Wednesday, February 6, 2013

Big Action Evolving On the Currency Front


The action in the currency markets has been taking a major league turn as of late.  There has been a lot of action on so many fronts recently but really, all that action has been in pretty much every currency in the world 'except' the American dollar.  The only exception would be the Canadian currency since it is extremely tightly linked to the American dollar... approximately equally as much as it is correlated to the health of the American economy itself.  Those two currencies also represent the ties between the two biggest trading blocks in the world and as such, it is critically important that that particular pair remain stable and that they be prevented from wandering too far from each other.

As a result, very close attention is paid to managing that pair and for that reason I have always maintained that investors who look at the USD:CAD pair for guidance on the equities markets are barking up the wrong tree.  Only when there are extreme stresses in the American economy will the Loonie start to wander off as the Canadian economy begins to suffer as well.  On the other hand, if the American dollar begins to tank relative to "real goods" like gold, the Canadian dollar will soar since the value of the majority of the commodities coming out of Canada would soar in value as well... regardless of demand for them.  If they're rising in value, they're rising in value.

At present, the key currencies in the limelight other than the Euro (which fluctuates for entirely different reasons) have been the Yen and the Australian dollar.  Without trying to predict the direction of the key currency pairs (the Aussie:Yen and the USD:Yen), let's take a look at the general story in the daily chart below which shows all 3... the USD, Yen and Aussie, along with the S&P.  Speaking in general terms, the annotations discuss what's going on:


Click here for a live and updating version

 =================     END OF ORIGINAL ARTICLE     ================


DarkestKnight is one of a group of Australians who seem to have a real good grasp on wave counting.  If I recall correctly I think he said he's British born, living in Australia.  Another Aussie with talents like this is 'mars', another good guy and his haunt of preference is over on Pretzel's site.  But we have the luxury of having DK drop in here from time to time with some great contributions.  In any case, I don't know why Aussies seem to be so good at being able to see (and demonstrate) EW patterns and counts as clearly as they do, but I suspect it has something to do with the fact that in the land down under they must be looking at their charts upside down.  Then they flip 'em over so we in the north can understand them.  In any case, DarkestKnight has posted links in the comments section below to some really good charts.  I'm going to insert some of them here for reference.

UPDATE: Once DK noticed that we were highlighting some of his charts here (I hadn't asked his permission but since he's been a friend of yours truly for quite a while and a friend of this blog since its inception I didn't think he'd mind), he suggested that we should probably start off with his weekly chart that would help put the others into proper context.  So we've arranged the charts so they flow from longest to shortest in duration.  And thanks DK for submitting more charts after seeing that I had posted your first 4 offerings.  It's become a pretty impressive full kit now.  With credit to DK and with thanks from this entire community, here are his excellent contributions:

HINT: Left click on any chart to open the 'lightbox' feature of Blogger and you can then toggle between all charts on a post.  That capability works really well with DK's four seven charts below: 


DarkestKnight's AUD:JPY Weekly - Click here for a larger version

DarkestKnight's AUD:JPY Daily - click here for a larger version

DarkestKnight's USD:JPY 4 hour - click here for a larger version

AUD:USD CHARTS BELOW THIS POINT
(British pound at the bottom)


DarkestKnight's AUD:USD Weekly - click here for a larger version

DarkestKnight's AUD:USD Daily - Possible mutated H&S - click here for a larger version

DarkestKnight's AUD:USD 4 hour - click here for a larger version

DarkestKnight's British Pound:USD 4 hour - click here for a larger version

...

148 comments:

  1. since we're talking breakfast, here's an important issue of how the inflation from a dishonest fiat money supply is leading to a dishonest, degraded food supply 
    http://www.zerohedge.com/contributed/2013-02-04/food-manufacturers-are-fraudulently-diluting-high-quality-food-inferior-quali
    http://www.washingtonsblog.com/2012/03/is-red-meat-or-fake-meat-killing-us.html#comment-790142085

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  2. Thanks David.  My apologies, but as you can see I pretty much re-wrote what was originally posted above and converted it into a more focused look at currencies.  That happens sometimes... a light switch goes off in my head and I get inspired to write something.  It's almost like I don't have any control over 'when' the inspiration hits me.  So my original reference to beer for breakfast is no longer there.  Nonetheless, thanks for kicking things off here.

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  3. Ok, currencies. AUD breakdown. SPX to follow?
    http://marketletters.blogspot.com/2013/01/aud-and-markets-generally.htmlhttp://blog.kimblechartingsolutions.com/wp-content/uploads/2013/02/aubreakingsupport500resistancefeb6.gifhttp://blog.kimblechartingsolutions.com/2013/02/why-should-investors-care-about-the-direction-of-the-australian-and-its-breakdown/

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  4. It's ironic that Kimble asks the same question I did on the chart above... "Has the AU$ lost its touch as a leading risk indicator?  Stay tuned!"

    I answered it though to the best of my ability.  I think that as long as the Japanese bond market is in tact the answer is "yes, the Aussie dollar via the Aussie:Yen pair will continue to act as a measure of the appetite for risk.  But since it's likely that the Japanese bond market is due for a collapse, then the Yen will soar faster than the Aussie dollar will.  In fact the Aussie dollar would likely collapse right along with Japan's bond market.  Therefore, in that case too I think the Aussie dollar 'will' remain tightly correlated with stocks."

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  5. the JGB market is indeed a key indicator to watch http://shortjapandebt.com/featured-japan-articles-news/

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  6. For some of us, the validity of beer for breakfast goes without saying...

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  7. Haha... my apologies ZimZeb, although I 'did' remove the nice frosty mug of breakfast from the post there are still plenty of 'em around here somewhere.   I really don't like doing the pub thing but the last post had a lot more comments than usual and it started to get stale.  I had to do something and luckily as the morning progressed I started to realize that the currencies might be worth reviewing right about now.  In any case, here's a quick one for ya... and you know where the taps are:

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  8. Currency post. Excellent.

