Quantitative easing measures from the Fed and a choppy session yesterday notwithstanding, the pairs for which I mentioned potential shorts yesterday are again presenting opportunity. Specifically, I’m considering the short-term trend line resistance coming under test on EUR/USD, USD/CHF, EUR/JPY (already broken) and GBP/JPY. Naturally I have a chart of the Guppy to illustrate:
The above chart actually reflects a failed breakout attempt with price bounded just below the trend line by the 194 EMA at 145.34. Not much conviction behind the rejection there, however.
Everything was setting up quite nicely for a short on EUR/USD, GBP/USD and several of the JPY crosses (granted I’d have to filter down to one or two of the most high probability of these) I regularly monitor when the Fed announces the introduction of an…abyss-filling (I presumed this wasn’t possible either, until now) amount of money, ostensibly sufficient to “unfreeze credit markets” (high finance = echo chamber) by purchase of $600B in GSE-held direct obligations and MBSs, while another $200B will fund the new Term Asset-Backed Securities Loan Facility (with a $20B backstop courtesy of the Treasury, derived from the seemingly quaint $700B rescue package), which we’ll refer to as the “TA-BSLF” for the sake of efficiency, I suppose….
As William Poole is quoted here: “They’re trying to put funds into the system, trying to unfreeze these markets…Clearly, the Fed and the Treasury are beginning to take a large amount of credit risk.” Whatever your other merits, Bill, master of the obvious is certainly among them.
And now another acronym to take inventory of that further obfuscates the everyman’s attempt to understand where the hell their money is going. Okay, done with the populist-oppression rhetoric.
Not enough time to thoroughly revisit each trade set-up to evaluate their ongoing viability, so I’ll probably scrap them all.
Nor enough time to take the TABSLQ…see above (I looked: the first 3 of 6 isn’t bad) apart to fully understand its intent and implications this morning. About time to trudge over to the mill, however, so that’ll wait until sometime later. One chart for now, on the Guppy:
Overnight the Guppy has been crawling along Senkou Span-A (this is from the Ichimoku Kinko Hyo study: the bottom of the cloud, in this case) and bottoming at .382 fib retracement of yesterday’s low/high @ 143.25, creating a descending triangle of sorts hoisted up several hundred pips from the reaction low set at ~139 yesterday.
Last afternoon’s 1400-1500 candles (1400 completing the morning star pattern) can be construed as a flagpole. But, a descending triangle is not the construction featured in either flags (box channel range) or pennants (symmetrical triangle).
Ignoring what may or may not be a pole, a new descending triangle has formed. With the Cloud turning down to 141.40 on the 1H, I think that’s likely as an intraday projection. Price is pushing the 143.25 threshold now, in fact Still – and this is pretty atypical – I’m wary of a continuation/upside break, which targets ~146.80 and then ~148.90 afterward.
After ending flat at 140.49, things became a bit hairy on the Guppy. A nice gravestone doji on the 1300 1H candle setting off a 600 pip rally (coinciding with a 552 point gain on the Dow) as discount shoppers turned out in droves in bid the pair up almost relentlessly from 139, of which I was not a part and during which caught zero pips. In retrospect there were technical grounds (check out the morning star on 1200-1400 candles below) for going long at the close of the 1400 ET candle. I wouldn’t have taken that trade anyway.
To my jaundiced eye (shorts to longs since 215.89 in late July on JPY crosses probably measure in around 20:1), this smacks of yet another rally to sell into on GBP/JPY. Descending trendline (from 11/10) and Kumo resistance with SS-Span A at ~146 support the thesis that trend bias remains unchanged, while this does bring us up to a point where a fresh short may be opportune. A Tokyo session that follows suit to this afternoon will invalidate this, so best to see what this evening brings.
A direct quote I overheard from my Primary Care Physician.
Short anew from 141.98 around 1000 ET this morning, targeting 139 and lower. Scaled half out @ 140.34; 25% set to come off just above 139, and then discretionary exit on the remainder (with stop adjusted, etc.).
Maybe it’s lunacy, but I have this thing (i.e. the Guppy) pegged to go still lower. Anything sub-139.06, as I recall, breaks out into territory unseen in 13 years. 161.8% of the present decline from 165.07 comes in at 123.07. That seems ludicrous; but then so does 7500 pips in 4 months. Nevertheless, here we are.
Edit: buy limit for 25% fired off @ 139.28 at 1322 ET. 25% left, look for a close below 139. Stop adjusted to 140.49.
Barry Ritholtz posted a great synopsis of the tipping point rising up ahead of us with US equities over at The Big Picture, which seems relevant given the tight correlation often exhibited between the Guppy and the Dow30.
