Technical Update Friday, February 28

Technical Update Thursday, February 27

KRUGER INSIGHTS THURSDAY, FEBRUARY 27, 2014

By: Joel Kruger

Push It So Far That It Just Won't Matter - I have to tip my hat to former Fed Chair Bernanke. Despite all of the turmoil in the markets back in 2008, the man managed to orchestrate the implementation of a super-calming mechanism in the form of never seen before ultra accommodative monetary policy. This resulted in a very attractive incentive to use this free money as a means to invest in risk correlated assets at seriously depressed levels, while at the same time, offering a compelling return on investment. There is nothing more dangerous than fear and uncertainty, and Bernanke understood that the super easy monetary policy would help to inflate one of the greatest gauges of investor confidence in the form of the US equity market. And so, the result has been a US equity market that has flourished in the face of this policy to fresh record highs, despite a still recovering economy. Critics of this strategy (I was one of them) would have argued that inflating the market artificially would only end up backfiring when the Fed was eventually forced to reverse policy, as this would cause a major disruption. But with equities having flown so far so fast, even if we pull back at this point (as the markets start to price in a less accommodative Fed), a sell-off of even 15% would still have the market trading around the record highs that were set just a few months ago in 2013. Bottom line, if we inflate the market to the point where it has gone so high, when we eventually do get a serious pullback, in the grand scheme, the pullback won't be that scary. This seems to be how everything is playing out, and in the end, perhaps this strategy will have proven to be a huge success. The jury is still out. But even if this is the case and the markets won't end in disaster, the fact remains that we still need to see a correction in the market. 

But It Still Has To Happen - No market should be immune to the normalization of a shift in policy, and just as other risk correlated assets have already come back under pressure as the Fed initiates a shift (as slow as this shift may be), so to should the US equity market. It isn't a question of IF but WHEN. The US equity market is just the last man standing at this point, and will not be immune to the domino effect. Currency markets have been warning of more risk off trade ahead, with emerging market FX under pressure and risk correlated, safe haven alternatives like the Yen and Franc very well bid of late. Today's USD/JPY break back below 102.00 and EUR/CHF drop below 1.2165 are significant developments, and should open the door for a broader risk liquidation. I am not sure if stocks finally start to relent to this pressure (I am currently short S&P 1857.6), but I definitely believe the timing is right. Interestingly enough, today's price action anomaly comes from my other position, where the New Zealand Dollar has been outperforming despite these signs of distress. I am a little unsettled with the bid tone in Kiwi, but at the same time, do not expect this relative strength to persist, and actually am projecting this market to start to underperform sooner than later. The New Zealand Dollar may be somewhat attractive on the yield differential side of the equation, but this currency looks quite vulnerable to me at current levels. Just as equities have held up too well in my view, so has the New Zealand Dollar. Other peers in this grouping have seen considerable weakness in recent months, and I believe the fate of this currency should be no different. So while NZD/USD has been bid up into the North American session on Thursday, I would not expect to see these gains sustained. I am holding onto my short position, and will look to add should the opportunity present. Keep an eye on the S&P as well. A close below 1830 would probably open the door for a decent bout of liquidation. Inability to break down today would only delay the inevitable just a little while longer.

Technical Update - Wednesday, February 26

KRUGER INSIGHTS WEDNESDAY, FEBRUARY 26, 2014

By: Joel Kruger

What A Letdown - It really has been quite the anti-climactic week thus far, with currency markets going nowhere and still locked within consolidation. While the S&P did manage a fresh record high, the price action has done little to influence broader macro flows. And so, we just have to sit back and continue to be patient. I had thought Monday's rally in equities would offer an opportunity to establish a compelling short trade that would ultimately trigger a fresh wave of risk liquidation, but no such luck just yet and it's back to the sideways chop. Interestingly enough, we did see a nice little sell-off in stocks into the North American close on Tuesday, and yet, Asia was happy to buy into the dip, which is a little strange in my view. Normally we don't see such commitment from the Asia session unless there is something really compelling to drive the price action. 