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  9. Thanks Papa, but there's not really any 'forecasting' or 'targets' involved in that little write-up.  It's just more or less speaking in generalities and in noting that there seems to be a major turning point somewhere on the near horizon.

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  10. An answer to the question:
    Why do we have two hands?

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  11. http://fabiusmaximus.files.wordpress.com/2013/02/20130206-food-stamps.jpg

    10% of farmers collect 75% of farm subsidies
    84% of the farm bill, which was extended in the fiscal cliff deal, goes to food stamps

    Even worse is the dairy syndicate

    http://www.washingtontimes.com/news/2013/feb/6/big-milk-a-raw-deal-for-consumers/

    because

    autoimmune disorders are diseases of civilizations, even preventable, but often imposed on us

    http://www.arnoldehret.org/healthclub/CHINA_STUDY_AND_AUTOIMMUNE_DISEASES.html

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  12.  Nice post AR!  Currencies are where it's at right now.  And your carry trade observation is nicely spotted.
    Guess I better watch AUDJPY also!

    A 20% drop in the yen in 4 months ... amazing.  And perhaps another 12% drop coming up soon.
    I think the market sniffs that the Japanese people can't loan the government all the money they plan to spend, so the BOJ is going to have to print like mad to "stimulate" their economy and also buy up the bonds that the government rolls over.  The currency is going from safe haven to junk real fast.

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  13.  That's an interesting thought, I was thinking that when the japanese bond market implodes, they currency would become trashed as capital flows out of Japan into almost anything else.  But you're stating the deflation argument I believe, it'll spike because there will be fewer of those yens as the japanese debts get destroyed.  But at some point I think capital flows fleeing Japanese yens trump that.  Maybe?  Not sure on that ... hmmm.

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  14. Well I'm not 100% sure about that myself Greg.  If the bond market collapses but is not entirely destroyed, then the currency is still in existence I guess.  On the one hand, I wouldn't be interested in buying any Japanese government bonds if that market is collapsing.  For one thing they are priced in Yen and the Yen are collapsing in value.  But if the JGBs were to drop to a level where at some point in the future, rates are spiked high enough that I'd be happy with the return, maybe I'd buy some.  That rate of return would have to be higher than the rate of collapse in the value of the Yen.

    On the other hand, if Japan refuses to default in the 'Spanish sense' by simply stating that "we sorry, we just can't pay your money back", in that case Yen have vanished off the face of the earth and that's definitely a deflationary event in Yen terms.  In that case Yen rise in value.  So I guess you could be right, at least until Japan defaults, which I think is what I stated in the brief article above.  On the annotations.  Let me re-read 'em and see what I was thinking at the time, lol.

    Oh yeah, I said "The biggest question might be whether or not there is a limit beyond which the crashing Yen gets so out of control that the trade becomes dangerous?  I don't think so, not unless the Japanese bond market crashes which would cause a sudden evaporation of Japanese currency.  At that point the Yen would explode in value and Japan would have to stop paying their bills entirely.  One of the two has to happen, either Japan eventually defaults by simply refusing to pay their offshore bills, or the currency goes Zimbabwe."

    So you're quite right I'd say, it depends on whether or not Japan gets to the point where they default in the 'Spanish sense or not.  I actually doubt that will happen, which would make you 'real right'.  But if they just say "screw it people, we just can't pay and you're not getting paid", like Spain has done 13 times in the past 400 years, then the Yen would rise.  I don't think they take that route but then again they may have no choice.  It's all about 'honor' donchya know? :-)

    The first default in history was actually done by... I wouldn't have guessed the answer, but... Greece, in 377 B.C.  And as this article points out, “The first lesson from the past is, when you have sovereigns
    defaulting, you tend to have several defaulting at the same time,” he
    told GlobalPost.  “History shows us it is never just one country; the issue tends to be
    broader, more systemic. Many nations are involved — and when things go
    bad, they go bad for many.”  This is certainly the case over the past 200-odd years, with clusters
    of defaults seen around the Napoleonic wars; through the 1840s when
    almost half the world was in default; the Great Depression of the 1930s;
    and the Asian financial crisis of the late 1990s.
    "

    So bottom line, I think you and I are on the same track and both of us are right... it just depends on whether Japan continues to default (which is exactly what they're doing right now) by deliberately destroying their currency knowing full well their creditors are taking it in the teeth, or eventually default by ceasing the printing, realizing it's a dead end street, and declare bankruptcy in the Spanish sense.

    No offense to Spain or the Spanish people (who I really like), but 13 times in 400 years?  That's impressive.

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  15.  Thanks for your response!  Very intewesting ... so there are two ways they can default, by printing trillions of yens or just not paying it back.  And each would have a different result.  More food for thought.  But since it is owned so far 90% by Japanese institutions and citizens, maybe that will give us a clue which they might do?   Hmmm.  No clue coming from that fact for me.

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  16. Yes, once those yields start spiking, Japan will be in a death spiral.

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  17. ... because women have two.... buttocks?

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  18. Even if Japan were to outright default in the classic sense I don't think the effect on other nations would be as profound as say a default in Europe would.  Mainly because 90% of Japanese debt is held within its own borders as you pointed out.  Japanese are also obsessed with 'honor' so I don't think they would default in the classic sense.  It would just seem more dishonorable.  Instead they're taking the 'honorable' route, which is to screw everybody with inflation.  I think the USA will do the same eventually.  But in Europe... those people are trapped because they 'can't' print.  A default there is a certainty.  And let me be the first to admit Greg, I'm no expert in these matters.  I'm just putting forth my opinions based on what I think is probably logical.  But not for a second do I pretend that I have any sort of 'vision' about all of this. 

