Sobering possibilities for yen - and possibly equities - bulls

Folks, I posted some charts at UBTNB3 blogspot (see links, and feed, at right) - these include a chart of the Yen. Something had been bugging me about the chart, and indeed, that nice spike up recently went right to the .618 retracement to its late 2008/early 2009 highs. Why is this a concern for the bullish yen case? Because the .618 retrace is a classic retrace for a wave 2 in Elliott Wave terms ... implying that the yen could be set up for a wave 3 down. Do I think that will happen? Well, not necessarily at all ... actually I've been thinking there's a very good case to think that the yen will march higher to re-test and exceed the 111.49 pivot level I've described for it some months ago (use the "Yen" label for prior posts on this topic). But this is information that clues you in - it might not be a bad idea to be short the yen - or just stand aside on it - and wait to see if it once again moves above its recent high (look at the $XJY chart I posted at UBTNB3) before buying the yen again (such as with the exchange-traded fund, FXY). If it falls under 101 again, then being short the yen is more likely the correct position.

What does this mean for equities markets? Not sure I'm the right person to call it, because we can make arguments either way. If the yen falls and the dollar strengthens, that could be bad for equities markets. On the other hand, there have been times when it's a strong yen that's correlated with bearish equities conditions. Perhaps it just depends on where the carry trade is flowing.

But there are other reasons to remain cautious on equities markets. Although the VIX fell under my 24.78 level again and didn't close above that on Friday, it's still at relatively low levels around this .786 retrace to its 2007 lows. Looks like the folks at Schaeffer's may be seeing some similar cautionary flags (wonder if perhaps the SPX might not make it all the way to the 961 level after all?? - can't guarantee it's a lock). Readers know I always recommend reading their Monday Morning Outlook, and recently they've started issuing it over the weekends. So if you're not already on their email list, then just use this link to see what they're talking about: Monday Morning Outlook: Market Could Be Due for Breather this Week; Bulls enjoyed a 7 percent mid-July joy ride (at Schaeffer's Research, this time by by Ryan Detrick, 7/18/2009). Ryan Detrick, Senior Technical Strategist, examines support and resistance levels for the S&P 500 Index (SPX), a pair of head-and-shoulders patterns for the index, and the impact of the first week in a five-week expiration cycle. Then, Senior Quantitative Analyst Rocky White takes a closer look at the CBOE Market Volatility Index (VIX), the growing spread between near-term and long-term VIX futures, the rising preference for VIX call options, and the potential indications for the overall market. We wrap up with a look at some key economic and earnings reports slated for release this week.

Bill Luby at VIX and More, as well as Jason Goepfert at SentimenTrader, have also been talking about the growing spread between near and longer-term VIX futures. Those websites are always included in the "other sites of interest" at the right side of the page here.) (For Jason's posts, you need to go to SentimenTrader, and then just under the sentiment gauge at the right side of their page, look for the SentimenTrader blog where Jason posts.)

This will sound funny maybe, but after I get the ChartsEdge forecasts posted here, I'll be taking some time off as we have guests coming to enjoy a beautiful Sunday on the water! I wanted to start putting together a "KI$$" concept with a simple listing of things we're watching (I don't know that I can say recommending?!) for simple/small cash portfolios.
Keeping
It
Simple for
Small/caSh/Slow
accounts.
= KISS, or KI$$ - I know many with fast-moving accounts with margin, with appropriately fast-moving accounts, also like to see what we're seeing and measuring here. But if you are working with a simple, small, cash, or slow-moving account - either a retirement account, or just something you noodle around with on the weekends - that's a niche that not so many people pay enough attention to. I know it means taking on a new project here, so I'm going to be very cautious with it. And - if at any time you are not seeing an update here on one of the items in it, either because I'm too busy to pick up on something or any other reason, and it isn't working for you, it's losing money, then you have to take responsibility to exit that, don't try to rely on me as saying I told you to buy, I told you to sell.

This may end up being not such a great idea - will see.....! And, there's no way we will catch every good idea - far from it, there will be plenty of good ideas that we'll miss. Time is a very precious commodity, and we just cannot track everything. In fact, we really just try to keep up with the biggest themes, which is certainly enough work in itself!

For now, here's the current approach we're thinking for KI$$ accounts:
SWHC - long; we starting posting in favor of it under $5, but still liking it as a very long-term position.
FXY - on the sidelines again, after the recent pop and weakness from that Fib level. If it starting going above 108 again, then long. If under 101, then short (will have to see if there's a good ETF for that) or otherwise ignore it.
TLT - enter long again if it moves above the high of prior day. Exit and sell it, if it makes a new low.
SPY and QQQQ - on hold at the moment - expect to have more comments on this later ... definitely have some ideas, but too busy right now to go into detail. Not wading in bullish OR bearish at this moment.
Gold - still short, will exit this position if it goes above recent swing highs
Dollar - evaluating UUP, leaving room if it demonstrates that it's ready to move up again
Euro - inverse of the dollar
Oil - closed the short (via ETF's) at that .382 retrace support it hit; resume short if it moves under that, or go long if $WTIC exceeds $75; currently, inbetween these levels is neutral and on the sidelines
Natural Gas - keeping UNG, so long as it remains above $12.20

For this new KI$$ idea, we've gotta start small especially as this is a new approach, and as I said, I have almost no time today! But, will "see you later" in the late afternoon/evening!