Shekel On The Move - Moving on, the two key markets I am watching have also been relatively quiet, but still point to more risk off trade ahead. USD/JPY looks like it wants to carve out a fresh lower top below 103.00 in favor of a fresh downside extension below 100.75, while EUR/CHF is still having a very hard time finding bids and seems to be slowly gravitating back towards critical support at 1.2165. One market that has been offering some encouraging signs for my outlook has been the USD/ILS market, where we are starting to see some movement in favor of the buck. This week's surprise Bank of Israel rate cut has unquestionably been driving the underperformance in the Shekel, and I am looking for more USD/ILS strength over the coming sessions back towards 3.56. I am also projecting a move to 3.80 in the second quarter of 2014. Finally, GOLD remains in good demand, and has been very comfortable establishing back over the 200-Day SMA. At this point, the outlook is looking more constructive, and a move towards the August $1430 area peak should not be ruled out.

Technical Update - Friday, February 21

KRUGER INSIGHTS FRIDAY, FEBRUARY 21, 2014

By: Joel Kruger

The Luck Variable - Sometimes, it's better to be lucky than good. On Wednesday, I had established a fresh S&P short at 1838 and held on into the close, with the market showing good follow through and looking like it could easily deteriorate further. But given how unwilling this market has been to break down, I decided to exit at 1822 on the Wednesday close with a nice profit that would otherwise have been given back. Yet, my bias is unchanged and despite this latest bounce back over 1840 and the potential for a break to fresh record highs, I do not anticipate these gains will be sustainable, and instead just view the move as one more hurrah before we see a more significant corrective decline. Interestingly enough, if we take a look at the currency market, and we need to take a good look, I don't believe the rally in equities is being confirmed. While it is true that USD/JPY has bounced well back above 102.00 in recent trade, the market is still locked within a consolidation below 103.00 and really hasn't gone anywhere.

Think Again - Furthermore, I never like to look at USD/JPY price action alone as a barometer for risk, and think it is equally important to keep an eye on EUR/CHF. If we look at the price action in EUR/CHF over the past few sessions, the market is still very well offered and looks like it could easily establish back under 1.2200. The downside pressure here should be reflective of uncertainty in the market place and I believe reaffirms the bearish risk asset bias. Finally, we have seen renewed sell interest in the emerging markets this week, and should this continue, I would be looking for the S&P and USD/JPY to roll back over. Overall, the US Dollar is looking like it also wants to reassert, and with the Euro tracking at key resistance, we could very well see an across the board push in the buck's favor (Yen exception). At the moment, my only exposure is short Kiwi from above 0.8300, and I will be looking for another opportunity to sell into this equity rally. I have been traveling on business quite a bit this week and am pretty exhausted, so I am going to step away now and wish everyone a great weekend. Whatever happens today, just do me a favor and make sure you aren't forcing anything. Wait for the market to come to you. I promise it will. If you are patient, it always does.

Technical Update - Thursday, February 20

KRUGER INSIGHTS THURSDAY, FEBRUARY 20, 2014

By: Joel Kruger

A Quick Profit - Although the situation got a little hairy on Wednesday, ultimately, things played out quite nicely. I had highlighted some rumblings in the emerging markets early on, and was looking for this to spillover. I took a short S&P position in anticipation and managed to catch a nice move from 1838 down to 1822. I still think there is a good amount of risk to be priced into the downside, but at the same time, I am already positioned short risk via the New Zealand Dollar (see below), and am happy to take the profits with the equity short. I don't think the troubles in the emerging markets will go away any time soon, and as these markets are forced to contend with the ugly mix of slowing economies and rising inflation, the situation could easily deteriorate further.

