Yen Shakeout

The plunge in the Yen overnight is what sent Stock futures lower, as some of you know we have been tracking some changes in the Yen the last few weeks from a solid downtrend (market positive) to a lateral trend (the market went lateral in the same area on increased volatility), today the Yen broke below that area, but is it a capitulation move? Even short term? I'm not sure, but there are signs the Yen may be about to make a run to the upside (market negative) and it doesn't really matter which pair, the AUD/JPY, EUR/JPY , USD/JPY...

Here's what I'm talking about as it does look like the Yen bottomed earlier today and on some of the largest volume since early February; it's not at all beyond the realm of possibility that was a capitulation move in the Carry trade, as a matter of fact, right at the NFP.

 The Yen vs the SPX, the correlation is clear, a falling Yen = a rising market, in yellow the Yen went sideways for the first time in a long time and today broke below on what may be a washout move, the volume was there for it and it was right on the NFP at 8:30.

Note the market chop/volatility during the Yen's sideways move, now imagine the Yen rallying, it's hard to imagine if you haven't seen what happens when a carry trade goes south, but suffice it to say, lot of momentum.

 Intraday the Yen vs the SPX, in white the correlation is as it should be, right now the correlation is off as the market typically falls on a rising yen, so this is another thing I'm watching closely.

 Here on the Yen Futures there are a series of 3C lower lows, that is downside confirmation of the Yen move, look at the recent move in 3C though as the Yen hit a bottom today

This would be the same as selling high or covering low.

 The FXY 5 min positive that started yesterday has grown.

It has now moved to the 10 min chart.

There may be more volatility than we expect very shortly, if it came down to it between a weekly op-ex pin and a carry trade going south on anyone who is still in, I'd bet on the Carry momentum which wouldn't be good for stocks. Whenever or whatever, something is happening here.

Jobs, Workforce Participation Rate and Seasonal Adjustments

I guess everyone has their own "Slant" on the economic data such as this headline by Drudge...

Which links to an article from CNS news, I know that is hardly unbiased, but they do have at least one thing right in their headline:

296,000 Americans Drop Out of Labor Force in February; 89M Not Working

This is the infamous "Labor Participation Rate" that the BLS ignores, which has the effect of making the jobless picture look better than it is. 

This is sort of like a permamnent "seasonal adjustment", which skews data to the positive side like it did last year, it tends to end around March and when it did last year, we saw the economic data go from beautiful to a nightmare almost overnight, starting the May 1 decline.

However there's something a little more disturbing in this report, other member have noticed it and I mentioned it earlier today, the Revision.

Today's 236k beat of 165k consensus was impressive, enough to scare the QE crowd, however, equally impressive was the downward revision for last month's data:157k to 119k !?!? 119?

How do we go from 119k to 236k in a month? At this rate the BLS's data is noisier than the infamous ADP data.

I have to wonder if the F_E_D is looking for a stage left exit sooner rather than later, no matter what needs to be done to get there. The reason is simply, monetary policy is easy to get in to, it's a nightmare to get of and from the last two releases of the minutes, it seems the F_E_D is becoming more and more aware of that fact.

GLD Update

Lets just get in to the charts...

 As long as GLD keeps this general "smile" I'm happy, it should start to see upside momentum as we are or should be on the right side of the middle of the pattern, I fully expect volatility like we saw this morning or in the yellow box, price patterns are never like the textbook. There were quite a few stops hit on the open (red arrow), but the bounce back was encouraging, I wouldn't trust it as much without the rest of the charts below.

 YG/gold Futures with a big leading positive divergence at the drop.


 The intraday chart shows a relative negative divergence at this morning's highs, but this is an intraday chart and a less powerful relative divergence so I'm ok  with that, I know there's going to be some noise.

 The 5 min chart of GLD, like YG also had a large leading positive divergence on the gap down open.

Most encouraging is the longer term 15 min leading positive which has picked up momentum right around the area to the right of the middle of the price pattern.

Market Update

As you can see by the posts, it's hard to keep up with the speed of the market. At 10:15 Wholesale Inventories came in strong and the market put in a bottom for the a.m. session and moved up a bit which, however the bug-a-boo was wholesale sales dropped, on one hand enthusiasm, on the other no proof as sales dropped.

