Note: This Interim Update is being written during market hours on Wednesday. I will be completely away from the markets until next Tursday. Here is what I see as I prepare to leave town.

In the last Update I highlighted the importance of the period since Jan 20 relative to the resolution or negation of the 11-month continuation H&S pattern on the daily continuation chart (roll at expiration). Refer to the last Update for a view of the massive H&S pattern. The daily chart (Apr) has completed a small 3-week H&S pattern. This pattern may provide confirmation of the 11-month H&S formation.

This market has reached more than 70% of the expected move to the profit target at .7996. The 3-day trailing stop rule (3DTSR) is now in force. Once a market reaches the 70% mark my mind immediately turns to the defensive. Notice that the market today penetrated the lower boundary of a steep channel (see 4-hour chart). BTW, the only intraday charts that have any value to me are the 4-hour and 6-hour graphs. Traders must be aware that the smaller the time scale, the greater the morphology. This is a trade that was never really put into trouble on a closing price basis. When we are dealing with a significant pattern that does not put the ideal entry level into jeapardy, the general rule is that periods of uncertainty will be resolved in the direction of the dominant trend. Thus, while I may lighten up on my position, I will retain at least a residual long position.

The H&S bottom has been completed on the weekly and daily graphs. In my opinion this will be a very decisive breakout if the strength can hold up through Friday’s close. With a NIRP by the BOJ, the only means available for the Japanese government to stabilize the Yen would be to massively intervene in their equities market. Should the Japanese equity market stabilize, the Yen’s advance might also be moderated.

You should all be aware of my observations on the monthly graph (not shown). The daily graph has formed a possible 2+ week flag. The market has held the lower boundary of this flag for three days. I like when a market pauses at a boundary line because it provides the opportunity to fine tune an entry.

Gold has met its upside target — the first example of a bullish daily chart on Gold meeting its target since Sep 2012. Gold is pushing up against the upper boundary of a falling wedge. This boundary could provide resistance. Silver has not met its upside target, and may not if Gold stalls at current levels.

A Factor member sent me a very interesting 60-year graph on USDD/CNH. As shown below, it is very conceivable that the USD/CNH could reach 20 to 1 or even 30 to 1.

I really like the chart construction going on in this pair. The weekly chart displays a possible H&S failure wherein the failure would occur by the completion of a symmetrical triangle. This trade can be executed in the spot market or in the futures market on a one-contract to one-contract basis.

I remain a long-term bull in this market, but it will be interesting to see if the 95.75 to 96.00 level will hold.

I really believe the U.S. stock indexes are in a genuine bear market. The S&P weekly closing price chart has a target of at least 1710. The Russell has a minimum target of 871.

If it is vital for you to reach me in the next few days please email Jolleen.factorco@gmail.com

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plb