SP500 --- BUND --- USDJPY

There is a lot to comment on after yesterday's moves : - Starting with the SP500; the solid break out through the bottom of the Rising Wedge has set up some interesting scenarios, though in my opinion nothing is resolved yet. The price action in the past couple of days and even weeks, has not yet broken the 'Lower highs and lows' trend from late April nor the 'Higher lows and highs' from early July.  - It is worthwhile noting that this pattern is not consistent with other US equity markets; the New York composite broke both the prior high and the prior low, the Dow broke the prior high and remains above the prior low, whilst the opposite is the case for the Russell 2000, and in addition the SP500 futures have broken this low with the overnight move. - So it may even be a moot point. -  I am re-posting the 'Clash of the Wedges' chart, which I have been flogging this past couple of weeks. Yesterday's breakdown was clearly a bearish development, though my hunch is that it is corrective in nature, thus I want to see how follow-up price action over a few days transpires before I have a stronger opinion on this. - Looking for clues elsewhere does not really help me at this stage.  I believe 10 year yields in the US, which I covered yesterday, are due for further lows in coming weeks and months. This should be a poor reflection of the US economy and hence should not be bullish for equities, yet it is possible that equities could take heart from a low rate environment, particularly if the Fed are seen to be helping their cause. The strength of the JPY, which I touch on below, is a sign that people are continuing to flee risk, and should argue for equity weakness, though it may also reflect Japan's own particular problems and may be less of an indicator than in the recent past.

Moving onto the Bund. - Last week I made reference to the Symmetrical Triangle, the original posting can be seen here. Since then the Bund has broken sharply higher in almost a straight line. I think further gains remains on the cards towards the triangle target at 132.20 (Current level 131.10), and probably higher. The Bund hit a first target @ 131.20 yesterday, this was measured off a Broadening Triangle Pattern which was internal within the bigger triangle. - I would however caution, that some corrective activity is probable before making the targets in the 132s. The area around the 131.20 target may act as temporary resistance for the Bund.  Whilst I do not see any immediate sign of divergences on the shorter-term charts on the Bund, if the Bund starts struggling in the vicinity of the 131.20 area over coming days, then there may be a risk of a correction before eventually shooting for at least 132.20.  If that correction did occur it would probably be short but sharp, possibly taking the bund briefly back to the high 129s. -- The chart of the Bund is posted below:

Looking at the USDJPY:  Firstly, let me say that I don't like trying to predict the USDJPY. Over many years this currency pair has made a good job of making me look and feel extremely stupid. Nonetheless I feel there are some matters to watch on the USDJPY right now. The USDJPY remains within a strong downtrend, and the downtrend is at present the dominant force. Yesterday the USDJPY fx pair made its lowest level intraday and daily closing since 1995. - This is significant as the JPY has been a source of safety from risk in recent years, and continued JPY strength could be a strong sign of further flight from risk. - One observation yesterday however was that the price action produced a small 'Hammer Candle', these are potential reversal candles. In addition daily momentum in recent weeks has been diverging higher from the lower price trend. There is also a clear 'Falling Wedge' pattern since Mid-May, which could be a sign that this may be readying for a reversal. I merely point these out as something to keep an eye on, whilst bearing in mind that the major trend is lower. The daily chart is posted below: