Thursday, February 4, 2010

EURUSD Rare double fib

A chart speaks a thousand words. As mentioned in previous post I took some long positions today. EURUSD made a significant low earlier in the day that was not broken even as the rest of the markets moved lower. Double fib targets are quite rare and once those hit at least one of them should provide a boundary. So we have hit the 50% retracement of our lows in the past 18 some months and also the 38% level in our 2 year chart.

Now what does this mean for the market. In my last larger post I was putting up the scenario for 1065 ( which was hit today even with a DOW test at 10K. This is significant. We also hit our previous maximum pull back range of 85 points ( Today we hit a total of 88 points pull back of our highs - right at the edge.

So we have a great low risk entry here on the long side. This is either the last chance for this market to finish a cyclical bull cycle into summer or the top is in. Looking at the daily charts - they are all pointing down. Weekly is about to give our final confirmation that things have changed. On the monthly chart we have to be a bit more patient but even a move towards 1118 this month confirms a top. So either way, we are in good shape.

So in summary - we are on the verge of deciding the direction for the next few months. EURUSD points to a move higher - SPX is 51% on a move lower. Currencies and markets can decouple for extended time frames so do not expect the dollar to lead this move. We have been talking about the dollar frequently now for the past year and I have always been saying - "dollar does, so follows SPX" - for the next few weeks, possibly even months that relationship will show more and more disconnects and will most likely not be useful as any type of indicator.


  1. it seems I am scared to trade. Just woke up to see EURUSD making a new low. I got stopped out of most of the position and have one last chunk left (33% of original as I had a total of 3 stops that got hit while I was sleeping away).

    Due to this EURUSD action I also ended up closing my futures long here at 1064.75. Small loss but rather take that small loss then get hit on my wide stop.

    I already know this is going to be one of those trades where hindsight teaches me another lesson but we still have a potential to continue lower from here with jobs number. Just like fed days I try to stay out of those types of trades that have a big swing due to news releases.

  2. just got back - wow lol. Got stopped out of all of EURUSD just to see it back above my stop price (whats the saying "no stop is low enough")

    At least I got lucky on closing out the ES position at the high (off by one tick) as I would have gotten stopped.

    I expect this to news to get bought strong at cash hours open so I would not be surprised to recover more then half of what we lost yesterday in the first 2 hours, maybe even sooner. Watch for strong buy volume at 9:35-9:39 - should see some 2+ million spy buy bars.

  3. well what did we have ... extremely strong sell volume in that time spot. That paves the way for potentially more selling here into weekend.

  4. market is fighting here quite strong on big selling and buying. Give it 3-4 more minutes and we have direction for the next 2 hrs.