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  19. I am working to find productive assets for a Tier One Tokyo Stock Exchange company. They have stated clearly their intention to divest a portion their of ¥. They made a large acquisition last week. Too bad they didn't speed up that acquisition. I can't speak for all large Japanese companies, but they generally act with the herd. More to come, I suspect.

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  20. Btw, wonderful article AR. Thank you.

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  21. This really is an interesting situation. The strategy, according to a lot of speculation, is for major economic countries to devalue their own currency tit-for-tat with others so that one doesn't get a trade or debt advantage over another. But if one or more of the major currencies actually collapses, then tit-for-tat would be impossible to sustain -- not without other consequences. And there's just nothing a "safe" currency can do to stem the tide of investors rushing in as they move from the collapsing currency or currencies. So no matter what, the "safer" currencies probably skyrocket.

    I'm still a beginner when it comes to currencies and FX, but this much seems pretty reasonable.

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  22.  Ah, that did seem to be their plan, easier to see now that you summarized it like that.  But now the yen is winning the race to the bottom (lapping others).  Tensions are already increasing, and we're hearing more countries upset with these "potential" currency wars.  Nobody will admit we're having a currency war yet, naturally.  That might get people all in a panic.  But anyone long the yen the past 4 months is beyond panic by now.

    The question is, is the USD the only safe currency this year (not in 3 years)?  And the Canadian Dollar ... that's much safer you'd think.  The Australian dollar maybe (but for it's risk on/off personality).  The Chinese renbi eventually is a possible option you'd think ... long-term.

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  23. The most important aspect of it all I think is that the whole time, while countries are trying to devalue their currencies relative to the other ones, it's all happening inside a basket that has been thrown off a cliff.  If they go tit for tat then there has been no change really.  But the basket still plummets relative to 'real stuff'.  Or at least it will if the banks ever start lending again and the money supply (via the creation of new business loans and the fractional reserve banking system) truly starts to skyrocket.  And as you point out, the Yen is outpacing the others so for now it's winning the race to the bottom. 

    When we compare one currency against the other we're not taking into consideration the price of oil or wheat or gold, items that 'should be' soaring.  Gold should be rising toward $2,500 right now.  Why isn't it?  I've always maintained that it's because of deliberate suppression of its price in order to hide the fact that we're suffering inflation.  But maybe I'm wrong about that.  Maybe gold is refusing to rise for 'legitimate' reasons, and that being that there are truly some deflationary forces at work.  Or perhaps even closer to the truth, because banks aren't lending.  Therefore, the fractional reserve banking system is not at work right now.  The money supply is not being multiplied via loans like it usually it.

    If that's the case, that would explain why oil hasn't hit $120.  Maybe the central banks are printing like mad but it's not enough.  If that's the case, then what deflationary forces are at work?  We're not seeing any big bankruptcies or defaults anywhere.  At least not yet.  Mind you, neither are we seeing real huge inflation yet either.  Inflation wouldn't really get cranked up until all this printed money hits the markets by being multiplied exponentially once banks start lending again... if they 'ever' do.  I think that might be the key... the central banks are printing like mad but none of that liquidity is hitting the markets in any place other than whichever table in the casino the minions decide to play at.  But whatever table they choose (commodities, bonds, precious, equities), it's not being loaned.  Therefore it's not growing at the exponential rate it normally would be.  Imagine that... almost every single dollar that is being printed by the central banks all over the world is being used or soaked up by those same banks.  It is not being shared with the economies at all.

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  24. Euro is getting pummeled this morning. Didn't like what the ECB had to say I guess.
    Wave counting has been dicey lately with a lot of things seemingly at some kind of turning point, but this pattern has been working like a charm a lot, most recently on the 120 min Euro chart:
    http://www.thepatternsite.com/3fp.html

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  25. The Yen has been ridiculous. There's got to be some kind of 2-3% pullback somewhere around here, but 95 - 96 in the next couple/few weeks is probably likely.

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  26. My delusional pipe dream is that all these currencies (and the thieving manipulators that attempt to control them) will just eventually end up on the trash heap of history and some decentralized (possibly digital but may a series of local) currencies emerge to take their place. I used to think it could be the dollar, but I think we're too far gone unfortunately.

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  27. Currencies are fun, but it's real easy to lose a lot of sleep LOL

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  28. I suppose that it corresponds to nested 1-2s, so that's why a sharp move follows

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  29. Alberta, here's a piece from John Aziz (@azizonomics:twitter ) on Mark Carney which might interest you:
     
    http://www.zerohedge.com/news/2012-12-01/guest-post-mark-carnage

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  30. Thanks Tom but that link doesn't seem to take us anywhere.  I may have read that piece already though since it was published back in early December.  John Aziz, the writer of that article is a 25 year old living in England.  So by that metric he would be totally unfamiliar with Carney, yet he entitled the piece with the name Mark Carnage.  Cute.  Very Zero Hedge of him.  In other words he has drawn the foregone conclusion that since Carney is an ex-Golmanite he will heap carnage upon England.  I definitely can't say I blame Aziz for that perception though, I hate Goldman and their offspring as much as Aziz does.  All I can say is that Carney did not lead Canada to the brink and indeed steered the country away from it.  Considering that such guidance is not at all Goldman-like, I can only report what I've seen of Carney so far.  Let it suffice to say that I'm one of millions who are pretty damned appreciative of the fact that he seemed to be a Canadian first, and a Goldmanite second.  I have no idea what his agenda is for England but I can only say that I don't think he's out to destroy the country.  I could be wrong... I just don't know.

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  31. It seems that there is a nice legitimate diamond pattern in the works here.  Let's see which way it breaks.
    $SPX 30 min.

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  32. I like your pipe dream because it's the same pipe dream I have.  There's nothing wrong with local currencies as long as they are owned by the 'state' or whatever jurisdiction issues them, instead of being owned by the Fed and literally 'rented' to Americans for their use.

