GBPUSD is nearing the 61.8% retrace of the rally from the 2020 low at 1.2495. The top side of the trendline that originates at the 2015 high (blue line) is just below this level near 1.2415. The next 3 charts highlight when daily RSI is below 21 over the last 20 years. All instances led to at least interim lows EXCEPT during the financial crisis. So, unless this is the financial crisis, we should be on the lookout for a reversal.
Heightened bond and FX volatility (notably JPY) has spilled over to equities. SPX is pressing yearly lows and there is no sign of a hold at this point. Price action since September is a distorted head and shoulders top with a negative sloping neckline…very bearish. The measured objective from the pattern is 3724. Barring a miraculous save, 3724-3856 looks like the next magnet. Recall that we started sounding the alarm on a top last September when price was pressing into the long term upper channel line (see below).
The Nasdaq is holding on for dear life. Price continues to trade around the well-defined trendline that crosses highs over the last 8 years (see zoomed out chart below). Bigger picture, one must acknowledge that trend is sideways at best and possibly down with price below the 200 day average and that average shifting from a flat to a negative slope. Near term, today’s reversal sets up for a squeeze higher with resistance in the 14300-14500 range. A relief rally is needed in order to relieve extremely negative sentiment.
The Dow traded to its best level since 2/10 today before plummeting all day and forming a massive bearish outside day in the process. Scroll out and you’ll see that price has been pressing against a flat 200 day average as well. I’m wondering if this is a larger trend change. It’s safe to say that the broader trend has shifted from up to sideways. If price breaks the long term center line then the trend will be considered down with focus on 29800 or so. The full picture from the 2009 low is below.
USDJPY didn’t quite make 130 but notice the channel from the 2021 low. 1/2 and full channel extensions are plotted with the channel. The March high was at the 1/2 channel extension. Today’s high was at the full channel extension. Near term focus is on the 1/2 channel extension near 125.30, which was formerly resistance. Near term, watch for resistance near 128.50 (see below). Finally, a volume reversal (on futures) triggered today. This is only the 3rd such reversal since 2014. Those charts are below.
USDCNH broke above a year long trendline today and price also completed a 4 month head and shoulders pattern today. Watch the top side of the blue trendline for support near 6.3930. I realize that this goes against the idea of the USD topping. Maybe the USD has more to go that previously thought?
NQ reversed higher from the proposed support zone today. Sentiment is stretched down here too as evidenced by the AA II bull bear spread (see below). Sentiment is stretched just about everywhere actually…bonds…the USD…and equities. So, perhaps the reversal down here in stocks is joined by a reversal higher in bonds and lower in the USD over the next few days…just a thought. Anyway, I’m looking higher in NQ. It’s possible that everything since 2/24 is a massive base but near term focus is on 2022 VWAP near 14500 for now.
It’s clear that the USD won’t roll over until/unless rates stop going up. TLT is the long bond ETF, which moves inversely to rates. So, a turn higher in TLT means a turn lower in rates. This could happen soon because TLT is closing in on a massive level defined by 2 legs down from the August 2020 high (using this high rather than the COVID spike high…the August high is the daily and weekly closing high) at 119.94. It’s also the 25 line within the channel from the 2007 low. This line nailed the 2013 and 2018 lows. Finally, the decline channels. If we do get a reversal then there should be a USDJPY play.
DXY printed 100.52 today and then carved a key reversal. In fact, UUP (USD ETF) made a high volume reversal (see below). The combination of the wave count, measured level (recall the 100.59 measurement), upper channel line, and volume reversal make a strong case that the USD topped today.