The collision of global markets and social mood

Friday, January 8, 2016

Friday -- Forget the Yuan -- Watch The Yen

S&P E-mini Futures:
Higher yet well off their moonshot right around NFP. 1969 key level.

Much better night in China. The Shanghai Composite gained almost 2% amid the smallest possible yuan fix and removal of circuit breakers.

The DAX has followed suit with over a 2% gain, but has come off its best levels

Stateside, payrolls data exceeded estimates. 292K vs 220K expected.

And just when I was leaning long . . .

. . . Marketwatch provided a helpful public service message that suggested I may want to re-think, though admittedly it could be interpreted either way.

Much different day thus far. More Risk On. CHF weaker. AUD & CAD stronger with USD and JPY weaker.

Forget the yuan. Watch the yen.

JPY got back inside 118.055 and could be signaling a giant triangle that could resolve higher (notable for equities if the yen/S&P correlation remains -- and with all the stimulus sloshing around, there's no reason why it won't as all "risk" assets are basically riding the same wave of liquidity).

Taking the brunt of the good payroll data. Prices coming off, yields higher.

WTI crude and NG modestly higher.

Gold lower, silver much lower (down currently over 2%), and copper modestly higher. More Risk On, less Safe Haven flavor.

S&P Outlook:
S&P nearly hit the 1935 Fib area, trading to 1938.83, and it still could eventually.

I dumped a load of TVIX yesterday, and added to a growing position in XIV (short VIX). Traded some SPY calls hit and run. We'll see if it was the correct thing to do, but the tone was so doom and gloom that I felt I had to.

I don't think the correction is over, but I do think I can add more TVIX at better prices.

As noted earlier, if JPY is forming a large triangle, it could end up quite bullish for equities at some point.

Meanwhile, the probability has gone way up that wave IV is not over. And while there are tons of wave counts out there, here's my favorite (but it's not mine).

Source: Michael Eckert
I love this elegant count for many reasons, especially the fact that it calls for a bounce right into the large "black hole" created when the S&P tanked the other day (2022-2050 area).

Also, VIX and A/Ds showed divergence yesterday which lend support to this count.

The entire premise of the decline has become China, which I believe is a false narrative. It's a correction just like any other correction, was forecast well in advance by the waves.

One other thing to note: the waves in the e-mini look terrible if you're a bear. Sloppy to the hilt.

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