Thanks to everyone who came out for the ICE Zone webcast last Wednesday. Each week they will have an interesting topic and guest and it’s all available on www.dtitrader.com.
I just spend the whole weekend moving; have no DirecTV or high speed internet until Monday afternoon. So here’s my shortened take on the action. The dollar is in an uptrend and should remain so until it gets to the mid 80’s, whenever that is. Last week we had a nice rebound to the top of the channel. It was one of those forks in the road where the price action play its hand. To use a poker analogy, it still carries a straight or better. We’ve had divergences in the banks. The better regionals are still okay but the big Wall Street banks are in trouble. I’m sure you saw the latest fiasco with the guys at Goldman. Here’s the bottom line, they were prepped by attorneys and couldn’t say anything. But so was Mark McGuire. You draw your own implications.
You know my take, nothing good happens to the market when banks are leading to the downside. The dollar started decently on Sunday night by holding support. I think the near term pattern is sideways to up. That means I still think the inverse relationship with equities is in force. That means I think it will be a sideways to down week for the stock market.
But I want to focus your attention on the long term EUR/USD chart. It has lower potential. You can see two scenarios, a bearish and a super bearish scenario. We aren’t even going to discuss the super bearish because that would be disastrous. But the mildly bearish scenario can take prices down to the low 120’s. You can blue lines and brown lines.
Look at the brown mid line on this monthly chart. That’s the mildly bearish scenario. Now you know why we aren’t talking about blue lines. It’s firmly in the channel and these channels are drawn to an 80% probability. It is what it is.
We go from monthly to hourly with this Dollar chart and you can see how the parallel warning lines caught the high. With a Euro like that, why would anyone think the Dollar should behave differently?
My full column will resume next week.