Back To The More Familiar - But now for Thursday, my focus is going to shift back to the major currency markets. I think it will be worth paying attention to USD/JPY and EUR/CHF. USD/JPY has been consolidating between 100.75 and 102.75, and if the consolidation is bearish, which I think it is, this would open the door for a fresh downside extension that would project a measured move objective at 98.75. Once we get down into the 98-100 area, I will then start to look for a resumption of the broader uptrend and a fresh buy opportunity. Until then, just sit back and wait. EUR/CHF is the other interesting market worth a look. We recently dropped back under 1.2200, and a break below 1.2165 could open the door for a retest of the very well publicized 1.2000 SNB defense barrier.

Technical Update - Wednesday, February 19

KRUGER INSIGHTS WEDNESDAY, FEBRUARY 19, 2014

By: Joel Kruger

Dont Look Here, Look Over There - Major currencies continue to consolidate this week and there haven't been any glaring moves. However, upon closer glance, there is definitely something brewing and one needs to look no further than the emerging markets. I think this is something that could easily cross back over into the forefront and make waves that rock the developed markets. The Russian Ruble has led the declines in this block of currencies, and the intense weakness here has resulted in fresh record losses for the RUB against the US Dollar and Euro. But all of the emerging markets are under pressure and I am a bit surprised that there hasn't been more talk of this and the potential implications. The escalation of stress on this front is a serious issue and once again highlights the fact that the global economy is still reacting to the shock from the crisis of 2008. Weakness in the emerging markets is a sign of rotation back into lower yielding and safer, developed investment, as these economies start to move towards recovery and paths of tighter monetary policy. It really comes down to narrowing yield differentials right now, and this will be a story that continues to dominate the flow of the market for much of 2014. The expectation of ultra low rates moving higher will attract investors that have been taking advantage of higher yield in more unstable currencies, and will ultimately impose additional layers of stress in the emerging markets. Unfortunately, the emerging market economies will be left holding the bag, unable to cope with this aggressive mass rotation, having to juggle deteriorating local economic prospects, depreciating currency and rising inflation. Quite the ugly mix. A lot of the coordination in the developed economies that we had seen at the start of the crisis will not translate in an EM crisis, with this part of the world incapable of coordinated intervention to stabilize an accelerated deterioration.

The Next Big Wave - So as I look at the markets mid-Wednesday, I see vulnerability in risk correlated assets, and anticipate a spillover into major markets that should weigh on equities and most currencies and benefit the likes of markets more identified with safety, like the US Dollar, Swiss Franc and Yen. We have seen a little bit of this through the Yen already today, but not enough that would turn heads just yet. USD/JPY has been locked in some consolidation in recent trade, but should be at risk for another drop below 100.75 and towards 100.00 over the coming sessions. Again, also pay attention to EUR/CHF and movement in this cross rate below 1.2200. The key level here is 1.2165, and a break below would probably intensify broader risk liquidation themes. I don't see much more upside for EUR/USD at the moment, and still think this market remains well offered on a medium-term basis into the 1.3800 longer-term falling trend-line off of the record 2008 highs. I also see GBP/USD well capped ahead of 1.7000 as this market is stalling yet again by multi-month range resistance that has been defined since 2009. Strategically, I have gone ahead and established a fresh S&P 500 short at 1838.1, as I believe this market has yet to react to this latest rumble in markets that it somehow feels it is immune to. Technically, the Dow has already started to reverse after putting in a bearish close on Tuesday, and this offers some added comfort. I also remain short risk via the currency markets, with my Kiwi exposure. I have been in and out of NZD/USD with overall success in 2014, but still am looking for this market to play catch-up (catch-down) with its cousins. Aussie and Cad have both weakened quite significantly over the past 12 months (Aussie first and more recently Cad), and I expect no different from what should prove to be a lagging Kiwi. I'd like to see a break and close back below NZD/USD 0.8280 to get things going and open the door for what should be an appropriate acceleration of declines.

