Chicagostock Trading

Chicagostock Trading

Japanese May Flowers = Equity May Showers

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Yen is trying to round out a bottom. After retesting lows and not breaking, the Yen is back to retesting where it failed from April 15th with highs of 10383. This has led to a pause in the market as it consolidates builds support to continue the pressure against this level.  Support is seen down to 10150 ever since the market squeezed the level and turned on the short squeeze. Squeezing above 10383 confirms double bottom and gives room to target 10883 from where the market failed early April as the Bank of Japan came out with stimulus, derailing the March bottom attempt. By coming back to this level the yen will have rounded out a bottom from 108-100-108, leaving shorts who sold the BOJ stimulus wrong. This will turn the level into support as the market will also retrace 50% of the year highs 11531-10008. Recovery above 108 will attract buyers to press the gas against shorts to target year highs of 11531 and fill gap up to 118 from November. 

During the past 4 years the Yen has had a tendency to bottom during the Spring months. 

 

Equities were squeezed to new highs on the last day of trading in April as equity shorts threw in the towel.  This led the Emini SP500 to take out the previous high of 1593 and put in new highs of 159550. Nasdaq completed the squeeze of taking out last year's highs of 287175.  To start May, equities reversed sharply off the highs to close below Tuesday's lows.  These lows now act as major resistance and what buyers need to overcome to retest highs. On the ES daily chart, the breakdown setup an outside bar bearish reversal, by opening above previous day making a higher high and closing below previous day's lows. The breakdown was fast and sharp as shorts had already thrown in the towel the day before, so they were left behind, having to come back and offer the market down as they chased back in. This gives way for the SP500 to test support down to the mid 1550s of where the market broke out after putting in a 153075 low in April as sellers failed to break the Cyprus 152950 low.  Shorts have already been cleaned after failing this breakdown and ralling to take out the highs and squeezing them out.  Coming into this range of support allows buyers opportunity to defend and continue the upside momentum.  Failure to hold and breach of 153075 confirms a double top with room to target the year lows.  Once the SP500 takes out the year lows, prices above 1440 will not be visited for a long time. A Yen short squeeze will put pressure to make this break take place.

On Wall Street, the old saying is the markets like to climb the wall of worry, and they have surely done so this year moving higher in the face of all negativity along with two attempted breakdowns in February and April. These are what we call "cracks". We like to say the market climbs higher on glass stairs. Reason being is ever since the 08 crash and 09 bottom at 665.75, the market has been VERY fragile and on life support through the Fed.  As we have seen, the glass stairs have been broken several times since the ride from the 09 lows and each started with cracks first before falling through violently, flash crash and debt downgrade in 2011.  The recent February and April corrections were the first cracks in this latest climb of glass stairs.

 

The Ultimate Short Squeeze 665-1441 & Accurately Predicting Every Correction Using Technical Analysis

 

 

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Bonds, Stocks, and the YEN

 


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The 30 year bond has consolidated above 14617 in an effort to hold above the year highs after seeing a massive short squeeze that reversed the market from the year lows of 14014. Squeeze was fueled by shorts as the market broke below the February lows on the March NFP release to put in these lows, the market saw a recovery the following Friday going into the "Cyprus bailout".  Cyprus news led to gap above 14200 turning level into a failed breakdown as market continued to force shorts to cover until the year high was taken out. The move caught many off guard and in turn cleared out shorts in the market. By holding above 14617 the market now tries to build a base of support to attract buyers that neglected bonds for stocks earlier in the year.  The market sees major resistance against 14923. Taking the range of 14617-14014, gives way to push toward 15221 high from November.  Just as the Yen tries to target its November gap.   

 

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Yen and SP500 show almost exact contrast comparison.  As Yen tries to double bottom in April, SP500 is trying to double top.  The Yen made lows of 10008 and 10013 before squeezing through 10158 last week.  This level has turned into a new area of support should the double bottom be good. Holding above 10150 gives room to force shorts to cover to give room to take out April 15th's 10383 high with next major level of stops above 10809 from April 2nd highs. Above 10809 confirms double bottom against 100 to give way for a massive short squeeze to target the year highs at 11531 and give room to fill last November's gap at 11790. During the past 4 years the Yen has had a tendency to bottom during the Spring months. 

 

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In contrast the SP500 has a small double top as market most recent reversed from 153075 to retest 1593 by making a high of 158825.  As the market hits it's head against this resistance it has managed to hold above 1570 to create a very tight trading range. Move past 1588 is needed to retarget 1593 for stops.  Break of 1570 gives way to test support at 1555 based from the 153075 pivot low.  Taking out this low would confirm the double top to give way to cross the "line in the sand" from the Cyprus lows of 152950 which have held like a rock.  This is line in the sand, just as 108 is the line in the sand in the Yen and 14617 was in bonds.  In contrast to the Yen with the gap at 11790, the SP500 has a gap down to 142575. 

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Euro's Double Bottoms

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Since the Euro's double bottom in January, with lows of 12627 on the 13th and 12628 on the 17th, the market trapped shorts who were looking for the breakdown and used as fuel to squeeze above 12884 being the highs from January 13.  This squeeze led to reversing the downside momentum and short covering as the market rallied through the year highs of 13085 and up to its next major resistance being 13237 from December 13 where this down leg started.  After hitting this resistance of 13237 and 6 handle move off the lows, the Euro went into consolidation period, building a flag for the move from 126-132.  This flag built right above the year highs of 13020-13085, being the new level of support as the year highs was conquered.  

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