Disclaimer: The opinions expressed in this article are the personal views of the author and do not constitute investment advice.
The fact that the EUR didn’t benefit much from this weeks rally in equities suggests weakness to me. The last time S&P 500 saw a daily close above 1,350 the pair was knocking on 1.4800′s door. now almost 500 pips down at 1.4370 we have a bullish hammer candle in extremely volatile markets. So the weekly candle could be more important and clearly, if the daily chop is going to be so severe, that could be an indication that a top is forming. For now, if the market is willing to build on yesterday’s turnaround ahead of the NFP (and why not, after all NFP day is all about volatility and absurd moves) then the next obstacle is at the falling daily trendline at 1.4560 – coincidentally also the top of the daily Bollinger Band. S&P 500 could be capped by the rising and once broken daily trendline, now at 1,383, with Bollinger Bands expanding both ways - so could exceed this year’s high or form at least a double top. RSI divergence can be seen so I cautiously expect a failure near this trendline.
What is also on my mind that the rally that we saw over the last year in the majors against the USD still didn’t have at least a minimum Fibonacci retracement – not to mention it’s been a monster cycle spanning 13 months since 8 June 2010. So how come we still weren’t able to challenge 1.3750 -, the 0.382 Fibo level? Apparently it’s China, right? They are keeping the EUR on life support, and reach in their deep pocket every time the market wants to sell. But hang on….China is also part of the market! AND a very big part of it. And if they are not happy to own US debt anymore, well, they will hold EU debt if so they wish….
So it seems like even if the USD finally gets some reprieve and manages to bounce, how long that cycle can last? Somehow I doubt it will be another 13 month cycle…more like 3? Even the old traders mantra :”sell in May and go away….” was a bummer this year.
Today’s close could be crucial if we are going to see a trend change at all. The market has received a shot in the arm with the surprisingly high ADP jobs number – however I think the ADP data is quite notorious for being inaccurate or a poor indicator for the real NFP number so we might see some surprises tonight.
On another note: I’ve started this blog about 18 months ago to assist myself in the quest for the ONE HOUR WORK WEEK as I honestly believe I work (and trade) too much. I think I am finally getting close to identifying the ONE HOUR per week that I want to invest in my trading. More about this in the following posts.
