ES (SPX futures) 60 min chart with a leading negative divergence (distribution)
Then by the time you understand, your chance to make money has already passed you by.
Friday I suspected from our longer term analysis of the Yen, the Japanese JGB market, the $USD, the market averages, leading indicators, etc... that the Yen was going to move higher as it started to on Friday and that the BOJ may have truly lost control by trying to push QE too far. In addition the $USD's base that looks like it will move to the upside (which has seen a recent pullback), appears that the pullback is ending and the $USD will head higher pressuring the market, risk assets and the highly leveraged carry trade institutions use to leverage up their AUM.
USD "W" base on a longer term daily chart with large 3C positive divergences suggesting a strong move higher (in line with our VIX/market analysis)...
The 30 min $USDX chart looks like that pullback is ending and the $USD will head higher as there have been recent 3C positive divergences.
If the Yen moves lower and the $USD higher, then the timing of Japanese PM, Abe's win and his nomination of Kuroda to the BOJ with several other ultra-doves, makes sense in context of when to close the carry trade, perhaps that's why the divergences have been so extreme as it wouldn't just be selling, I suspect that was done a while ago, but short selling.
The longer term ES chart (as I showed Friday morning) with a number of Index future charts as well as the breadth posts and leading indicators would all suggest the market is ready to see a deep downside move.
The carry trade and Japanese politics would seemingly be the last thing you think of in the timing of all of this, but it seems it can't be ignored.
Short term tonight ES should bounce and the USD/JPY should bounce as well, there are short term (1 min) negative divergences in the $USD and positive in the Yen as well as ES, but that's just short term (likely overnight).
The signals have been there, the signs have been there. I wouldn't be surprised to see a massive unwind of the carry, in fact I think the action Friday in gold and even tonight (as a longer term position for many funds and a profitable one at that) is part of closing the carry and meeting margin calls, especially if they are in Japanese JGBs and that market is so large, I'd think most institutions have some exposure there.
Our buy at the bottom for GLD and sell at the very top last week were perfectly timed, good thing we stayed away, this is why I don't look for probabilities, but high probabilities.
This Gold futures 30 min chart shows the positive divergence as we bought there at the lows and the negative divergence as we sold there at the high and then backed away.
Interestingly though...
Even though (as this 5 min gold /3c futures chart shows) gold has been slaughtered, if this 5 min positive can keep up, we may have a short term, high probability trade to the upside or it may set up a nice short entry, either way, the signals here have been good for trades when they have been high probability.
It looks possible that the market may even bounce...
ES futures, 5 min chart. I'd love to get XLF puts on a bounce, but I would not at all be caught believing or buying in to the idea of price strength, you saw the 60 min ES chart above.
NASDAQ futures on a 5 min chart look the same (like they can bounce), but the longer term (higher probability) 60 min chart has gone down the tubes...
Again, for me, any bounce is good for 1 thing only, selling in to, this is a VERY dangerous time to chase prices higher, as I always say, "There's nothing more deceptive than price alone." and this 60 min NQ chart proves it.
TF (R2K futures) look similar, but they are definitely weaker than the others so they are an obvious target if we can get a bounce to hold in to regular hours trade.
The Russell 2000 futures (TF) 30 min chart, it's clear to me what I want to do, SELL PRICE STRENGTH or short it even better, if it can hold up. The timing looks good as these longer term charts have never looked so bad. This one shows accumulation in to the lows and HEAVY distribution in to the highs, they are selling in to strength or shorting it, I want to be doing the same as them.
I think this will hold up through regular hours, the FX pairs like EUR/JPY and USD/JPY are moving short term toward supporting a bounce (I hope it's not just overnight), the XLF chart looked to be in a head fake zone, everything I see above and in this weekend's post, suggests that's true.
I'm pretty excited, we don't often get signals and tops/bases this big, this looks like it's going to be a monster move, but we could tell that more than a week ago with the VIX/Market analysis and expectations that have played out exactly as expected thus far, the last part of the expectations are where it gets really ugly for the market.
If you want an idea of how ugly...
The CONTEXT model for ES is at an astounding 45 point negative differential!!! I HAVE NEVER EVEN HEARD OF SUCH A THING!
This looks like our week and according to our analysis form a couple of weeks ago and positioning, we expected last week to be up and this week to be down, thus the calls for last week and puts for this week.
This is one of those times I feel really excited about the market, I feel like all of the hard work and analysis has paid off against what seemed to be impossible market action, but can you imagine what a 45 point correction in ES could do to the market? A month of gains could be lost on an opening gap!
I'll see you in a few hours!
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