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  33. Sorry Alberta, I didn't realise it was an old piece - he flagged it up today on Twitter but it must have been a re-post. I don't know how much he knows about Carney but I think he was just suggesting that people who have labelled him the saviour of the British banking system ought to recognise the favourable economic context of his tenure in Canada. As a no-bullshit merchant he's one of the few economists I bother to follow - in a similar manner to Steve Keen he tends to have his feet on the ground rather than in the ivory towers of academia.

    As to your question about how Carney is being perceived, I don't really know. Of business/economics correspondents I only really read AEP and Paul Mason - the views of mainstream writers don't interest me. The public just know what they're told by the press and the press haven't really got anything to say yet. He doesn't even start until July as far as I'm aware. When the pound and the economy crashes people will no doubt start to ask questions but everything will be seen through the prism of the "informed" economic elite as usual.

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  34. Right, he doesn't start until July.  Interestingly, today he was queried on BNN about whether or not he has political aspirations.  His answer was an emphatic "no".  One of his critics shortly thereafter said "well, that's a very political answer.  It means "yes".   What they're speculating is that his intentions are to spend the 5 year term with the BOE and then return to Canada to run for office.  If he did, he'd win... barring a disaster over there in Jolly Olde.

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  35. A chart I posted a few weeks back. Still in dark red, but the CAD is currently unwinding its oversized COT imbalance.
    http://highrevsopenhouse.blogspot.com.es/2013/01/the-case-for-pullback-range-analysis.html#comment-763865557

    http://mediacdn.disqus.com/uploads/mediaembed/images/414/6626/original.jpg

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  36. Actually I find it a bit remarkable how 'steady' those currencies have been over the past 20 months or so.  Rangebound, or maybe 'coiling' a bit.  So once they break out, the movements will most likely be rather sudden and probably coming with some sort of bad or scary news.  You've actually helped me realize that of all the currency movements world-wide in recent months, it has been the Yen and the Euro that have shown the vast majority of the movement and volatility.  Yen to the downside, Euro to the upside.  I'm leaning toward the notion that those two are the most fragile currencies out there.  Japan has obviously broken and I think the Euro's turn is just around the bend.  Watch the USD then... bam, it should explode when the Euro meets it's maker.  Or should I say "eats" it's maker.

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  37. http://www.scribd.com/fullscreen/123487201?access_key=key-1bgpaomvbpod3f52d86e

    Advanced economies dont usually end up with hyper inflation but Israel was an exception. Page 117-119. 

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  38. My guess is its a consolidation to new highs.
    Looks like you picked the right time to post about currencies. Forex is really getting interesting today

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  39. Actually I couldnt stop reading the entire article. Long but interesting.

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  40. You don't dream alone.

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  41. You sure could be right about that partner.  It's difficult to think any other outcome is even possible when we know that the Fed is issuing POMO money every day this month.  I mean it's not like they're not telling us what their plan is.  The market is starting to behave just as it did during the endless and mindless melt-ups off the lows of 2009 and June, 2010.  Up and up and up and up with absolutely no room for even the slightest pullback and not a single overbought situation on any chart of any time frame made one iota of difference.  It feels like that now.

    On that topic, it appears that today most market internals indications turned lower, and those are happening up at levels where tops in the market are usually found.  Yet... so what?  This is exactly what happened during the run-ups I mentioned above.  What does a person do?  Wait for a better buying opportunity to add some more and just ignore all the indicators or just buy into the Fed's plan and jump aboard fearlessly at any time we like and just go for a ride for 4 years?  Personally I feel a lot better seeing a pullback first.  The problem is that as soon as we see any sort of pullback the bearishness in all of us comes out of hibernation with a vengeance, fully convinced that the top is behind us, only to find out yet again that it wasn't.  Bear pancakes yet again.  Road kill.  And it will be fully understandable why the bears came out in full force because any pullback worth mentioning will be accompanied by all kinds of negative press and ZH going ballistic with glee.  It's hard not to get caught up in that isn't it?

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  42. USDJPY:

    93.2 today to 96.2 would be the fifth wave of 1 of Extended Fifth.
    Chart to follow ... trying to get the kids to bed.
    But I've got my full position from between 96.2 to 96.50 and we'll see ...
    Current Account Balance out at 6:50 pm ... much more negative than expected and than last month.  
    So, harder to fund their debt with negative trade balances.

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  43.  USDJPY 4hr chart:

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  44. Hey, that EURUSD WAS getting ready for a iii down, eh?
    Had a sell stop set up that I took off at 7 am.  Ooops. 
    But I caught the second half of the waterfall. 
    Nice extra money to put in USDJPY long tonight.

    Thanks for your observation that a zigzag was validly completed since August ... makes this recent action from Feb 1st clearly a i-ii-iii ...

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  45.  And that big fall a few days ago had a wimpy 50% retrace ...
    Impulsive drops right as Spanish debt yields going up.
    But I guess the rate cut was telegraphed by elliott waves, very amazing to see  that stuff.

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  46.  Hey I put my latest yen count up above .. I think today hit support at 93.2, and is ready for:
    (v) of i of extended fifth wave. If (v) = (i) then target would be 96.2.  See what you think of that count.
    Then i would be 8.  So the iii of extended fifth would be 13!  Yayzer.

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  47.  That's for sure -- that's my main new year's resolution -- get more sleep. 
    Then there is those chronic tension knots in thy back.  And tense muscles.   Butt-clenching as DK calls it.  But I'm learning the beauty of buy stops.

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  48. On the 60 min USDJPY chart now is the same 3 falling peaks setup as the Euro this morning. 
    I know you are probably right and I'm going to get my face ripped off if I short it, but still...

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  49. http://www.amsa.org/healingthehealer/breathing.cfm

    Who the hell knew there was a better way to breathe (breathing for cripes sakes!)
    A friend into yoga clued me into it. Changed my life seriously

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  50. Thanks for having my back bro!

