Futures Update

Monday afternoon I was a bit concerned about a 1 min (short term) positive divergence in the USD/JPY as that suggests it moves up and the FX pair tens to lead the market so the market would possibly move up as well when I've been expecting a short term move down early this week. Normally this wouldn't concern me much at all, but I knew tonight was the BOJ's policy statement and the conventional wisdom was they were going to try to instill confidence in their QE program and the $USD/JPY might move higher overnight, thereby putting some of the very short term positions opened Friday and today (short term, short positions) at risk.

Luckily the BOJ disappointed as the 5 min charts this afternoon were suggesting to be the highest short term probability.  The Nikkei dropped some 500 points intraday and the $USD/JPY dropped 80 pips like that, in fact...

This is the i min USD/JPY and it looks almost EXACTLY like the pair right before the April meeting, I think they have a leak over there. At the April meeting there was a negative divergence just like this one that lasted 8 hours right up to the policy announcement and then a waterfall sell-off, if this were a 15 min chart and instead of 80 pips, it was several points, I'd swear this was the exact same chart. In any case, it looks like someone knew and had been selling the USD/JPY for at least 6 hours  before the policy statement.

ES didn't move as much as you might expect with that volatile of a drop, but it did move, keep your eye on the 11 pm (23) period.

ES 1 min chart...

 Here's the move on the Nikkei on a 5 min chart, 3C is negative so it does look like the Nikkei will see a similar move to the one I'm looking for very short term in the US market (the one we set up short positions for on Friday and today).

In fact here's the Nikkei 15 min chart, negative and it looks a lot like the ES 15 min chart below...

ES 15 min.

I'd say we are still perfectly on track for that near term move down.

Finally, the Yen 5 and 15 min charts confirm all of the charts above and our expectations form the next move in the market to be down, because a rising yen sends the USD/JPY lower and the market with it.

This is a huge leading positive divergence in the Yen, I'm not going to post the 15 min Yen chart because it looks exactly the same. In other words, we are still exactly on track for the next move, locking in the bears. The Goldman Nikkei long call tells me we are on track with a bear trap / short squeeze higher as the move after this, it sounds like Goldman has some Nikkei exposure to offload as mentioned in Sunday night's post.

My guess is that we see some upside in the Futures market (for Equity Indexes) from now until the morning, but we should see that downside move tomorrow, the NASDAQ futures are a good example.

 The intraday 1 min chart looks like it has built up a short term positive of several hours, but just like the 5 min charts in the averages today which were negative which is what gave me the confidence to keep those new trades open...

The larger trend in the NQ 5 min chart is clearly negative so any upside that may come through the European session to pre-market is capped by this 5 min chart which is right on schedule with our expectations for the next move which should be tomorrow as down.

I do expect that move is a psychological jiggle to get the bears in motion and it should be followed by the short squeeze I'm expecting, the move this entire triangle and everything since has been predicated on, but we'll take it 1 bridge at a time. Positive divergences in to market downside would be the evidence we are looking for to confirm the short squeeze move as coming next.

So if you are long VXX or UVXY or short any of the positions mentioned today like Financials (long FAZ) or the averages, you should see some green in your account tomorrow.

We'll set up new positions once we cross that bridge and confirm.

See ya soon.