A.M. Observations.

After the Turkish Intervention (Central bank) the Lira has now faded all post policy gains and is below pre-policy change levels as South Africa unexpectedly raised their benchmark interest rate by 50 bps to +5.5%.

Emerging markets are selling off, the USD/JPY (as mentioned and posted last night) is lower with Index futures on the negative divergence also significantly lower, however they are largely moving down as expected (although more early afternoon) in to intraday positive divergences. What really matters is what the 5 min charts do which should be signaling soon.


Obama if anything (from what I saw before I fell asleep) used the S.o.t.U. address to tell Republicans he was prepared to do a lot by executive order, bypassing Congress.

Remember today is the F_O_M_C policy statement, remember the KNEE-JERK reaction and how it is almost always wrong and proven so usually within a couple of days. This will be Bennie's last F_O_M_C along with a change in voters with doves such as Rosengren and Evans, the Center Bullard and Hawk George all being replaced by a slightly more hawkish group, Plosser and Fisher (hawks), Pianalto (center/hawk) and Kockerlakota (dove).

What we aree looking for is guidance on the initial 6.5% unemployment rate that would trigger rate hikes as we are at 6.6% due to a smaller workforce as those who dropped off extended unemployment when it wasn't renewed after the last budget agreement, are no longer counted as part of the workforce, thus the 4 bps drop from 7% to 6.6% on a gain of only 74k jobs last month.. The F_E_D is likely to argue that low core inflation will keep rates low for an extended period, however any deviation in the taper or more dovish tone will send the market higher.

As for charts, remember the open always sees a strange shift in volatility and we just opened.


Index Futures

 This is the 1 min intraday positive divegrence I mentioned above that the market was falling in to which should slow the fall or create a bounce, how serious depends on the 5 min charts.

ES 5 min shows the range we predicted last week (yellow) and last night's post predicted a move to the lower end of the range pre-F_O_M_C, I thought early afternoon, but the a.m. works as well. Note the divergence CREATING the range. We may see a move below the range if we still stay positive enough for a move higher as it forms a "U" shape which is a bit late now or more likely, a head fake move/shakeout/stop run which we see just before a reversal, in this case an upside breakout from the range.


USD/JPY

It was obvious last night from Yen futures alone as I posted that the USD/JPY (and other JPY crosses) would see downside, the POSITIVE Yen divergence was there last night 

Yen Futures

 Here's the Yen 5 min chart, note the downtrend as we predicted which is seeing 3C confirmation (green), this sent the USD/JPY up or at least steadied it so we could get enough support from the carry trade to build the market's base of this week. The white arrow is a positive divergence sending the Yen higher (we saw this last night) which sends the USD/JPY lower with Index futures following. 

NOW we have a slight Yen negative divegrence, this could be what halts the decline and forms the Index futures lower base area drawn above on the ES chart in yellow.

 This is the EXACT 15 min Yen positive we saw last night, all in all, the Yen has been positive most of 2014 which is why the USD/JPY has been in a downtrend all year. This may also move further into the 30 min chart and this will ultimately halt ANY UPSIDE MOVE, KEEPING IT AT A BOUNCE, THUS GIVING US STRONG REASON TO SHORT IN TO ANY MARKET STRENGTH.

THE YEN 30 MIN WHICH IS THE CHART as far as what's going on. You can see the pause that has allowed index futures to build a little base, we will see what happens at $9.825 (resistance) which may allow for the Index futures bounce, but all in all, I doubt very much it will turn the major uptrend which is a market negative.


 USDX Futures...

 $USDX 1 min chart and negative divegrence, with the bouncing Yen and weakening $USD, you can see why the USD/JPY was/is lower and Index futures with it.

 The 5 min chart is closer to in line so it can shift either way pretty quick.

$USDX 15 min chart with the same kind of negative divegrence that we saw on the ES 5 min chart (second chart) which is forming the rectangle base that has been building al of this week.

 Gold Futures (YG)

 Remember that gold trades opposite the market for the most part and this is also why I'm considering fading GLD/gold strength early on.

You can see the steering divergences (negative to a move down and positive to a move up)

The 5 min chart however, is clearly diverging leading negative, this is why I would fade this bit of strength in gold.

Gold futures 1 min also show it looks to be about the right time for a gold/GLD short on a trading basis, maybe a very quick one.