The SPY is now drifting laterally as the market wrestles with QE on/QE off.

SPY bounce on Wholesale Inventories and then thinks twice on Wholesale sales...

The thing I don't like this morning (and I usually don't look at Leading Indicators this early because they haven't had time to move), but I don't like the way credit and Yields are holding up so far this morning.

Those are several assets I'll be watching.

GLD Update

GLD / Gold was hammered at the open on the weaker dollar, but has since re-gained all of the losses and gone green, this may actually be good news for the position, when Wall Street invests money in to something like accumulating a position, say GLD for instance, they defend it, of course taking out stops is all part of the game for them. We'll see how GLD looks in a bit, for now though, an impressive comeback,

GLD intraday

Again, moving faster than I can post it

ES and NQ updated and the Yen looks to have hit a low, perhaps to reverse, but that's too early to say.

 At this capture only a couple of minutes ago ES was 3 points from taking out the overnight low, the entire night of melt-up within 3 points of being taken out in 45 mins., now ES has moved within less than 2 points of the overnight low.

NQ was just above the overnight low, it has now taken that level out.

Jobs level is lost

Now both ES and NQ have lost the pre-jobs level, the QQQ is below yesterday's close, the SPY
is finding some temporary support right at yesterday's close.

 ES gave up all the jobs gains and then some

 So have the NASDAQ futures

As strong as the Yen was overnight, the $USD's strength this morning is playing counter-balance and we are in the twighlight-zone known as the market when good news is bad.

It's way to early for opening indications, but...

I thought the degree to which the SPY and QQQ failed to confirm the gap up this morning would be a good lesson for reading intraday 3C charts, the failure to confirm means, well basically money didn't follow enthusiasm, at least so far. It's more likely money came out on enthusiasm.

 This is one of those moments when the market is moving faster than can be posted, the Q's were at support of yesterday's close, they have already broken that level since this capture a few minutes ago.

The SPY hasn't broken below yesterday's close yet, but is lower than seen here.

The point is the fastest chart, the 1 min should confirm the gap up if it will hold, this can't be taken as a longer term indication, except the early tone it sets as this is an intraday chart, but what it shows is the gap being sold, however if you noticed the ES and NQ charts posted in the Overnight update, they warned of the same thing.

For now we are back to good news is bad news as the fear of the punchbowl being taken away rises, there's already quite a few F_E_D members who want to do it sooner than later and today's jobs report just gives them more ammunition in the debate, that is what the market is responding to.

June ES Contract at Jobs level

ES has dropped all the way back down to the pre-jobs level over the last 17 minutes.

ES is actually now below the 8:30 jobs situation.

NQ is on its tail...

NQ

Overnight

We start in China, as futures slowly melt up, where Chinese imports fell apart and exports surged as Soc. Gen. has said is a harbinger of economic weakness, which led to another Shanghai red close. Then we jet over to Europe where UK Construction Data dropped by nearly 8% (7.9). The Bank of Italy said January Small Business lending was down by -2.8%, Austria printed a negative for Q4 GDP, Spanish Industrial Output dropped by 5% in January while German Industrial Production printed at 0 on consensus of +.4. Finally the ECB announced that banks will repay $4.2 billion in LTRO 1&2 loans, about half of what was expected which contradicts the strength Draghi claimed yesterday in LTRO re-payments.

The reason none of this mattered overnight... The same pivotal asset I have been talking about all week, the Japanese Yen.

Yen plunges overnight

At 8:30 US payrolls blew away consensus at 236k (expected 165k) with January revised from 157k to 119k, the UE rate dropped from 7.9 to 7.7, but a usual there was another drop in the labor force.

However this isn't all good news to the market, the immediate question... "Will the F_E_D start tightening sooner?"

Look at ES...

Not quite the party one might have expected on the jobs...

Perhaps more important to all those fearing the open... the EUR/USD

As suspected yesterday for different reasons, the Euro plunge on the news and USd flew higher, NOT GOOD for STOCKS. And we are now below $1.30 again.

Price is always deceptive, give it a few minutes to work through a.m. trade before hitting the panic button.

More to come