AM / FX Update

Good morning.

Notice anything about this morning? You probably woke up to a rampless market. While a rising Producer Price Index (yesterday) and rising CPI (today) which is now 1.7% inflation on a y.o.y. basis (just shy of the F_E_D's 2% comfort zone) doesn't help the case of those who would see QE stay at current levels, it wasn't that.

Initial Claims coming in this morning at a slight beat didn't have anything to do with it, nor did Continuing Claims at a whopping 3.03mn (this is before the 1.3 mn people on extended benefits start falling in to the or out of the labor force rather I should say, which should start showing up next week and lowering the unemployment rate again).

No, what it was is what we've been watching, the only thing that it REALLY important right now.

 This is the USD/JPY 15 min chart, all that is really important here is the trend, lower highs as it fell just short of the $105 level.

Here's 5 min USD/JPY reversing down last night around 10:30 as we expected because of the Yen divergences.

And the 1 min USD/JPY overnight.

As far as the AUD/JPY, we saw that nasty drop last night...

 That was some ugly Australian employment data, that's a huge move and important as well.

The EUR/JPY, again, all that is important is the trend, lower highs, now we see if we make a new lower low, that is the game changer of game changers.

overnight EUR/JPY...There's no carry ramp, thus there's no ES ramp!

ES has been following AUD/JPT yesterday and overnight so...

 This is AUD/JPY vs. ES (purple) overnight, pretty much in line right?

Well here's the trouble...

Just on a 5 min chart, ES is pretty darn disconnected from AUD/JPY, it has some catching down to do if that correlation sticks.


So here's the idea, the Yen moving up makes the carry trades more expensive to hold because of the huge leverage so they can turn in to big losses for smart money really fast as the Yen gains ground. We saw a pullback/correction in the Yen, but the trend seems to be up since the start of the year, 3C has warned us of this Tuesday and yesterday. This sends the carry crosses down which in turn sends Index Futures down which sends the market down and it all comes back to the Yen and the only way we know what is going on with the Yen is 3C, unless you want to wait two days to find out because 3C was telling us 2 days ago what would happen.

Take a look.

 30 min Yen/3C was always positive or in line, NEVER negative, even with the last 2 days, the draw down WAS A SIMPLE PULLBACK!!!!

Note 3C leading even more today than yesterday and the Yen's reversal process, just about done it appears.

Here's the 15 min chart I said was leading positive so not only did we have signals, but they got stronger every hour.

Here's the 5 min and the Yen is now pulling out of the correction's reversal process on significant 3C accumulation, that's the important part because the accumulation told us what the probabilities were while price was still pointing down.

 This is ES/SPX futures today 1 min in line

This is R2K Index futures 5 min, which is where it counts short term, at the white area on Monday night I said the market had some room to move up, but it didn't have accumulation, it didn't have a reversal process, thus DEAD CAT BOUNCE. Now we have a CLEAR negative leading divergence which is usually how I determine trading position direction.

This is all the market is really about right now, other indications help and are important, but this is the theme, this is HOW YOU TAKE THE MARKET'S TEMPERATURE.