The title of that post denotes no directional bias, but Barry (one of my favorite bloggers, CEO/Director of Equity Research at FusionIQ) alludes to being well-positioned to pick off some discounted issues around the 10/10 or 10/27 lows, reflecting at least some underlying optimism looking forward.
I would hate to be caricatured as a permabear, and while I do think there is a sound, almost primordial technical rationale for buying at support (no, really), I differ in opinion here on what I think are equally sound technical grounds and based off the general sentimental malaise afflicting the markets (GBP/JPY shorts excepted, of course). Admittedly, our profiles and methodologies as managers of money (i.e. I manage only my own, for starters) differ significantly; but pick a bottom by putting money on it is the same process with the same potential consequences, and I can see little justification for entering positions when the bottom appears to be some way off.
Jobless claims printed to the upside yet again, coming in with initial filers at 516k, the highest since 09/11. Continuing claims coincidentally moved up to the highest levels since 1983 (end-of-recession there). Noteworthy here is the 4-week moving average: the highest initial claim print since 1991 (amidst recession).
Any argument against domestic recession is defensible only on grounds of sheer pedantry (“where’s the second quarter of negative growth?!”, “The NBER hasn’t said anything to that effect”, etc.) at this point.
Normally this report has little impact because of the frequency with which it is issued and thus the swift obsolescence of the data. However, with the inclusion of downward revision and probing the deep fathoms of numbers typical of previous recessions, this week’s figures lend portent to nothing positive.
Sorry to be such a debbie-downer. Now, how about that horizontal support at 8200 on that descending triangle on the Dow? 8000, 7880, then back to the 2002 lows?
Because I’m sitting on my hands positionless after hitting buy limits on GBP/JPY, EUR/JPY and CAD/JPY yesterday morning, how about a non-trading-related smackerel (that’s from my daughter’s Winnie the Pooh book)?
Jimmy Eat World will be embarking on a 10 city tour to commemorate the 10th anniversary of the release of Clarity. Released in early 1999 when the band lived and moved in relative pre-In the Middle obscurity, Clarity’s dynamic and driven emo-core-inflected pop undoubtedly stands as the band’s creative high-water mark.
Definitely in my top…oh, 25 albums. Don’t ask what the other 24 are.
That’s “emo”, by the way, without all the mascara, pubescent scenesters/tresses, emaciated upper-middle class crying man-children roving about with effeminate posture smoking solely to give their hands something to do; and none of those cookie-cutter carmelized, castrati-inspired multi-tracked harmonies on every stinking chorus. Middle-era indie-emo, if you will. Whatever that means. I’m no music gestapo, however, so that taxonomy may be incorrect; which matters not.
JEW departed significantly from the sound of Clarity only to break out with mainstream success on their next album (eponymously-titled, fair but mediocre by comparison). The noteworthy thing about this tour, though, is that whatever else is played, they will be performing Clarity straight through en toto from slow-burning opener Table for Glasses to the epic 16-minute dream-pop closer Goodbye Sky Harbor.
Here’s the second track off the album, Lucky Denver Mint (cheesy video with sub-par sound, but more than makes up for that with some ultimate frisbee):
You can listen to snippets on iTunes or any of an array of sites like this. Ticket pre-sale begins today. May have to make it up Chicago way for this, even if that means being on Lake Michigan in February.
The Guppy short from 152.46 fared well today, with profit targets scaled out at 150.16 on 2/3, and the final 1/3 at 149.18 – each firing off just above those support levels noted this morning. It’s not often a trade worth hundreds of pips unfolds so linearly (except that bump up to 151 that correlated tightly with the Dow late in our domestic equity session) or in such a superficially intuitive fashion. If this makes me a simpleton, so be it.
Flat for now, but be sure I’ll prowl about bottom-feeding (cat/fish mixed metaphor) for more stupid-simple trades this evening.
The descending triangle referenced a few posts ago broke to 150.64, only to be followed by an upward march to 157.34 early yesterday.
Given the lower low at 150.64 (~400 pips below the horizontal support pegged for that triangle) the lower high at 157.34, and now a higher low at 151.64 a couple hours ago, the criteria are there to shift over to a symmetrical triangle (most easily visible from H1, H3/H4 charts):
No surprise that I remain bearish. Fib retracement support at 152.15 (mentioned in the descending triangle post, also), followed by psychological flooring put in at 150., and then relatively little in the way of obstacles until ~149. Let’s see if Chinese stimulus package mania further subsides in the upcoming session….
