ES/YM SPY/SPX/INDU/DOW

It’s Friday and for the past few Friday’s it has been retracement day…. meaning we reverse and move higher into our HWB retracement targets.

There is a good amount of unfitted business below – this is usually taken care of Tuesdays – Thursdays.

2423 remains open on the ES / 2430 on the SPX as a down town profit target…

A 10 point gap & go prior to open would be a solid pointer for the retracement – without it, we may continue lower until we find the next support level.

These are the levels in working order for today.

The Reflation Trade

Or the rate of change of inflation over time –  The Inflation rate is declining over time, but it remains positive. (Their verbiage – not mine.)

Central Banks despite their huge and sustained injections, can’t effect change… Yet… despite massive efforts Globally.

#CHINACPI #DISINFALTION
China CPI

 

 

 

 

 

 

 

China faces greater economic risks internally – The PBOC will need to mobilize once again, even with massive RMB injections.

Global reflation is failing while Debt extends.

#REFLATION #INFLATION
Global Reflation

 

 

 

 

 

We must consider what Central Banks will employ.

I don’t believe Monetary efforts will assist in preventing a further decline. Governments are going to be required to spend and spend at a pace unseen in Human History.

 

Morcheeba

Whom do you trust – No one and nothing.

The Algos took control and ran us down on the DX/YEN with the short breaking. The DX spiked to near 94s on the 6/Basket – once the Algos began feeding on the Currency pair… it was over for the metals.

Gold and Silver were sold hard.

Gold broke it’s Line in the Sand @ 1272.

Silver has not failed it’s support @ 16.53 – yet.

Energy and the Metals are going to follow the Dollar/Yen – The Dollar finally got off its ass and rallied hard.

West Texas Intermediate Crude bares observation at this juncture, we broke our Long Setup and have some unfinished business with an overnight Gap prior to setting up the next short entry.

#CRUDE #CRUDEOIL #WTI #WESTTEXASINTERMEDIATE
West Texas Intermediate Crude

 

 

 

 

 

13/21 Cross setting up along a period of flatline consolidation.

#CRUDE #CRUDEOIL
West Texas Intermediate Crude 2

 

 

 

 

 

Simply put – I believe this trend will continue into Labor Day.

Waiting for a retracement to re-enter QM/CL Hedge:

#CRUDE #CRUDEOIL
QM/CL

 

 

 

 

Retracements are to be expected in the hunt for Money – the primary trends are going to see the Sands shift.

Yesterday’s meme:

In order for this to be a healthy Bull Market the 1276 would need to trade – it’s quite normal and expected… 1272 is support and failure would likely send us to back to the bottom of the range @ the 1201s with many bumps along the way – 1250, 1244, 1240.”

I doubt this is merely a dip-in on GOLD, but a larger reversal that will have a number of micro retracements towards the .618 @ $1201.

 

 

West Texas Intermediate Targeting

$44.50 trades and we cold see the $38.50 level – the extremely bearish COT provided a number of inferences where “Commercials” began adding to their Hedges over the past few months.

It required a bit of shake & banks, but they took the longs for a good ride and reversed their positions when $51’s were looking likely…. Profit targets are not always met.

Rarely have I seen the WTI COT so negative – which leads me to believe there could be one large whipsaw ahead. Best to wait for a retracement before jumping in and making sure there is confirmation – the Algos remain on the hunt for suckers.

Exited my hedge on the break of 47.55 – waiting for position back into the trend.

Fast Cache – Part 1/2

What has the Monetary Order in store for the Hoi Polloi?

A large dose of Confusion, Fear and Chaos.

Where is it all heading? Clearly not to a welcome destination.

With the latest declaration of a “Trade War” with China – the response will be instructive for the Longer Term horizon. There will be a very large reaction and where it points will provide the short term response in all Markets.

The dial is being turned up to 11 quickly.

Which begs the question why now?

What is the desired outcome?

Where will The United States Capital Stocks head?

How deep will the effect become over the next few months?