    Recent developments:http://www.usatoday.com/story/money/business/2013/02/06/newser-virginia-minting-coins/1896059/http://reason.com/blog/2013/02/07/bezos-or-bernanke

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  51. Tell me about it. 
    I swore off zerocred long ago. Not that I don't agree with them or enjoy reading them. On the contrary, I agree way too much for my own good.
    Remember the whole JP Morgan silver manipulation stuff. Can't remember if it was 2009 or 2010. I was trading a lot of spot pm's then and I just ate that story up. Not that it wasn't true:
    http://www.kitco.com/ind/Radomski/20130206.htmlit was just untradable information. Maybe those bankster vampires will get their comeuppance some day, but I doubt I'll ever make money off it. I swore I'd never trade news after that. One part of my brain reads news. One part of my brain looks at charts. Sufficient quantities of beer keep them apart. 

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  52.  I see that three falling peaks.  Hmmm.  Hopefully the difference could be where each are in their wave counts.  I hope so anyway, since I am up to my eyeballs long usdjpy as of this afternoon when it bounced off those two trend lines.  :)  At least in this area I can have a fairly tight stop anyway.  I would have liked it better if it held the 4hr moving average at 11pm at 93.495.  But I can forgive that transgression.  Hey, I just noticed it has three tight closes on the daily chart -- finviz.  I'm going to go with the count on this one, it's been following it so well, and I know it feels that daily resistance line which is now support the way it's traded around it.  One never knows tho, and normally I would wait for a i-ii off the bottom, but since there was a line there, or two ... I guess we'll know at 3 am when we're sleeping. 

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  53.  USDJPY hourly chart with volume:

    Check out the massive volume when they conduct their stop stealing grabs.  Today and last week showing support at 92, and today just over 93.

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  54. It seems the only thing we can do is ... short the yen!
    Don't fight the BOJ should be our mantra.

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  55. Hey thanks for sharing that!  I'd taken some yoga and meditation classes long ago, and had learned some of that, and it's a good time to practice it after sitting for hours in front of the screen at night breathing shallow breaths ... Many thanks!  I sense another new year's resolution!!

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  56. Looks like we have 5 down complete on AUDUSD & GBPUSD.
    Watch for wave 2 retrace over the next week or two, for a potentially awesome shorting opportunity.
    I expect we could also see AUDJPY reach my target of 101 in this time period before AUDUSD plunges.
    I will post updates if all goes according to plan and try to nail the absolute peak of (2).
    DK

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  57.  Maybe all that free money that isn't being loaned out is being used to short the yen into oblivion.  Wouldn't that be like capitalism feeding on itself and creating an unstable system?  One liable to spontaneously self-combust ...

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  58. Yep, in my opinion it's been strictly a short Yen, buy Euros carry trade as the previous USD carry beneficiaries have relatively languished. And as you mentioned, the USD has also held fairly steady in the face of this recent Yen-Euro carry. They both are MORE than ripe for a big reversal, and one that could easily get some legs, and quick. And a major double Clase A bearish divergence relative to the SPX too!

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  59. That second wave retrace should hopefully coincide with equities peak

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  60. USDJPY looks right now to be where the Euro was yesterday afternoon. Should be interesting to see how long Euro leads. I'm just happy things are moving in clear waves again

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  61.  Yes, you would think so Greener.
     I was looking at a very long-term chart of GBPUSD the other day to try to get a handle on where we might be bigger picture- It's pretty messy.
    Based on the assumption  we are about to begin c wave down of an a-b-c on weekly (after completion of recent b triangle), the best I could come up with is that we are in D leg of massive triangle  on monthly. Max for this down leg then would be the low of C, which is 1.05 (back in 1985)
    But it's prolly too messy to be of much use. Still, a nice drop to 1.10-1.20 would do nicely, thankyouverymuch.
    DK

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  62. GBPUSD
    http://screencast.com/t/9DG7IZaoTcN

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  63. Nicely called!  Now I need a new count on USDJPY.  Does three falling peaks give a clue on a count?  Maybe that means i is done, and we're onto ii?
    EURUSD definitely has some clear clear waves off that top.

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  64. AUDUSD
    http://screencast.com/t/l7lOQlRk1

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  65. Thanks ... so we might finally be ready with AUDUSD ... that's been a long hunt, eh?!
    Hadn't seen those five waves yet ... but I'm looking forward to a (3)!
    We'll all be eligible for honorary degrees in patience soon.

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  66. USDJPY 4hrly
    http://screencast.com/t/HYMmvz0Xk

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  67. AUDJPY Beserk Risk-On Blow-Off coming up?
    http://screencast.com/t/CDvqz88U

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  68. Those are great charts buddy.  Thanks for the contributions.

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  69. Thanks Amigos, always a pleasure posting here.
    I don't have as much time on my hands these days, much busier job, unable to pull those all-nighters as I have to be on the ball the next day...but I'll do my best over the next few weeks to track these suckers.
    Have a great weekend, I'm off to bed now!
    DK

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  70. Hey Gregorius
    AUD has been quite pathetic recently. 
    Looks like you've been nailing that USDJPY, but I'd be tightening up on those stops if you're still long.
    Good Ruck!
    DK

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  71. Only 3 real waves down so far.
    DK's count could be right

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  72. This is very good trading advice. I’ve been studying your site and this other site. 
    http://tinyurl.com/investing007

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  73. FWIW, Prechter's just gone short again...

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  74. In reference to the diamond pattern I posted yesterday, I don't think it's unreasonable to recognize that although the S&P has burst through the top of the diamond and therefore would suggest that it was a continuation pattern (as Greenface thought it would do), the thrust is developing into a beautiful 5 waver upward.  To me it also looks very much like it could be the final fiver of this entire series off the Dec. 31 low.  Here's that chart again:

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  75. Something maybe to take into consideration when trying to guess what a nation will do is its history and culture. The Japanese, for example, have a long history of high standards and not dealing with losing face very well. Simply declaring bankruptcy and ceasing to pay might be hard for them to accept. So maybe they try everything else first.

