Early Market Driver...

The SPY Arb will take a little bit to kick in so right now it's still the Yen and how it effects the USD/JPY that is driving the market, but openings are always emotional and more volatile so just be patient and wait for the dust to settle, but this is the actual mechanics of the market in the simplest form right now.

 The USD/JPY Carry Trade (when it moves down, even though it's $USD weakness), it's market negative so to the right you can see why we have been getting a string of red closes the last few days.

This is the 1 min chart of the pair, there's a slight positive divergence, but on the open it dove lower which is to be expected from the emotional fear and "Risk off attitude" after what happened in Japan last night.


However, more than $USD strength or weakness, this is about the Yen aspect of the carry trade being covered and bought, sending it higher and closing the carry.

 Yen 15 mins shows a recent trend of the Yen being bid, it's being bought in the final step of closing the USD/JPY carry trade used to leverage up/finance institutional long (typically) money, this is largely because the market is "Unsure" and the fear of interest rate changes in both countries as a carry trade can be leveraged to more than 100 to 1, typically 10:1, but even at that a 1 pip move is like 10.

This is the Yen from overnight, positive early in the evening, a big run to new local highs and a second run that lost short term 3C strength so this is why I think we may settle, again assuming the herd doesn't just stampede, in which case, WE ARE READY BECAUSE WE HAVE BEEN PREPARING FOR THIS.

I may toss short term longs out very quickly, I wouldn't blame you for not taking them and just waiting for any price strength to short in to, but if you are more aggressive then you might want to play both sides.

I won't be able to give all the background on the trade immediately, they are short term longs if they come and speculative and likely all on some leverage.