Technical Update - Tuesday, February 18

KRUGER INSIGHTS TUESDAY, FEBRUARY 18, 2014

By: Joel Kruger

Stone's Throw - Markets are back to to full form today, with US participants returning to action following the long holiday weekend. USD/JPY has been chopping around quite a bit of late, and after coming under some intense pressure at the weekly open, has since regained composure. Still, my short-term bias is for additional weakness, with an expected retest and break of the 100.00 psychological barrier in the sessions ahead. Ultimately, only back over 103.50 would negate this view. Elsewhere, the US equity recovery is near fully complete, with the S&P 500 within a stone's throw away from fresh record highs. Yet I will happily take another shot at fading this rally if the opportunity presents, as I still contend this market to be well overvalued. My only exposure at the moment is a Kiwi short from 0.8316, and I expect NZD/USD to be very well offered on any additional rallies. Look for a break and close back below 0.8300 to confirm this bias and accelerate declines.

A Bit Of A Yawn - Elsewhere, GOLD has been on the move, recently breaking back over the 200-Day SMA for the first time in over a year. While the development is constructive, I wouldn't get too bullish just yet. Daily studies are now overbought, and we would need to see a push back over $1360 to really open the possibility of a bullish shift. As far as the other major currency pairs are concerned, Cable is trading at the top of a multi-month range and could be on the verge of some medium term weakness, while EUR/USD should remain well capped below 1.3800 on a weekly close basis. Only a weekly close back over 1.3800 would give reason for rethink. Overall, nothing too exciting at the moment and not a lot to talk about. I suspect there will be more to talk about on Wednesday. Keep an eye on the S&P and look to see if this market tries to break to a fresh high. Also make sure to keep monitoring EUR/CHF price action. EUR/CHF has proven to be a good barometer for risk sentiment, and any signs of extreme strength or weakness will likely impact the broader markets.

Technical Update - Monday, February 17

KRUGER INSIGHTS MONDAY, FEBRUARY 17, 2014

By: Joel Kruger

Taking A Step Back - Despite a recent bout of broad based USD selling, I am not seeing any real compelling reason to be selling the buck at the moment and would still be looking for strength. Overall, the Greenback's trajectory is constructive on a medium term basis, and the ongoing expectation for a move towards more normalized Fed policy (as slow as it may be), should continue to narrow yield differentials in favor of the buck. I still believe risk assets are overvalued at current levels, and expect US equities to once again roll over up here. Unfortunately, I was forced to exit this latest S&P short from 1820.9, with the market just running too far beyond what I expected. Still, we have had a good run with the S&P in 2014 and no reason to be discouraged here. Just need to stand aside for the moment. Earlier today, there was an amazing counter-trend setup to sell Cable (hope you guys caught my message with that), and I was able to take advantage and get a great entry at 1.6816. 

Waiting On The Yen - I have since exited the position for a small profit, but would not rule out the possibility for deeper setbacks, with the market tracking at multi-month range resistance. My only exposure at the moment is a Kiwi short, and I will be looking to build into this position in the sessions ahead. A break back under 0.8300 should do the trick, while any rallies beyond 0.8400 should be exceptionally well offered. USD/JPY has recovered nicely from earlier lows, but I would be looking for another topside failure here in favor of an eventual break below 100.75 and towards 100.00. There is still room for more of a correction in this major pair before the broader underlying uptrend resumes. Ideally, I would love to have the chance to pick some up between 98-100 over the coming days. I have to run off now. I am speaking at the Traders Expo in New York today. Apologies for keeping today's note a little shorter than normal.

