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 yen has now officially tagged the head & shoulders target I posted on February 5.  This is a level to take profits in cross trades and/or tighten stops as it tests the previous inflection lows.

10:35am – market immediately opens with a third push lower – wolfewave pattern.

11:30am update – pattern targets are met.  Note the lack of overnight globex futures quotes, therefore inflection points 3-4 are invisible in this chart.

2:30pm update – ES has a second lift and consolidation sequence.

5:30pm recap

The Japanese yen has shown a lot of strength, however, at this juncture a ‘pocket trade’ is asserting itself.  At a smaller scale, a head & shoulders pattern is also visible, which should take it back to a retest of the 1.06 level.  This is a short candidate in any cross trade for the next week or so.

I also realized that the currencies futures are better served by using the continuous contract symbols, since they will illustrate overnight and intraday prices ranges more clearly.  Below is an example of the yen continuous contract (J6H9 compared to above JYH9) and the improved detail.

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.