With the focus still on the 240 minute chart we’ve been examing all week, let’s look at the follow through from the momentum play.  So to sum up, there was initially swing short opportunity that stopped out as the market cycle transitioned to a three o’clock making the strategy of shorting bounces (swing trading) no longer valid.  Then the focus shifted to the momentum (momo) play of yesterday which did break to the upside and was confirmed by the positive MACD Histogram.  The follow through went to 97.24 and that means that the 97.00 level (major psychological number) was hit and had to have been seen as potential profit targets.  For that matter so could have 96.00.

Now the market cycle has shifted again as the momentum of the breakout has formed an uptrend.  Remember this analysis is specific to this time frame.  If I were — for example — looking at the 15 minute chart, you would see it’s in a downtrending market cycle.  If fact it’s the weakness on the 15 minute chart that “builds” the pullback or correction on the 240.

We’re back in swing mode and curently the pullback to the Wave is a swing entry long which initially triggered at 95.93.  I’m not happy that prices dipped below the “00″ of 96.00 nor that the entry was below it because now 96.00 is a obstacle to the upside.

The easiest (and best!) way to handle this entry scenario is to wait for prices to pop back over the “00″ so even though the pullback triggers the correction and the entry, it would be best to watch and wait for prices to rally back over 96.00, preferably, 96.05 and buy it then.

If not, it’s Friday, so leave this one alone.  Another market cycle will come  along and with it another set up…

Yes I’m having some fun but I don’t want to abandon our discussion here because the 240 minute USD/JPY did indeed transition to a sideways market cycle for a momentum set up and broke out.

Here’s the momo set up after the Wave finished leveling out to a sideways three o’clock angle.

I circled the MACD Histogram which is my confirmation tools for the breakout which is also circled.  Price broke up through the resistance of the downtrend line triggering the momo.

The swing short from the previous downtrend got stopped out as prices pierced the top line of the Wave.  The Wave then proceeded to flatten and trigger the momo.  NOW we have a uptrending market cycle and I’m magaing my momo and looking for corrections to play the swings once again…only now they’re swing buys in the uptrend.

part two of the forex market pulse - futures connection and how to incorporate it into your trading.

part one of the forex market pulse - futures connection and how to incorporate it into your trading.

I want to do some continuing analysis and follow up to my post of the 22nd about the swing on the 240 minute USD/JPY.

The trade did confirm as prices bounced (corrected) into the bottom line of my Wave…the 34ema low. You can see that post here.

So the what’s happened since then?

The swing is still but…the market cycle has shifted to more of a sideways market cycle.  So here’s what to consider:

Is the trend still down?  NO

Is the reason for the swing short (Wave resistance) still in place?  YES

Is there another trade set up to begin considering?  YES, a MOMO

The Dow is up 195 points as the bonds are getting ready to close but the USD/JPY did not trend up higher indicating that there is much risk apprtite.  In fact gold did not sell off much indiacting risk appetite and the U.S. Dollar has been holding onto 80.00 support.  If I were a betting kinda gal (I’m not!) I would say that this rally is not supported by the cast of characters I would want to see if the rally were going to hold onto its gains tomorrow.

Good new for the Dow has been sending the dollar lower and so with that logic today’s better-than-expected Consumer Confidence number would have sent the dollar through 80.00?

So I am still happy with the swing since even with an up day on the Dow, resistance is holding in the dollar-yen.  BUT I am keeping my eye on a potential momo (breaktout/breakdown) set up all the same.

The Dow sold off slightly as panic wasn’t necessarily the mood of the street…but neither was buying going into the long weekend.  It’s no surprise that with the Memorial Day weekend investors really didn’t want to take positions in this environment.  In the meanwhile the USD/JPY found some buyers as the dollar gained of the ten…strange enough as the dollar broke the 80.00 decade level for a short while this afternoon.  With the overall trend of the dollar still down, there is a nice swing set up off the bottom line of the Wave — resistance at 94.81 — setting up just below the 95.00 major psychologicla level.

I love overlaying charts because it offers me a very impactful view of inter and intra market correlations.

Now let me digress a moment because as an English major I have a bone to pick with the whole “intra” / “inter” market word use. The way I was taught is that “intra” is to mean within while “inter” is “among” or “between”.  So let’s take this one step further…”intramarket” analysis would to be compare pairs within the forex market while “intermarket” would mean comparing say the USD/JPY to the Dow Jones; two different markets or groups.  Still with me?

I do both types of analysis.  I will compare the EUR/USD support and resistance levels to the USD/CHF (intramarket) and the crude oil market to the USD/CAD (intermarket).

Today the the overlays that have caught my eye involve the USD/JPY, the Dow, and the $VIX:

This chart shows the USD/JPY and the $VIX.   So as the U.S. Dollar is losing ground versus the Japanese Yen, market volatility is falling.  The chart is a daily so you can get an idea of the past correlation which is typically inverse but is moving together the past four to six weeks!

The chart above of the USD/JPY and the Dow Jone Industrial Average shows the risk appetite surging as the Dow rallies but the “pasue” button has definitely been hit as the USD/JPY has gone into distribution as equities wait for the next reaction from traders and investors.  I think is also merits mentioning that the USD/JPY has dipped back down below the 200SMA onace again.  The correlation between the Dow and dollar-yen remains intact.

Yup, I shared my set up…bared my hear and soul…and the fiber followed the 15 min. swing instead of the 240.

It happens.

Here’s a video walking you through the aftermath and (more importantly!) what you can learn.  Even the “pros” can get it wrong.

This morning I was watching a breakout on the 15 and 30 minute charts and was not really happy with the breakout set ups I saw…the 15 minute’s chart was ok:  decent flat Wave, good downtrend line break.  It was all a moot point because the trigger happened before I was awake so I saw the follow through as it rallied toward the “00″ of 1.3500.

Sometime that’s the way it goes…a 24 hour markets means you’re going to miss some trade!  No worries though because the set up I was after was what the breakout was taking prices to…a swing short off the 3500 to 3520 levels on the 60 and 240 minute charts.

The daily pivot at .3533 is likely to be helpful as a ceiling if prices get up beyond the 3520 minor psychological level.  In the meanwhile, the bigger battle will be the 3500 as that level is still holding up as support.

I have a video I’ll share here in a bit that walks you through the set ups I’ve described here.