Technical Update - Friday, February 14

KRUGER INSIGHTS FRIDAY, FEBRUARY 14, 2014

By: Joel Kruger

Caught Off Guard - Markets definitely caught me off guard on Thursday. I was looking for good follow through from some initial risk off trade, but as the day progressed, everything played out to the other side. Risk assets were broadly bid, led by a surge in US equities to fresh weekly highs. The move did nothing to help my open positions short S&P and Kiwi, and the price action was somewhat concerning. Overall, the bias from my side has been for medium-term risk off trade, with equity markets and risk correlated currencies expected to underperform in the first half of 2014 as Fed policy reversal is slowly priced in. I had thought that the recovery we had seen on Wednesday was the final straw in an impressive February relief rally for risk assets, before we once again rolled back over, and yet, Thursday was disheartening, with the S&P breaking to fresh monthly highs and threatening a potential retest of the January record peak. I haven't found any fundamental catalyst that would change my view, and if anything, the recent retail sales data out of the US, should do nothing to make anyone want to be buying into risk. This should also do nothing to change the Fed's mandate. So I don't see any motivation to be buying risk on that front either. Perhaps it was the better than expected business inventories? I'm kidding. While the data was positive, this is hardly a market mover of the magnitude seen on Thursday, and again, if anything, stronger data would just reenforce prospects for less accommodative policy. Perhaps it was a squeeze. Right now, this latest rally has left me unsettled, but at the same time, as uncomfortable as the price action is at the moment, there is still no reason to stand aside. In fact, there have been some very encouraging developments this week, that have helped me to feel better about my views.

Shining Light of Pessimism - The shining light (for me - ironic because my views are bearish risk) this week has been the behavior in risk currencies like USD/JPY and EUR/CHF. Despite the rush into equities over the past few days, the normally well correlated USD/JPY and EUR/CHF markets have failed to share the same enthusiasm. In fact, we have actually seen some inverse correlations here, with the major risk currencies moving lower, while equities have pushed higher. USD/JPY looks like it is in the process of carving a lower top below 103.50, ahead of the next major downside extension below 100.75 and towards the psychological barrier at 100.00. Meanwhile, EUR/CHF has been well offered on rallies, and is considering another dip back below 1.2200 and towards its key support at 1.2165. I can't really put a handle on the divergence between currencies and equities, but will follow the lead of the currency market here and discount this latest surge in equity markets. But we have definitely reached a kind of short-term inflection point here, and will need to see this equity rally stall out, to feel better about the medium-term outlook. Friday's are never good days for getting a read on markets in my view, and this point is further emphasized on this Friday, ahead of the long holiday weekend in the US. As far as EUR/USD and GBP/USD are concerned, although both of these markets have been very well bid in recent trade, both markets show a lot of good resistance just ahead. The Euro has still been well offered since the end of December, and there is a good deal of sell interest in the 1.3700's. Cable is also looking overdone at current levels and is near the top of multi-month range resistance that would suggest another topside failure around the corner. I would love to see broad based USD demand and a resurgence in risk off trade on Friday, but we may just have to wait until next Tuesday when markets return to full form. Have a good weekend!

You are all invited to VOTE HERE

FXStreet's Forex Best Awards 2014  

Although we are already into 2014, I'd like to take the time to again thank all of you for your amazing support in 2013. JKonFX has been nominated by FXStreet for the Forex Best Awards in the categories of "Best Buy-Side Analysis Contributor" and "Best Video/Podcast." The ongoing support from this very loyal and growing community is highly appreciated and I am most grateful for my interactions with all of you on a daily basis. FXStreet has sent me the voting ballot to pass along to you all. There are 10 categories and JKonFX has been nominated in category 3 and 5. I have been assured the voting process won't take more than a minute or two and it would be great if our community took the prize :). You are all invited to VOTE HERE  http://svy.mk/1fXmvvq 

Technical Update - Wednesday, February 12

KRUGER INSIGHTS WEDNESDAY, FEBRUARY 12, 2014

By: Joel Kruger

Drats - A frustrating bout of trade for me over the past 24 hours. Equity markets have run a little further than I would have expected and this in turn kept my Kiwi short from moving in the right direction. The short position actually performed quite reasonably considering, with the trade only marginally out of the money into the New York close. But a scorching series of China trade data sent the market back over 0.8350 and I decided to step aside. I have been in and out of this short trade over the past several weeks with overall success and will continue to look for fresh opportunities to sell.

