3:30am – The dollar is seeing a significant movement lower ahead of the jobs report expected today. This is generating a lift in the Euro and in lockstep, the globex futures have now ticked into positive territory which mirror the gyrations in the foreign exchange markets. Expect the 1% drop in dollar to be reflected in a similar lift in the futures before the open.

Is this perhaps a manifestation of the positive divergence noted into the close yesterday on the hourly charts?

12:00pm – The EUR/USD cross is a great way to get leading signals on the S&P market movements.  It is the same as saying that the equities move inverse to  the US dollar.  Here are examples of the EUR/USD vs. ES futures 5 minute charts.  Notice the correlation in price action as well as 5/35 MACD (a momentum indicator).

3:30pm update – small a-b-c completes an hourly bear flag.  Testing lower bounds of the pattern setup (a confirmation zone / make-or-break level) here.

The dollar is retesting the 2008 highs.  Although it will likely go higher, an equity rally will undoubtedly be triggered first by a pullback in the greenback.  Pay close attention to this index as it test the highs.

Yen update – The previous head & shoulders pattern has evolved into a double top setup. Once again a place to tighten stops as this pattern approaches to target measurement.  This will also constitute a 62% retrace from the daily swing high and represents a multi-year breakout pivot at 0.98 that should provide very strong support.

The original title of this essay started out as the ‘Fox in the Hen House’, an elaboration of some of the meals served by our master chef President Bush, but I will reserve that for a later topic. Instead, it dawned on me that the Internet is a wishing well. Yeah, right dude .. whatcha been drinkin’, eh? Well, let me elaborate….

If you peruse the Google candidate acceptance package, you will find a very interesting elaboration on the company’s morals and goals. The one that gets software developers the most excited is “Don’t be evil” as adapted by Sergey and Larry after a seminal meeting in 2001. I was very close (a couple Sobrato buildings away) to this fledgling company and you could feel the genesis of this modern-day powerhouse. It has since grown to devour the old SGI buildings (and much of their staff) in Mountain View. Today, we don’t search, we ‘Google’ something. Google knows what you want.

Soooooooo, when you go to find something, where is the starting point? Do you realize all your wishes, fears, hates, friends, foes, family, and lovers are all but a few key presses away. Furthermore, so does Google. They know their addresses. Maybe even shopping habits if they or you bought something. Sign up for Analytics?? They know who visits your site, both coming and going. Have a Google toolbar or popup blocker??? Perhaps they know where you are going because you needed directions, and your home address is most certainly saved. You guys like porn, right?????? So do I. Ahhhhh.. but what do you really wish for in the dark of the night when nobody is around, you know, that dirty little secret. Google knows, too. Do you filter your mail though G-mail to get rid of spam??????? Well, you must have forgot your password some time back and had an e-mail reminder sent so you can log back into your account. Google knows that account, too. And the password. And how about those new fancy G-Phones???????? I just gotta get one this Xmas ……….

Software developers are made to wonder at the efficiency of functional programming and simplicity of Map-Reduce. Behold the usage of high-speed networks to tie together vast seas of commodity PCs into cloud computing (interesting twist on words). In the end, it is just matrix math on a global scale, and you occupy a distinct cell within the giant redundant, fault-tolerant, interconnected, non-heterogeneous storage brick we call Google. Welcome to the Matrix Revisited.

Make a wish and it is yours, Master.

No big deal, right? Tiger Woods would remind us all that any thought, whether positive or negative is reinforced. Every golfer can attest to this truism, and probably give you a great story to boot. The brain cannot distinguish between “Don’t hit it in the water” and “Hit it into the water”. Just ask Ryder Cup captain Paul Azinger whether Boo and J.B. needed this little piece of advice.

In the end, what does this mean when the programmers chant “Don’t be evil”?

Be careful what you wish for, it might come true.

The current update as of 11 am EST.

The tiger shows its true stripes. The yen bounced off a 7-year cup & handle pattern – the neckline or rim was exactly at .999. This illustrates the relationship between the index prices and how the dollar can be used to alter the perceived value of the underlying assets (S&P 500, Dow Jones, Nasdaq). At this moment, do you wonder what every treasury secretary meant when he was howling “Strong Dollar Policy”?

The current update as of 2 pm EST.

2:45 pm EST – key turn going into 3:00 pm hour.

3:30 pm EST – rising channel breakdown target measurement.

The closing tally. All makes cents, right?

Bearnake is doing his best to shovel American dollars onto foreign soil. Interesting how this is also a way to artificially lift the indicies. All things being equal, dropping dollar -1.5% should at least produce a +1.5% pop in the markets just to keep things ‘even’.

Your hard-earned dollars are being deflated as we speak. Intraday results, within one hour of the opening bell on Wall Street. Or perhaps we are seeing a flight out of the Greenback ahead of the election results?

I learned a lot about Fibonacci trading from a trader named <Brach> in ensign chat back in 2002-2004. The most informative piece of trading logic he imparted was the notion of 62% – 78% retraces – the ‘Brach Zone’. This represents the best area of opportunity for the trader to enter with well-defined risk (stops just above 78% retrace) to capture big moves in equities, futures, and foreign exchange. A good place to look for a ‘b’ wave high or low in larger a-b-c retrace context.

As far as running with the pack. a perfect wolfewave setup this morning on ES – E-mini s&p.

In the end, it is all just a zero-sum game, right? But it seems like the markets are doing soo good before the elections – all just smoke and mirrors.

As far as the stock market, the lifts are quite impressive as shown below. Second largest percentage gain on the Dow Jones Industrials – bear market rallies are indeed a wonder to behold.

Markets have been moving lockstep with the Euro / Japanese Yen (EUR/JPY) cross. The media reaction to the yen’s appreciation has reached a crescendo, and the foreign markets are showing signals of government intervention as mentioned in previous post with a -4% route. Also significant is the lack of fx flows after the equity markets have closed.

Markets are anticipating fed fund rate to be slashed tomorrow, just as the dollar signals that trend started in March 2008 could go into a consolidation sequence – an intraday wolfewave pattern signal shows on 5min chart.

Here is the monthly chart of the US dollar. Superimposed upon the lower left is today’s intraday action as recorded on a 5min chart. One of the beauties of wave structures is the symmetry at key junctures – compare the 3 days of intraday data against the equivalent topping action which unfolded over almost 2 years of monthly swings.

Equity markets have just closed (13:00 Pacific Standard Time = 16:00 Eastern), yet it is very interesting how the foreign exchange market immediately comes alive.  This ongoing money flow signature is just another dynamic of interrelated markets.

Could it be that the USD dollar / JPY yen is actually a 30 minute leading signal for the futures equtiy market?  Note the collapse in this cross just moments before markets close (12:30 PST = 15:30 EST).

This amount of movement would have required almost 3 weeks in 2007 foreign exchange markets.  Two hours with the current volatility as trillions of dollars move through hyperactive world markets to cover bets of unimaginable size.