Futures

I hope everyone had a great Thanksgiving or if you don't celebrate Thanksgiving, then a great Thursday. Tomorrow the market is open half a day.

I got an email when I woke up that the EUR/JPY carry was no longer in retreat, it was heading up and futures were rising with it and honestly, I looked at it and really wasn't too concerned, there are very few major players left in the market right now, they'll be at the Hamptons until Monday morning, so some jiggling in futures as the cat is away and the futures play doesn't hold much water with me compared to the negative divergences and weight of the evidence against this market.

I took a look at futures a couple of hours ago, I wasn't even going to write anything tonight, but I noticed intraday 1 min charts acting...well, bearish.

So, as I am devoted to my members, I found something to do for a few hours as I'd rather be in bed so I could see what developed and I wasn't disappointed as the indicators have been pointing this way, even the tone of trade has been pointing this way.

First the move in the EUR/JPY that caused some concern among some members.

However I want to remind you of something, China's first response to BOJ policy and the hot money flows from Japanese and US QE flowing in to China and the inflation it brings, they aren't happy about it.

I don't think you'll read this anywhere else, it's my own observation, but Wednesday Japan was unable to jawbone the Yen much and I said, The Bank of Japan will have to take real action now instead of just talking about it to keep the Yen lower", I said this because the half life of BOJ jawboning has dropped dramatically.

Wednesday Japan broke out the big rhetoric and started talking about MORE QE, China obviously isn't going to like that.

What I have noticed is China's response to Japanese monetary policy has always been a military confrontation, sending ships in to Japanese waters, especially the Senkaku Islands that the two countries have a territorial dispute over.

A few days ago China created an "Air Defense Zone that reaches over the disputed islands as well as over other sovereign nations, the Chinese demand notification before any other country flies in to this zone, effectively telling the Japanese they must notify China if they are to fly to their own islands (at least in the world's eyes)

The US immediately challenged the zone by flying B-52 Bombers through it, also showing who the US is siding with (Japan).

It seems the testing of the Air Defense zone over the last few days by the US and Japan has caused China to step up the rhetoric saying Japan is "the prime target" and China's air force will train for a full confrontation...

 "We are willing to engage in a protracted confrontation with Japan. Our ultimate goal is to beat its willpower and ambition to instigate strategic confrontation against China."

You can read more here...

In any case, my point is simple, every time Japan has threatened China with more inflation via QE and killing the Yen, China has reacted in a military fashion. You may recall around the time Japan announced their monster QE, China had enraged all of its citizens and there was a boycott of all Japanese goods, there wasn't a Toyota dealership in the country that had not been vandalized in one form or another, I haven't seen anyone else come to this conclusion, but every time something happens in Japan regarding monetary policy that would effect China, I SPECIFICALLY WATCH FOR CHINESE MILITARY PROVOCATION AND HERE IT IS AGAIN AS JAPAN ANNOUNCES THEY MAY ADD TO THEIR QE PURCHASES.

So here's what I noticed tonight as I stayed up 3 hours longer...

 This is the EUR/JPY seeing a ramp up around 3 a.m. Wednesday

ES followed about an hour later in the wee hours of the morning on almost no volume.


I told you I saw something on the 1 min charts, I waited and this is what I found on the more important 5 min charts.

 ES 5 min strongly leading negative

NQ 5 min strongly leading negative, much of this damage has been in place for well over a week.

Russell 2000 Futures...

And the 60 min chart of R2K futures as the distribution has been heavy for a while, that just means there's a lot of it and it looks pretty darn serious.

As for the Nikkei futures, I thought they looked pretty good earlier this morning, but...

 The 3C divergence turns Nikkei right after it makes a weekly high, that's amazing divergence as 3C divergences usually saw 2 just like this before QE and then a move would happen, this is exactly that.

This is the longer, stronger 30 min chart as I have noted distribution often overnight in the Nikkei, but look how sharp that downturn is.

As the market has been making new highs on 0.10% gains on the day, I have said, "I would not buy anything long that is highly correlated to the market", my reason is I have seen days, weeks and even months of longs wiped out on an opening gap, it's just too dangerous.

We'll see what tomorrow brings, but I'm glad I stayed up to show you.