The big news in futures tonight which has sent SPX/ES futures below Friday's lows is the Q3 Japanese GDP dipping -1.6% , the second quarter consecutively which is officially a Japanese recession. The USD/JPY's initial knee jerk higher may have lost all of its steam on the thought of the Japanese people suffering under rampant stagflation throwing Abe and thus Kuroda out of office, ending the Japanese Grand Monetary Experiment.
$USD weakness and Yen strength has been one of our macro themes now for over a month, which means USD/JPY, thus the Nikkei and US futures eventually follow as they have similar if not exact macro themes here's a look...
USD, after months of consecutive gains showed negative divergences recently as the F_E_D came out with a series of comments seemingly made to knock the $USD lower as F_E_D minutes revealed deep fears that the strong $USD was going to have a big negative impact on global growth, this is the $USDX 4 hour chart and macro theme of coming weakness.
For years under the linked articles, "A Currency Crisis" on the member's page, we have maintained that a rise in the Yen would go hand in hand with a collapse in US equity markets, thus this 4 hour chart depicting a positive Yen macro theme, thus a negative USD/JPY, Nikkei and US index theme.
And the Nikkei 225 futures with what can only be called a "Parabolic move", which I never trust in to a huge negative divergence, but lately these macro themes have been coming closer to fruition as our multiple timeframe analysis has seen them sneaking in to shorter and shorter charts while VIX futures have seen 3C explode to the upside.
$USDX 60 min negative
Nikkei 225 with a sharp leading negative very quickly...
$USDX has crept up to a 30 min chart while VIX futures have as well except VIX futures exploding to the upside in positive divergences while the $USDX has seen a sharp negative in to late last week and opening trade this week, one of the reasons for the "Week Ahead analysis", which also saw early strength Monday, we'll get to that.
The Yen divergence has crept up to the 30 min chart as well, strongly leading positive, all bad for the USD/JPY and thus index futures.
And the Nikkei 225 futures 39 min with a sharp negative in to late last week and the open of trade tonight.
With such a sharp sell off in the Nikkei 225 futures, I expect some kind of dead cat bounce to be likely as the 5 min chart seems to indicate, but the macro theme should reassert itself taking the Nikkei futures lower.
So far the 1 min /NKD chart is not showing that probability yet and nor are any US Index futures as they are in line on the 1 min with their losses since futures trade has opened tonight.
However the 1 min USD/JPY seems to depict that probability along with the 5 min Nikkei 225 above and this 1 min Yen chart below.
Yen 1 min chart, however as mentioned, I expect that the macro theme will reassert itself after a dead cat bounce which may coincide with the Week Ahead's early strength Monday fading in to weakness through the rest of the week.
USD/JPY vs NKD (purple), I suspect the initial parabolic drop below Nikkei 225 17,000 will see a brief reprieve, however as the market gets more volatile, these short term divergences like the 1 min, not as much the Nikkei 5 min, have a greater chance of being run over.
Whatever happens, the macro theme still dominates and it's not good. Apparently bad news this time is bad news, which I think has surprised many as my inbox is full tonight. We'll know more in the morning, but the macro themes are through out just about every asset and leading indicator we have, they are the resolution of greatest probability and it looks like Japan in a triple dip recession may just have been enough to crack the thinning cliff this market has been dangling over.
