What that means at the top is intense fear coming into the market can bring on not a long term top but a selling event more like what we had in with the Asian contagion. We eventually got through it but it caused extreme disruption to the complete financial system. Given the fact we are so close to the 610 day window, we do run the risk of an extreme short term event.
I’m sitting here on Sunday night watching these events with the same kind of disbelief that many who understand how financial markets work and know there has to be some kind of reaction because market participants have been working under the assumption that a deal was to be had. There still might be, but now the risk of a downgrade is much higher and that would likely bring on another selling wave. Why? The way the cycles are set up here, people may be looking for any excuse to sell and Washington is handing it over on a silver platter.
So while we are talking about Silver platters, Gold lifted right through the natural resistance level above 1610 and all the way up to 1620 in one bold gulp. Silver just busted through important resistance that kept it down since May. We are also thinking this is just the kind of event we’ve been pointing to on the Dollar for the past 6 months as the 121 month square out relationship winds down as we come to the close of July.
So as I sit here and watch this on Sunday night, I have to separate myself from the news event and think about what it really means in terms of market psychology. The bottom line here is these markets are not topping on euphoria, they are topping on fear which is an entirely different animal. That is the silver lining in the cloud. We are starting at fear and if it escalates, it would mean this should be a short but intense event.
For those who don’t understand how financial markets work and think a default is better, this is finance 101; hopefully the lesson is absorbed before it is too late.
Click chart to enlarge
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.