside risk. The bulls would have to reclaim 105 to postpone this unwind.

USD/JPY 30m

USD/JPY 30m

The EUR/USD traded below its wave (b) lows as expected and is now moving in lockstep with the EUR/JPY carry trade unwind. My initial target remains 1.3400 for a minimum wave C (red) decline with targets much lower if indeed this is a wave 3 decline.

EUR/USD 60m

EUR/USD 60m

In conclusion, it appears that the Central Bankers need to step up here and support the Yen crosses to avoid a sharp fall in global risk assets. While the decline in markets has been orderly to date, there is nothing orderly about a highly leveraged carry trade unwind. BTFD’ers beware.

Edit: I have included the February Liquidity Schedule below. Strong first half of the month, very weak secong half

February Liquidity Schedule

February Liquidity Schedule

Sing along…

Don’t Go Chasing Waterfalls