Futures / FX Update

This is not a wrap of the day's events, it's an update.

While I'm finishing a UNG post, which is a bit more involved than most because as we long suspected and received confirmation last night, Natural Gas is apparently going to be one of the main players in Energy in the years moving forward according to Shell, in fact potentially the #1 Energy source, we are talking about a secular change that may be one of the biggest ever, perhaps bigger than the Internet and the Tech revolution. Decades, nearly Centuries of reliance on oil as our primary power source is about to change. We knew there was something big happening with UNG and had many hints from government along the way, but this is even bigger than I imagined so I think the piece is worth the time it takes to write.

In the mean time, here's what's going on with futures and FX pairs

 ES(SPX Futures) 1 min has had a solidly negative trend today, this reminds me a little of the days of persistent negative divergences that preceded major shifts in the market, both bearish and bullish although we saw 2 bearish turns and 1 bullish. However it is not the same thing. The reason I tell you that the most gravitational pull on ay stock on any given day is going to be the market first, the Industry group (rotation) second and lastly the stock itself (of course there are exceptions such as stock specific news, earnings, etc) is because the market largely moves together as one, there are differences in relative performance, but the market herds as do the participants. What I see above looks to me like the Dow close the headlines needed as talked about late last week and many times on Friday, the market in essence was pegged for a Dow close at new highs rather than an intraday move to new highs, but as it was, it looks lie distribution was fairly consistent throughout the day and why not? Prices are stable, they weren't likely to move due to the need for the headline and this is the environment we most often see distribution and accumulation in to. The late day positive divergence looks to now be fading as the after hours in the red box shows a picture perfect "divergence".

 ES 5 min is in a relative negative divergence, we've had these work fine with the weekly options trades, in fact we've has smaller ones work well. again the 5 min chart is moving to the downside (3c) in AH.

 1 min NASDAQ futures (NQ) saw the same type of action today, there was the afternoon positive divergence mentioned in a Futures market update at 3:09. Again, the AH trade in AH in the red box is a picture perfect example of a divergence.

 The 5 min NQ chart is exactly what we have been looking for to enter Puts, the market up, a strong negative 5 min divergence, this one leading negative strongly. As mentioned yesterday, I get the feeling volatility is about to rise, that doesn't mean we will be trapped in a range, but I do think it is more likely volatility rises than shrinks with a trend.

As far as FX, there weren't too many moves of much importance as far as violating the pattern of lower highs/lower lows, the AUD/JPY was one of the biggest movers, it also is one of the only FX pairs with a clear negative divergence.

 EUR/USD once again seems to have some floor, temporary or otherwise at $1.30, it's too early to say if there's intervention to hold this floor t $1.30, but we saw this last week on Friday and yesterday, technically though the pair hasn't done anything of note.

 The EUR/JPY has been pretty flat so far this week, coming off a move late last week.

 The exact same could be said of the USD/JPY.

While the AUD/JPY has not crossed or broken any trend markers, it was one of the pairs that has seen some movement this week, it is also, as mentioned late last night, one of the only pairs with a clear negative divergence.

 Above is the AUD/JPY, when price moves up, the AUD is gaining in value while the Yen is sinking in value vs each other, this is generally bullish, but the negative divergence suggests that a reversal of this move is likely. It's hard to get a lot of confirmation of the FX pairs, unlike with equities, but I did, if 3C is correct here than we should see the AUD by itself with a negative divergence and the JPY (Yen) with a positive divergence, I checked the futures of each.

 This is the AUD futures (AUD only) and as the FX pair chart above suggests, the AUD futures themselves have the same exact signal or confirmation.

To further confirm this the JPY should have a positive divergence.

Here's the Yen with a positive divergence so we have 3 different charts, 1 an FX pair and two individual futures for the single currencies, all agree and confirm each other. Should the divergence cause the reversal on the AUD to the downside and JPY to the upside this will put negative/bearish pressure on the stock market.

More coming as well as UNG.