    Other countries might be more populist in nature and culturally disposed to give a quick flip of the bird to creditors and simply default.

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  76. Levitating on borrowed time. JNK, HYG, LQD, VEU, and Nas TRANS are screaming the mood is risk off, and has been since the end of January. 

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  77. That's the most amazing aggravating part... that the markets are being driven up by the Fed and nothing else.  Sure, the argument is that funds are now "all in" bullish which suggests that their inflows have helped drive the market higher too.  But they ve been "all in" for months.  So how is it that they're "more all in" now than they were back then?  In any case, now that they're all in twice, we know that the only reason they're all in is because they've drunk drank drinked drunk the Bernanke kool-aid.  In other words despite arguments that funds are 'now piling in', they aren't... they're already in.  It's the Fed who is jacking this market up and nobody else.  Who to sell to?  Nobody.  If it weren't for the Fed's interference, a normal market would have already reacted to those indications you mentioned.  The elastic band is getting stretched to the point where the Fed either has to buy the market forever now (which they seem willing to do) or the snap-back is going to be just horrid.

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  78. Yup, that's the way I see it.  I read a book once called "Thick Face, Black Heart" which was written by a Chinese woman who was an adviser to American business people about how to understand and deal with the general 'Chinese' philosophy about saving face.  I think it applies to all Asians for the most part.

    The Japanese simply could not outright default in the classical sense.  That's why I'm convinced the Yen will fall much further, maybe to near zero in a Zimbabwe repeat.  I amazes me how so many countries don't have the cojones to just step up to the plate, recognize that they are now doomed as a result central bank policies and for having played the game according to the guidelines set forth in the global banking mafia's playbook, "How to Screw the Entire World", and just flip them off and start over.  Kick them out of the country and set up their own central bank that is owned by the government, not some offshore den of thieves.  If it's owned by the government, then it's owned by the people of that country.  Why in hell that couldn't work out beautifully is beyond me.

    And then there's Iceland... ;-)

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  79. Euro net longs at the highest since July 2011

    Commitments of traders report:
    EUR long 38K vs 27K last weekJPY short 68K vs 71K last weekGBP long 1K vs 11K last weekAUD long 81K vs 85K last weekCAD long 27K vs 35K last weekCHF long 4K vs 4K last week

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  80. Japan's finances deteriorating http://globaleconomicanalysis.blogspot.com/2013/02/japan-posts-second-consecutive-current.html

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  81. He must have read your chart

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  82.  I see you have posted my charts... now I'm scared.
    It would probably be a good idea to also post this long-term view of AUDJPY, as it would give context to the other charts... and in my own humble opinion, could be my finest work.
    cheers.
    http://screencast.com/t/2nrLzlqoJtg

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  83.  you and your work are much appreciated!

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  84.  i shorted early this morning. closed with a key reversal day today.

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  85. usdjpy key reversal today. i am short as of early this morning. looking for 91 or perhaps as low as 9225ish....

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  86.  that's hilarious. quick get long. he'll be right one day though.

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  87. so there's been a really big dead cow on the side of the road for fours days now. guess no one has missed it. so i finally called the sheriff tonight and they said if it's not IN THE ROAD then that is where it stays. good ole Texas. SJ said it's QQQ. LOL. actually this is the SECOND dead cow i've seen in two weeks near the road. the other disappeared after two days. Now the vultures are starting in on this latest one. two more and that will take care of the indexes! it's a sign! or maybe imma havin' a flashback or somethin'

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  88.  that was a bloodletting for sure. i forgot draghi was speaking and was driving to work and was short euraud. had a biggish stop on that. ouch...

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  89.  Man, I love Texas. you're in Austin, right?
    I've visited a few times- took part in the chili cook-off down at Terlingua on the Mexican border may years ago- totally awesome!
    & loved the story about Ozzie Osbourne pissing on the Alamo (but that's probably a hanging offence down in Tejas)

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  90.  ZH and other blogs definitely affected my trading. i was one of those idiots who kept shorting ES a few years ago. didn't realize what bernanke bucks could do. so i agree GF, have the keep the news and what is right in front of your eyes on a chart far apart.

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  91.  virginia wants to mint their own currency and they are serious. heard that on NPR the other day

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  92.  yes i am in Austin! I have never been out to Terlingua but i heard it's amazing land out that way. hope to do that trip this spring before it gets too hot.

    ah so you are a chili head! me too!!! and yes....someone prolly woulda shot Ozzie

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  93. I am with you here AR, and frankly found this thread very interesting on the currency war which I agree appears to be in full swing, and garnering a lot of attention.  Forexkong is another site I look at from time to time and basically the observations are similar to what you have here.    I have focused on the SPX and the RUT but unfortunately am short via TZA and underwater at the moment, but feel it more risky to sell it now as opposed to waiting for the drop I strongly feel is coming, imminently.

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  94. This seems to agree with the top of the mean using Andrews pitchfork, roughly 1530 here; http://timethetrade.blogspot.ca/2013/02/s-open-to-possibilities.html

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  95. pffffff, great. Kiss of death.

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  96. Somehow I got a sense of relief when I read your comment that "someone prolly woulda shot Ozzie had they seen him." because you didn't spell it "Aussie". :-)

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  97. I'd hate to urge you to hang on to TZA only to see the Russell continue higher.  But if there's anything the market has mastered, it's the brilliance with which it squeezes shorts to the point that they capitulate and exit those positions at the exact time they should be entering them.  I'll be buying TZA very soon here.  As soon as I see the Russell break 908 I'll be all over that. 

