In the near term, the Greenback has more or less accomplished what I’ve been anticipating. Institutional support has whittled away to the point where the pattern is currently retesting the emotional low part of the bottom back in May. The week concluded with an excellent Gann reading at the low and the Greenback should make an attempt to bounce this week. That could provide the equity markets with turbulence. Now that we’ve had the big rally, for this market to survive we need to see a lack of selling come in. That was the kind of day we had on Friday.
We’ll also be watching China which held an important area of support with some good readings as well. Finally, other areas of interest are the banks which have been improving. While I’m on the banks, people were complaining the market was overbought before the big squeeze. How could it be overbought as the banks were barely coming off their lows? We are also concerned about Apple computer which has come off the support level we were watching which enabled the NQ and NDX to get near the top of the range. I’m still not sold Apple has what it takes to put together a big leg right now.
At the end of the day, the big short squeeze produced a near term euphoric condition. But how can we have a long term top just after such a squeeze? That’s what people are missing. The VIX dropped big last week but I don’t need to look at a VIX to know things are euphoric when my favorite business channel plays Zorba the Greek all day long. The condition needs to be worked off and in our work it either drops big or makes up for it by wasting a lot of time. The story of the 2011 bear market has not been one of a humongous drop but it certainly has spent months going sideways. This was the best October on record. The time for disasters and crashes has passed. While I still look for the euphoric condition to be worked off this week we are now only weeks away from the Santa Claus rally season. The higher probability is we won’t see another month like October, more than likely backing and filling. It’s also very likely we’ve seen the lows for the year as well.
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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.