Important Market Update / YEN Currency Carry

This is another post from Friday that is coming true just as expected and this is another example that should help you understand the difference between short term moves, mid term and long term and how they work together, what they mean to each other and even how strong a move can be.

In this update from last Friday Market Update, I was talking about the engines they'd need to push the market, SPY Arbitrage or one of the 3 Currency Carry Pairs, since the Japanese Yen is the "short" of all 3 pairs, it is key to any support the market gets so analysis of the Yen is important. I said the following...

"However, maybe the most insightful chart was that of the Yen. The importance of a positive divergence in the $AUD and Euro is that if the move to the upside strongly on the 3C 5 min divergence, then they can cause a carry cross to move up like AUD/JPY or EUR/JPY. For this to happen, the Yen needs to either move DOWN or move up a lot less slowly than the other currency (AUD/EUR).

Here's where it got interesting, the Yen 5 min is in a positive divergence, but also at a low as if it is in a reversal process. The 15 min chart is positive too, but the 1 min chart suggests the Yen falls back toward the bottom of the most recent range where it's creating a reversal process, this would give the carry pairs a short window to move up and push the market as that's what they are used for since they truly died earlier this year. However when the Yen recovers and starts accumulating and moves up on this reversal process, the carry crosses will likely falter and market support will be gone.

In other words, there's a short window forming for a market move to the upside, but it is capped by the Yens likely larger move to the upside coming, it's just near a downside correction to build a larger upside reversal base and that correction is what the market can use as an engine to push it as shown last night."

The two engines I was talking about were either the Currency carry pairs for a short duration because they are already done or the SPY Arbitrage, the S.A. isn't working today...

 So, is it any surprise that the Currency Carry trade is being used and it's not so much $AUD strength as it is the situation I described above, 3C was telling us the highest probabilities for the Yen and here they are as it predicted.

 1 min intraday sees the Yen fall after the SPY Arbitrage Fails, it's almost as if they switched from the SPY Arbitrage and when it started to fail, jumped over to Yen based Carry trades.

 Recall in my analysis last week that the Yen "Pull back" or correction was short term only so the window for the market to rally was also brief because although the 1 min chart showed a probable pullback in the Yen which we are seeing now (supporting the market)...

 The 5 and 15 min charts are positive and trending up in a new trend, so any help the market gets is from a TOTALLY NORMAL correction in the Yen.

The daily chart of the Yen shows strong accumulation, I wrote two articles in April, "The Currency Crisis" and both are linked on the member's site. My opinion was the Yen would go up and the market would go down at the same time, I mean seriously up and down.

This Daily positive divergence in the Yen suggests a strong move higher, if I was right, the market will see a horrendous move down.

In any case, the market upside is very fragile because as of now, it is relying on a normal pullback in the Yen and there's a longer 5/15 min uptrend established which will re-establish and the market loses ALL carry support.