    I don't know if this will help you any or not, but I've got a calculator here that I put together on Excel that calculates pretty accurately what the price of any ETF will be at any given price of it's underlying, provided that target is hit relatively soon and without too much volatility between now and then.  I've got about a million different calculators, some of them doing absolutely freakin' amazing things for me.  Anyway, just for you I plugged in tonight's value for TZA and tonight's value for the Russell.  I ran the numbers then took a screenshot of the spreadsheet.  Then I cut out the piece of that picture pertaining to this little calculation and voila... here it is below.  So whatever price you think the Russell is going to drop to, you'll find the corresponding value of TZA in the center column.  The picture didn't turn out quite as clear as I'd have liked, but it'll suffice.  For what it's worth. 

    Have a great weekend SS :-)

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  98. Will do pardner.  Sorry for the delay... I just got back in.  It'll be up there momentarily.

    ... and don't be scared, lol.

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  99. I was thinking a little lower than that, but I think you're probably right.  Binve's target is the same as yours too.  I have no idea if you're familiar with him, but he's a great guy who runs a nice clean show over here.  A class act.

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  100. Saw your tweet on the red weekly doji.
    Great observation!

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  101. I spent a lot of time in San Antonio over the years. Was really surprised at how small the Alamo was. Must have been a short battle. My friends lately keep telling me I have to come back down and see Marfa near the Big Bend. Some big art there or something?

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  102. Your longest term chart of AUDUSD where you debunked the big triangle of the past few years was a masterpiece. I saved it and share it with my hyperinflation-inclined friends who think I'm nuts for liking the dollar. They still think I'm nuts but at least not for financial reasons haHa.

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  103. ty Greener. we'll see. I always notice that particular candle pattern, but didn't realize for quite some time that it was actually called a key reversal. LOL. i'll play it though, especially as it's a weekly candle.

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  104. sigh...yes for sure.. part of my new trading plan going forward is not to enter trades in the night session. It's a weak spot for me. there's either not much direction or too much news volatility then big reversals, then stop outs add up. I make good money at times BUT often give it back.

    So I think I'll swing trade/day trade something I've entered in the day session, but stay away from "looking for trades" (that aren't really there) during the night session. I have an acquaintance who trades for a brokerage and has done so for 20 or 30 years and she doesn't enter night session trades. Pretty darn sure she has that rule for a good reason. She's a careful trader as she is trading other people's money!

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  105.  I know the Alamo IS small. Especially in context to SA which is such a large city and it's right in the middle pretty much. Back then it was just an outpost in the vastness of Texas.

    Terlingua, where DK was at for the chili cookoff, is out near Big Bend. My artist friends say I MUST go out there. That it is gorgeous. Think that is the area where Gus had to ride to rescue Lorena from Blue Duck, if you ever read Lonesome Dove. Anyway, was thinking of just packing my tent and driving out there and camping for a few days in the middle of nowhere.

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  106. CME just raised margin requirements on the Yen.

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  107. Wow that's probably going to thin the herd a bit

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  108. And if I'm not mistaken they lowered the margin requirements on gold and silver just a day or two ago.  Which inspired me to look at the price of gold as a Japanese person would see it.

    Strangely enough, if a Japanese had bought gold right at the peak in late September, they'd still have lost 13% because gold fell as well, just not as much as the Yen did.  The Yen itself has dropped by 15.9% since the last week in September but gold started dropping at the same time  Gold has fallen 6.5% since then.  So in terms of the Gold:Yen ratio, a Japanese would 'still' be underwater since then. 

    BUT... since the fiscal cliff circus on New Year's eve a Japanese person is off to the races for having bought gold.  And he's likely to do well going forward since the Gold:Yen ratio on a weekly basis looks ready to pop pretty good... the momentum indicators fully supportive of a rise.

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  109.  thanks AR for pointing that out. this is why i loike it here. so much I don't know is pointed out to me! and that brokerage trader friend of mine has been saying, too, that the YEN is going to pop. Then I read somewhere that there is a seasonality to the YEN trade, but not sure if that is true.

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  110.  wow. i am duly impressed!!!!

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  111.  i hope it spx drops for ya SS. I've played TZA and it's definitely not a game that I am good at.

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  112. Something Greenface said below made me revisit my AUDUSD longer-term chart.
    I'm still Uber-Bearish of course (give or take the occasional wobbly lip), but it will still take a drop below 0.9575 to invalidate the bullish triangle scenario completely, which is some way off yet.But everything I see in AUDJPY, GBPUSD, EURUSD, EURAUD & the tea leaves tells me It's Gonna Happen.DKhttp://screencast.com/t/xb2sgnGWS

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  113. more on AUDUSD
    And to get things off to a good start, a possible Mutant H&S on daily -target 0.98 ish

    http://screencast.com/t/P1bI2otbbyVf

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  114.  Big Bend.

    http://www.tpwd.state.tx.us/state-parks/big-bend-ranch

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  115. AR, I've got a good little buzz right now thanks to some CC and coke, but this looks great.   I'll revisit tomorrow. Thank you for sharing this.

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  116. do you have to regularly update the spreadsheet to account for erosion?   

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  117. Thanks for sharing Bive's stuff, never seen it before.  By the way, Leafs 6, Habs 0.  I'm thinking playoffs this year, which is something I can barely remember as a Leafs fan.

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  118.  oh methinks you are absolutely right. some "goodbye ghosts" (check line charts of HS's, they DO look like Casper) are somewhat deformed yet true to their nature.

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  119. Yes.  The calculator works simply based on the fact that if the underlying moves 1%, a trippple ETF will move 3%.  The erosion over a single night is minimal, but if there is a lot of volatility (which is partly why JPM is constantly jacking the Russell one way or the other) 'does' make the erosion greater that it would otherwise have to be without their freaking meddling.  Nonetheless, the erosion over one week isn't really all that much.  So if a person plugged in the numbers once every two or three days or so the calculator would of course still generate accurate results once again.  And however much erosion happened between the last time we checked the numbers (two or three days ago) is now all factored in.  So basically the calculator will give pretty accurate results that will be reliable for say a week or so. 