Is this the end of the Federal Reserves Liquidity-Fest for the next few years?

We can begin to assess some of the above in thesis and theory based upon History.

Currency

91.88 is my Line in the Sand for the Dollar low. Should it break this level and close under it – the potential for further downside increases in probability.

92.50 is acting as support for now.

The Euro would need to break above 119.50 on a closing basis to mover higher – 120 to 125. Irrationality rules as Europe is clearly in dire straights as well.

11750 – 11800 is acting as support – should it fail and close under – the 112s open up with the Gap Fill at the 108s. Volatility has picked up and will continue as the Algos remain on the Hunt for every penny.

The Yen is range bound – it did close its Gap Fill… Caution is warranted now as it spiked and was sold down. The next few weeks should prove to be pivotal for the Yen.

Bonds

Fed Funds & Capital Flows continue to lead Short Term Rates.

Momentum, Strength and Trend are quite Bearish and have been for some time. The boundaries for Fed Funds is 764.050 – 1220.500.

The Dynamic Yield Curve in retrospect is interesting – as should the Dollar strengthen – something will need to give to prevent the Short End of the Curve from becoming unruly.

In the past – an Equity selloff has been used to contain accidents.

I believe this will no longer perform as intended and the Federal Reserve understands. Yes it will provide short term relief… but it will remain very short in duration.

Capital flows have reversed Globally with China’s Bond Market becoming the largest recipient.

Bond Connect arrived just in time this was no coincidence and why I presented its importance back in July – it represents an exit.

China’s Bond Market is absorbing inflows at a record pace now. It can reverse quickly as a “Trade War” will cause disrupt all movements Globally.

Global Capital Flow
Global Capital Flow

Equities

Prior August declines in 2014, 2015 & 2016 were volatile. Large retracements during each of these seasonal declines were typical. Will it be different this time? I do not believe so, Monday’s are typically low volume affairs with participation on the weaker end of the Price action during the week.

I believe tomorrow has the potential to be quite different – participation will have increased as the weekend Headline News did little to calm the already nervous and twitchy Investor herd. A large Gap down overnight would appear to be a high probability.

Always consider the irrational – a best practice. We will need to watch it trade first.

The Dow has remained a leader for months on end. This is atypical as the ES has been the leader and is understood to be such by participants. A divergence began awhile back and it festers to this day. Over the past few sessions the ES has “appeared” to revert to its leadership role, but the time period observed is extremely short. It has been easier to move the Dow/INDU as it has a far narrower component.

Among the Public – the DOW is what is most often mentioned, rarely does one hear the S&P given the same weighting in perception.

DOW

The INDU has traded below support @ 21,862.

21851 was the Friday Close.

This indicates a dip in of support by 11 ticks, one tick under the 12 rule.

An extension to lower lows is clearly being suggested.

22,179 (Cash) August High from the 21,496 July Low – provides a HWB (50%) @ 21,837 for Cash.

I’m using Stock Charts as most do not trade Futures and receive the benefit of Fib discipline without confusion.

21,858.32 was the Friday Close.

We need to watch for the Overnight gap down below 21,837 Cash.

21,842 was Friday’s low, 5 ticks away.

S&P

2407.70 was the July low – the August high is 2490.87.

The HWB stands @ 2449.25.

Friday’s close – 2441.32 – the ES failed at ST Support.

The Dow remains in divergence for now against the ES loss of support, although the DOW is very close to losing support.

Moving out to a larger draw in time… April 13, 2017 – the low was 2328.96.

A draw from Low to the High of 2490.87 – the HWB would be 2409.90.

2425.53 is the Gap Fill on the Daily.

These are the levels that need to be watched this evening. 

Please remember – large retracements are part and parcel of the prior August sell-offs in 2014, 2015 & 2016.

It is quite possible a far larger retracement to the downside is being traded, it simply has not shown itself – yet. 

The potential for a far deeper retracement cannot be discounted.

__________________________________

Precious Metals update will be presented later today in Part 2 of this update.