What is most interesting about last week is the fact banks started to participate in the move off the high but held the line on Friday. They literally HELD THE LINE. It is the banks holding the line which gives one hope we are not going to see the worst case scenario in the Greenback. IF the currency goes over the cliff I don’t see how it would be possible for banks stocks to go higher. But sometimes storms start slowly and develop into monsters. A hurricane was once a tropical depression. But you can usually tell if conditions for the perfect storm are setting up. We have a couple of elements in place but an incomplete picture. I’ll tell you the same thing I did 12 months ago. Nothing seriously bad happens to this market unless banks are leading to the downside.
There’s one other problem we haven’t discussed. It’s the bond market which has consolidated sideways for a whole month. At this stage of the game, the longer it consolidates, the greater the opportunity it’s going to have to drop in price and it should test the far end of a downward sloping pitchfork line in exactly a week. That brings up the state visit of the Chinese last week. Sentiment was interesting to say the least as our media and Congress maintained a high level of hostility pointed at the Chinese President. It seems we are having a hard time understanding our new role as debtor to the developing new superpower of the world. We have a society open to debate, that’s where our strength as a democracy comes from. However, when we don’t show a united front to our largest competitor that can’t be viewed as a good thing. The way it looks to me right now, if the Chinese or the Treasury doesn’t start buying our bonds pretty soon that is another component that will add to the storm.
With the divergences the way they are, we could be all over the map this week.
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Jeff Greenblatt is the author of Breakthrough Strategies For Predicting Any Market, editor of the Fibonacci Forecaster, director of Lucas Wave International, LLC. and a private trader for the past eight years.
Lucas Wave International (https://www.lucaswaveinternational.com) provides forecasts of financial markets via the Fibonacci Forecaster and other reports. The company provides coaching/seminars to teach traders around the world about this cutting edge methodology.