Pre-Market

This isn't going to be the usual pre-market report, although I may finish that post and put it out that will give more background, but as you know, the carry trade in the USD/JPY has been being closed out this week, the Yen has been bid sending it higher which is the final step in closing out the carry and the USD/JPY headed lower last night taking the Nikkei down 576 points or about -4%, which would be similar ro the Dow losing 4% in a day, a big move.

That leaves us with an open in the cash SPX near yesterday's intraday lows.

I'm going to be looking early for a chance to fade the overnight "RISK OFF - TAPER ON" as we have seen all week, if there are some quick longs as speculative trades, there's a chance this is like an exhaustion downside move before the typical move up, if it looks weak like it will break further, then that's a different strategy, either way we are in good position, it's just what's the best tactical allotment of assets in the immediate present.

From looking at ES 1, 5 and 15, all of them look like ES is ready to make that short term upside bounce we talked about yesterday, the question is, "Can the JPY weaken enough during the day to allow for some strength?", I believe it may be too high for more covering of the carry. Also "Can the arbitrage trade like moderate strength in HYG as we saw EOD yesterday kick in and take over for a day or so?" From what I saw at the close, I think so, a wash out just makes a short term bounce more attractive, but we have to be able to judge risk, that's why I'm keeping this shorter.

 ES 1 min

ES 5 min showing a bounce situation setting up

ES 15 min showing the downside reversal and a smaller bounce within the downside reversal.