Sooner Than Later - Moving on, despite some bids in USD/JPY on Tuesday, this market is still quite a bit more reserved than equities and has not shared the same enthusiasm. I think this is an important point, and I still expect to see USD/JPY roll back over in favor of fresh weakness towards 100.00. Ultimately, only above 103.50 would negate. For today, the key level I will be watching is S&P 1827. This level represents the 78.6% fib retrace off of the record high to recent low move, and should finally stall the current rally. If and when we get there, I will be looking for some form of a catalyst to once again trigger a fresh bout of risk off trade and broad reversal.

Technical Update - Tuesday, February 11

KRUGER INSIGHTS TUESDAY, FEBRUARY 11, 2014

By: Joel Kruger

I'm An FX Guy And That's Why - While the USD/JPY-US equities correlation still exists, there has definitely been a bit of a departure, and this development has been the most intriguing to me in recent sessions. Really, it isn't only USD/JPY. I should include EUR/CHF as well. While the S&P 500 has raced back over 1800, both USD/JPY and EUR/CHF have been less enthusiastic. Of course, as a currency guy, I always like to think the FX market is the more sensible market, and as such, this should be telling us not to be so excited about the rally in risk assets since Friday. I have also warned that we could see such a bounce in risk markets before the next drop, and though the move in the S&P has been aggressive, it is still well within reason. That being said, we should see this risk rally stall out very soon, and I would be looking for a bearish resumption as early as today or tomorrow. Moving on, I haven't been giving EUR/USD a lot of attention of late, but there is good reason for this. The major pair simply isn't doing anything all that exciting. However, with the market finally reaching a key 78.6% fib retrace off of the recent 1.3740-1.3475 high-low move, we could be on the verge of some topping and a fresh move lower. Elsewhere, GOLD is on the move after breaking out above $1280 and it is worth noting that while the trend is bearish here, this latest break could open upside towards $1320 before the emergence of offers. 

Not So Hot Seat - Finally, I have gone ahead and taken another shot short NZD/USD, with the position established at 0.8294. I continue to see this market in the process of carving a major longer-term top, and believe it has a good deal of catching up to do with its already beaten down commodity cousins. A lot of the direction here will likely be predicated on the broader risk theme, but given the timing of the move, everything seems to be suggesting that we should see this market stall out yet again in the sessions ahead. A lot of focus will undoubtedly be on Fed Chair Yellen's testimony on Tuesday. But I wouldn't be expecting too many surprises here. The markets know where the Fed Chair stands and the groundwork for a very slow and steady policy reversal has already been laid down. Yellen's predecessor did her a big favor after recently adding even more insulation to the already well insulated Fed threshold, after stating that rates would not be going higher until well after unemployment dipped below 6.5%. And if any of you are looking to see if the new Fed Chair succumbs to the pressures of the hot seat, I suspect you will be deeply disappointed as she is extremely poised, and very experienced. Going forward, I think the Fed will continue in the slow policy reversal direction that it has taken, and I anticipate the emerging markets will once again come under renewed pressure as the rotation away from these assets intensifies.

Technical Update - Monday, February 10

KRUGER INSIGHTS MONDAY, FEBRUARY 10, 2014

By: Joel Kruger

Correlation Break - On Friday I cited USD/JPY 102.90 and S&P 1792 as the key levels to watch. I had said I liked selling rallies to those levels in anticipation of bearish resumption. USD/JPY didn't quite get there, but the S&P managed to achieve its objective, with the market trading just shy of 1800 before stalling out. Because the level was hit later in the day, and because I don't like trading on Fridays, I did not establish the short position. Moreover, given the fact that USD/JPY had deviated a bit from price action in equities, with USD/JPY having a harder time rallying towards 102.90 (a level I had though coincided well with S&P 1792), I am also now a little more reserved with equities, and instead will wait to see if USD/JPY can now trade up to test 102.90 before rolling back over. For USD/JPY, so long as this market holds below 103.50, I still see good chance for a lower top and fresh downside extension to challenge 100.00. I don't believe this latest rally in risk is indicative of a bullish resumption and still classify the move as a corrective bounce ahead of fresh risk off trade. 

