Liquidations of $USDJPY correlate with major bottoms in $SPX500

Liquidations of $USDJPY correlate nicely with major bottoms in $SPX500.

I put this chart together to make a point to our Key Hidden Levels chat room this morning. I had never made this chart before but I knew it would look like this just from watching markets for 30+ years.

I highlighted a handful of these situations from the last two years here for you to review.

Really take note of how the bottoms in $USDJPY happen right at the same time as bottoms in the $SPX500 ($SPY).

I'm sure you can do the same going back further.

Here is some market commentary that I normally don't get into, but given the recent action might be worth sharing:

Q: What am I looking for here today (Thursday May 18th, 2017) given the drop on Wednesday (yesterday) in equity markets?
A: I'm going to look for a loss of downside momentum to see how far down the sellers can take the market. The buyers are right here at this level, but given the news, they may let prices go lower to get a better deal on new purchases. The shorts are eager to make some money and will likely be pretty aggressive in adding to their new momentum positions as the market is in a weak position. So, being respectful of everyone as a market participant and trying to figure out which side of the market has a stronger hand, it would certainly seem irresponsible (as a portfolio manager of a major fund) to get aggressive and step in and start buying aggressively, so more likely the response to lower prices this time is to accumulate slowly on the decline.

Tim 8:27AM S&P500 Futures -9.00 @ 2348.50

So, net-net, I am looking for a bottom here in the S&P500. I am looking for VIX to stop going up first. Then I will use the peak in VIX as my stop.

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Here's a chart of the two markets going back two more years.

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USDJPY fell today and broke support, which should be alerting you to signs of liquidations in stocks. Keep a close eye for another "signal".

6/6/2017 9:52PM EST

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Did you see it happen this time? First a sell-off in the USDJPY and then set-up this rally today? Keep a note on the low $VIX*$SKEW charts that I have published.

6/9/2017 1:12PM EST

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Another wave of USDJPY selling into the low yesterday on June 14th was a concern for lower equity prices. Then the reversal back out today on the 15th set-up the rebound from the gap-down to today's low in the S&P500.

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It still seems to be useful to some degree.