The bears feel cheated, this was supposed to be the move that toppled equities and allowed the shorts to take control. The US dollar has been marching steadily upwards, and instead of bearish chaos, US equity markets have remained neutral to bullish. There are so many events that are culminating into the craziest confluence of technical events I have ever seen in the markets. Let’s take a look
I was reading the T3Live Community blog this morning when I came across an article entitled “Euro Falling Into Support,” which mentioned a strong move in the Euro could spur a bullish breakout in US equities. From the Dubai debt news to the Greek debt problems, the Euro has been getting spanked over the past couple of weeks. However, the bullish move in the dollar and the bearish move in the Euro appear to be losing steam.
Concurrent to the spike in the US dollar / fall in the Euro, gold has fallen off a major cliff, losing over $140 (over 10%) lickety-split. Once again though, gold is looking to get its’ legs underneath it at current levels.
US equity markets have been something else entirely. From a technical standpoint, the forces keeping the market afloat are totally opaque. Every bear I know thought a rise in the dollar was going to be their holy grail, yet the markets bullishness has shrugged off this entire move. Could the hedge funds be keeping the markets afloat, thinking this spike in the dollar is only temporary? who knows??!?!!?
One thing I do know is this:
- US equity markets are coiling in an incredibly tight spring, just below major resistance in the form of a downtrend line, and the 50% fibonacci retracement level.
- The euro is stabilizing at support
- The bullish USD move is running out of steam at resistance
- Gold is finding support
This entire confluence of events combined with the coiling pattern of the equity markets can only mean one thing. Much higher volatility. I’m not going to bother predicting which direction this thing is going to breakout. What I will predict is, regardless of direction, the move is going to be fast and furious. There is lots of money to be made over the next couple of months, and all you have to do is wait for the market to tell you which direction to go!
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