Saturday, April 16, 2011

Where is the market going

Short answer: We are still stuck in a range, and until we break up and out we are still in the chop zone, but...

Long version: ... we are at a bit of a decision point. Let's start with the S&P chart (SPY)

2 things, the obvious inverse head and shoulders pattern and the moving averages. I don't actively seek out h&s's, and the market could flick this pattern off like dandruff, but everybody must be talking about it (not been following twitter or doing much blog reading as of late). It makes for a bullish scenario. Also, the market managed to get above the 2 MA's, the 20 and 50, so this should act as support. We lose these averages on Monday and I am immediately cautious.

Since I am now spinning silver dubs on my Datsun B210, I take great interest in what the dollar is up to, as monetary policy drives the markets. I use the UUP for a quick read (check the vol on UDN friday, probably nothing, but), and then the EURO as my main benchmark. Why the Euro? In my mind it is the most 'like' comparison. Pound, country too small; Yen, govs are fighting to break it (trade on); Canadia, too solvent and Celine Dion; etc. Right now the charts are coiled up, with a move coming. More weakness will likely send the markets up and the metals with it. Which way? Ultimately, USD down, markets up, but I am only concerned with my next work week, and it could go either way. The dollar is certainly due to bounce, but it also looks like it is about to fail in a big way, and maybe now is the time, driving a fat rally in the markets, and sending metals parabolic. I give this a 20% chance of happening this month, 50% chance of happening this year. I'll trade it when I see it.

How else to figure what the dollar is going to do, and thus the market? I almost never trade on Fibs, but no matter where I took a shot for the Euro/USD, things really lined up. Here is one shot, check it:

So if the Euro breaks up here, off we go to the races, especially in PM's. If SLV goes to $100 my wife says I can bring over a Russian 'exchange student' to polish my dubs daily. She'll be at the spa getting a rubdown from 'Sergie'.

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