Euro/Yen signaling higher stock prices ahead in the short-term…
The Euro/Yen of late has held at falling channel support and looks to be breaking higher from a bullish falling wedge pattern. This leading equity indicator is suggesting, that in the short-term, stock prices should move higher.
Speaking of game changers…Mr. Market frequently changes directions with the least amount of investors on board. In the chart below “bullish sentiment” has dropped to the lowest levels since March of 2009. Last week I came across numerous articles with a similiar theme…How low the markets are headed! I believe this economy has challenges, yet when the competition becomes who can predict the lowest number, frequently, short-term surprises are in store.
This past week the “Ground Hog Day” posting highlighted the trading ranges of the 500, Nasdaq 100, and Russell 2000, with the following directions….”bring stops down right now to protect profits” and that inverse “head and shoulders” patterns could be at hand.
With the Euro/Yen upside ”Pattern Breakout” taking place, the 500 index at the bottom of its trading range and bullish sentiment at the lowest levels since March of 2009; the ingredients are there for an upside move in prices that most likely would catch many by surprise.
EUR/JPY is down to 107.34 right now (~2:15 PM EST 8/30/10), if it continued to drop in the coming days, would that change your outlook? Although bullish sentiment being close to the bottom seems like a contrarian indicator of a rising market…
Glad to see you’re following up on this, I’ve been tracking the EUR/JPY daily since your initial entry.
I’ve come to the conclusion that sentiment measures basically tell you the market went up/down recently and not much more. Bespoken.com seems to post a lot of little factoids to not much purpose. I gave up on them entirely when they did a piece showing the market is up on most Friday the 13ths.
I would be careful about making any short-term bets on price action this week, if the ISM and/or jobs number come out much south of expectations things could sour very quickly.
1065 sure appears to be the neck line (see weekly chart). All previous attempts were stopped above the neckline. Last week it gapped through and spent the rest of the week and today trying to break thru it.
If 1065 is the neckline then a measured move to 913ish sure seems likely. .618 Fib of this move lies around 971.
My question is…
How often do HnS patterns after breaking there neckline, will come back up to test it again? And if so where could we expect a bounce for this to happen? Does 971 sound correct?
It sure seems like alot of testing of it was done last week and this week. I know I might be jumping the gun here but its what I have been anticipating…
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great chart. IMHO, I don’t believe the market will go down to 950 with reflationist Ben at the wheel. If the market falls to 1000, he’ll come out and start buying not only T’s and MBS’s, but will visit yard sales and buy old washers/dryers and wornout Metallica T-shirts from everyone.
@Bob in MA -
Sentiment is also tough to track in that you don’t know where the bottom is until you start bouncing back up. Given the market and macroeconomic conditions, we might see even lower numbers than in 2009.
[...] the Currencies correct and many things fall in place! Sunday night I ran a post entitled “Euro/Yen signaling higher equity prices.” The chart below is a update to the action of the last couple of [...]
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Hey Chris, I am amazed at your prophetic pronouncement of the late Aug, early Sep. surprise to the upside. I shorted the market thinking the economic data would be negative and the market would go down- but as you most eloquently put it “…the ingredients are there for an upside move in prices that most likely would catch many by surprise.”
Please enlighten me on how you came to this deduction that the EUR/JPY would be a bullish indicator for the market to rally holding all things constant with removal of bad economic data being released?
[...] treated us to another good week… Last Sunday evening the patterns suggested to Long Stocks (see this post) and to Harvest/Short Bonds (see this [...]
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K-Rob,
Sir John always shared, “don’t worry about what you know, it is already built into the market!”
As you have seen, I am a price/pattern fan. Prices often lead fundamentals and patterns put the odds in our favor.
Pattern looked great in the euro/yen, on support and bullish falling wedge, so it was time to long stocks.
I have been doing technical analysis for 20 years, I have faith in the “power of the pattern” and have become a tad bit suspect on how to make monies with lagging economic data.
Chris
[...] want to subscribe to my RSS feed. Thanks for visiting!In the chart below, which was posted on 8/29 (see post), I suggested a “game changer” was about to take place, with a rally is stocks, due to [...]
[...] you may want to subscribe to my RSS feed. Thanks for visiting!Went long the first of this month (see post) due to the pattern in the Euro/Yen, which often takes an early leadership role for equities. [...]