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  120. Brilliant post, thank you.

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  121. USDJPY daily and 4hrly

    Here's an updated count, a variation from DK's ... (an update to a few days ago -- should have had (v) earlier than I did).
    And the two alternatives in this count are we just had either i of 5 or 5.  i of 5 would imply we are going to have an extended 5th.
    Hard to say at this point which it is.  One clue might be volume ... volume in 4 and this latest 5-waver up are all HIGHER than in 3, which according to EWP is a clue that another wave higher is a-coming.  The test will be what happens in this correction.  Breaking the 1-3,2-4 channel will end the extended fifth alt count.

    I'm not long or short now, but if this goes sideways for 7-9 days and tightens up, and doesn't break the channel, it could be making a base for iii, iv, and v of and extended 5th. 

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  122.  Hey DK, thanks for all those charts, I'm going to study them soon ... have a deadline at work I need to catch up on.

    Here's my count on this USDJPY (daily and 4hrly) as an alternate to your count.  Two possibilities in this count, either we just finished with 5 of minor 3 or we just finished i of an extended 5th.  No idea which one it is, but volume seems to suggest that a wave higher might be in store. Because volume in 4 and this wave up are all higher than in 3.  The channel line of 1234 breaking would invalidate the extended 5th possibility I suppose.

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  123.  Most excellent sleuthing good sir!  Thanks for making sense out of this one!
    Our two year wait may pay dividends yet, eh?

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  124.  Beautious!

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  125.  That's big news!  And could stem the massive leverage surely going on with the yen.

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  126.  Thanks again for all your work good sir.  I only track USDJPY, so I'm very grateful for your work on AUDUSD and GBPUSD and AUDJPY and your view on USDJPY.  You are a master of the EW, and I learn a ton from your work.

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  127.  ty for your update Greg.

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  128. Thanks, but really my own contribution was pretty basic and I didn't even offer any targets.  I was just offering a general picture about what's happening between 3 major currencies.  I'm sure you're referring to DarkestKnight's charts which are most excellent and very valuable.  So we're going to give credit to DK and from that standpoint, I agree with you totally.

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  129. I added that one to DK's array above Greggor.  He's doing some awesome work man.

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  130. Well my friends, you can clearly see what's been transpiring above.  DarkestKnight's charts are just freakin' fabulous.  Obviously he doesn't mind that I've posted them above and in fact he's been very cooperative in offering even more charts in the 'series' so that it all ties together pretty darned well and offers a really good assessment in my opinion.

    BUT, this has actually evolved very innocently and unintentionally into a masterful piece of work by DK.  So I've republished this article entirely because even though this article has received the usual decent number of hits, the vast majority of readers who read it the first time are totally unaware of DK's amazing contributions.  Those contributions are definitely worth seeing so... here it is.

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  131.  i am just enamored with DKs charts! a map to what i am pondering! thanks AR for highlighting them all in one spot. truly a great idea on your part.

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  132. Thanks Blue... I'm glad to do it.  It all happened quite by accident, just kind of evolved innocently enough.  I guess it was just that he had posted 4 links in succession that all fit together.  I should have asked his permission to highlight them but he's been a friend here for a long time so I felt pretty safe doing that.  But man, he stepped up to the plate and offered even more charts that really started to paint a great overall picture.  It got to the point where I just re-published this entire thing because there are a ton of people who aren't even aware of DK's additions here.  I didn't ask his permission for that either.  And once again I've got my fingers crossed, lol. But I think you and I and the others here are in agreement, they're so good that they simply 'have to' be seen by a wider audience. Not to put any pressure on DK, because as I noted in the next article, he's nimble. He'll change his counts as he sees fit... and he has every right to do that. And thanks for your vote of confidence... I don't want DK to get upset with me.

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  133. fingers crossed too, but i don't think he'll be upset because it's so helpful to find them on one place! yes market is constantly evolving so counts can and do change, we all know that...and if ya DON'T then you shouldn't be doing this! LOL.

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  134.  I wanted to thank you for highlighting DK's most excellent work.  I've been following his work for 2 years.  There is a fortune in those charts, let me tell you.

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  135. My pleasure Greg.  Yeah, I've enjoyed his charts ever since I've known him but the opportunity to assemble a set of them like this either never presented itself quite as readily as this or I just missed the opportunity.  Whatever the reason, this was a good opportunity and the thought crossed my mind to do it.  It's all good :-)

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  136.  Hey Greenface, I had a chance to read and try those breathing techniques -- most excellent, thank you.  A very calming influence, the deep belly breaths.  Should be required reading for currency traders, or anyone really.  Didn't realize how habitual shallow breathing had become.  And I know I'll make better decisions if I remain calm in life and in trading, and breathing will help.  Like the Karate master said in Karate Kid, balance helps in karate and in life. 
    Merci.

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  137.  This time he might be right.

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  138. and you also do excellent work Greg! though you are focused primarily on usdjpy. so yes, it's great for all of us to see DK's charts on several different pairs all in one spot.

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  139.  Why thank you Blueskies!  I focused on USDJPY because it was coming off the bottom and had some amazing fundamentals, so the count was easier ... what DK does to those messy middle squiggles is truly amazing.  Counting corrections is the hardest part.  And then going back in time to find starting points?  Mind-boggling.

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  140. whoa. ramparama on usdjpy overnight. they ate my stop. and asia was closed for a holiday. lol. thing is unstoppable. weekly close was up for twelve weeks in a row as of feb. 1 for the second time in history. last time it did that was 1981. last week closed down so didn't break it's record. If it exceeds 94.05 which is last wednesday's high and the two and a half year high, it's going to visit Greg's 95 call. heck it's going to the moon!

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  141. so much for technical key reversals.... LOL

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