USD/JPY

Earlier this week I was looking for the USD/JPY to not only halt the downside it had sustained after a break of the psychological $103 level , also where a ton of stops were congregated, but to form a "W" like base which I suspected would get the correlation algos turned back on and would move with a similar "W" base in the market.

It's too early to say if we'll get a "W" base in the market, we are heading in the right direction, but what matters is whether or not there's accumulation of lower prices as we move down, we'll know before we get there.

Right now we have something like this.

IWM 30 min chart, prices right now heading toward  lower support.

As for the USD/JPY, we will have to continue to watch it (as well as the market) as it would have to likely put in some time in idle mode being it has completed the "W" base I was looking for.

 Here's the 5 min positive divegrence that made me think some sort of "W"-like base was likely (at least lateral movement rather than down as it was just before).

Note even in FX pairs we have the same head fake run on stops below support of a "W" or double bottom as stops are very predictably placed.

This is the resulting pattern on a 15 min chart that we were looking for.

As for the components that move it, the intraday Yen is not doing much right now, but the 5 min where it is a much more important timeframe for our purposes...

Shows a negative divergence, that means Yen down, USD/JPY up.

Also the 15 min $USDX chart is building a strong positive divergence, also $USDX up= USD/JPY up so both the Yen and the $USDX are showing nice signals suggesting the USD/JPY carry trade will move higher which would take index futures higher (or at least it has 95% of the time ...or one of the other Yen based carry trades).

This is why I think it is likely that the broad market probably puts in a base and is not turning down to make a real lower low (other than perhaps a head fake). Also the nature of the divergences on the averages are short term 1-2 min charts, this could change if we see migration of the divergences tto longer charts, but for now it looks like a simple pullback, likely to form a similar "W" base pattern, that's where we'd want to look at new trades.