Japan Market Following in US’ Footsteps

Japan is following in the footsteps of the man who laid the groundwork for the greatest global inflationary operation of the modern era. We see the Yen in the top panel of the chart below forming a similar pattern to that which USD made from 2000 to 2002 as an epic bubble in credit expansion was being fomented in the US.

japan-market-folow-usa

The similarity in the charts (with a decade stagger) is striking and it is probably no coincidence that Japan has chosen to leverage its currency – which had been chronically strong since the 2007 beginnings of the US-triggered global financial meltdown – just as the US did with the once strong ‘King’ dollar in and around 2001.

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EUR-JPY (Forex)

 

EUR JPY

 

Challenging the strong resistance at
111.44/111.60.
• EUR/JPY’s rise is overextended but, yesterday,
it managed to make new highs. It is now
challenging the strong resistance at
111.44/111.60. Given the general overbought
conditions, we favour a phase of weakness in the
next few days.
• EUR/JPY has moved above its long-term
downtrend (linking the October 2009 top with
the April 2011 top). Monitor the test of the key
resistance at 111.60 (31/10/2011 high).

Short 3 at 111.30, Objs: 110.35/108.10/106.10, Stop: 112.25 

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EUR/USD(Bouncing on support at 1.2875) updated 11-12-2012

 

eur-usd-intraday

Await fresh signal.

Bouncing on support at 1.2875.

.
• EUR/USD has successfully tested the key
support at 1.2875. Resistances for a bounce are
given by 1.2973 (07/12/2012 high) and 1.3046
(04/12/2012 low).
• The underlying trend is negative (see the
succession of lower highs since May 2011 peak).
Therefore we expect limited upside potential
given the strong resistance at 1.3172 (17/09/2012
high) and the overall overbought conditions.

 

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S&P Following Up of the Short Term

This is just a brief follow up since tomorrow morning I will be busy and today’s inconclusive price action with another small range body (Spinning Top) does not add anything new to the short-term potential scenarios I have discussed in the weekly technical update.

For the immediate time frame price remains range bound between the immediate support at 1398.23 and the immediate resistance at 1423.73.

Theoretically despite being close to a potential break out the daily Spinning Top is suggesting weakening of upside momentum, but it is unlikely to expect a meaningful pullback ahead of the FOMC.

It seems that the market remains, so far, careless to Risk off news from Europe and a potential, at least, short-term reversal of the EUR, the approaching FOMC meeting may be the reason behind this benevolent attitude.

Therefore at the moment there is no clear edge within the potential EWP options that I showed this Sunday.

Also it is strange that at today’s eod we have VIX up Equity up and Bonds up.

Below in the 30 min SPX I show the same ideas:

sp-short-term-bullish

 

Additionally the scenario of a Zig Zag with a wave (C) unfolding an Ending Diagonal is still possible as long as 1410.90 is not breached.

If this ED pattern plays out it could have a bearish outcome by ending the assumed wave (B) off the September 14 high since we would most likely have negative divergences in the final wave (V) of the ED.

sp-short-term-bearish

Conclusion:

Regardless of a potential pullback I maintain a bullish bias (until technical evidence shifts to the bears camp) since the pattern off the November lows is not complete yet.

EUR / USD (Await fresh signal)

eur-usd

.

Testing support at 1.2875.

• EUR/USD has weakened after failing to break
the resistance at 1.3140 (17/10/2012 high).
Monitor the test of the key support at 1.2875. An
hourly resistance is at 1.2973 (07/12/2012 high).
Another support can be found at 1.2834
(intraday low).

• The underlying trend is negative (see the
succession of lower highs since May 2011 peak).
Therefore we expect limited upside potential
given the strong resistance at 1.3172 (17/09/2012
high) and the overall overbought conditions.

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S&P 500 Panic Coming!

The TV pundits all contribute their fair share to the conditioning process by clouding thoughts of any market player. To the extent that all ambiguities presented will bait investors to thinking IRRATIONALLY! Like, waiting for a 1000 point rally to emerge once the fiscal cliff is resolved.

Fortunately, underneath all the headlines a visual and graphical interpretation can be mathematically extracted. It is here, in these very charts, where you will find an answer that illustrates what is really going on, so that us technicians can observe, scrutinize, and formulate a particular bias.

The information provided does not tell you why, or when, but what!

In this case, ‘the what’ is a bear market rally. These particular rallies are very sneaky and most convincing, but can be properly identified when using the right tools.

For starters, a basket of heavily weighted companies, ‘THE NIFTY FIFTYs,’ which offer the bulk in the performance in the averages -all now have chart patterns that cannot sustain the continuation of this advance. Invariably, when volume remains light during an extended window of time, the result is an inevitable sharp collapse back downward to the previous lows or worse, new lows that can no longer support a bull market.

The S&P 500 index is a case in point, which is still in rally mode, and perhaps can continue higher if there is further consolidation. But if only mother market is ever so accommodative to our own expectations.

And it is because of her complexities that make it an impossible arena for perfection. The current rally back is clearly overworking itself to recapture the previous drop in November and rather than guessing where exactly it will end, think of it in terms of direction. The future course of these violent counter trends ultimately end in a scare plunge; and all the pumping in the world cannot uphold the violent cascade of selling pressure that will implode on the masses.

Consider the technical chart below, which projects a disaster waiting to happen, and with only a small chance of one last leg higher before this rally is all said and done.

S&P 500 – Daily Chart

SP-500-Panic