Back To The Sidelines - The strategy right now should be to stay sidelined and wait to see just how much more this corrective rally in risk will last before relenting. The emerging markets may play a key role in determining the length of this corrective risk rally. The emerging markets have taken quite a big hit in recent weeks, and so the prospects for some relief on this front are perfectly understandable. Technically, these markets have been rallying back a bit, and you could still argue for another few days of upside before the selling continues. And if these markets find more bids over the course of the coming sessions, it is likely to have a favorable influence on markets like USD/JPY and US equities. At the same time, the overall momentum still sides with the bearish camp, and the medium-term outlook for emerging markets is still quite bleak. As per the above, I am just not sure at the moment if the risk off trades resumes as early as today, or if we see a little more recovery in risk assets before the selling resumes. As such, I happily sit on the sidelines and will wait for the next opportunity to present. I have been playing this strategy via NZD/USD, and have been selling the market on rallies over the past several weeks. There is a lot of formidable resistance around 0.8300, so I will be looking to get back in on the short side as soon as the next trade sets up.

KRUGER INSIGHTS FRIDAY, FEBRUARY 07, 2014

By: Joel Kruger

Forget About NFPs - I am not going to focus on todays monthly employment report out of the US, as I really don't believe it will have any influence on the trajectory of the market. While the data could very well inspire a good deal of intraday volatility, this volatility should only be used as an opportunity to take advantage of attractive entry points for new trades. At the moment, what it all comes down to is whether this latest bounce in risk correlated markets is for real or for not. Is the intense bullish risk asset trend of the past few years still well intact, or are we now on the verge of a more significant corrective decline. To answer this question, I think we need to focus on the key markets and take a look at what the charts are telling us. For this exercise, I am going to highlight USD/JPY and the S&P 500. While we have seen a bounce from the weekly lows in both of these markets, if you take a look at the weekly chart, the price action is still showing weekly lower highs and lows. In reality, so long as USD/JPY remains below 103.50 and the S&P holds below 1805, there is still a good deal of risk for deeper setbacks and the formation of lower tops. It is also worth noting that both of these monthly charts are just now rolling over from overbought, and this leaves plenty of room for additional weakness without even close to compromising the longer-term uptrends. If this is true, it also implies additional headwinds for the emerging markets. 

Here Are Your Levels - So as we close out the week, I would be looking for this latest rally in risk assets to stall out very soon, in favor of the next downside extension. Though I try to stay away from making recommendations on Fridays, my recommendation for today would be to wait for an extreme intraday rally in USD/JPY and the S&P, and if, and only if this plays out, look to take a shot and fade the moves. I will even go as far as to give you actual levels I think could be attractive today as fresh sell opportunities. For USD/JPY I would look to sell a rally to 102.90, and for the S&P, I would look to sell a rally to 1792. If these levels are hit on Friday, I think you should feel good about taking a shot at some shorts in anticipation of a bearish resumption. Don't trade both markets. Just pick whichever you are more comfortable with, and go with it. I still think USD/JPY tests 100.00 and the S&P visits 1700 in the sessions ahead. Should we manage a break and daily close back over USD/JPY 103.50 and S&P 1805, I will reassess. At the time of writing this report, I only have one open position, short NZD/USD from 0.8276 (open position tracker below). I took a little profit and the stop is now at cost on the remaining portion. I really like this market lower over the medium-term and believe we will soon gravitate back into the 0.7700 area. Have a great weekend!

Technical Update - Friday, February 7