Tuesday, October 11, 2011

Did Friday really screw up the entire daily structure?

Friday was not a day I wish to remember… The weakness in the Dollar certainly ruined my day and at the same time put the cat amongst the pigeons. It has left the daily structures hanging mid way between bullish & bearish scenarios like a piece of rotten meat to be plucked and gnawed by a swarm flies…

It has also left the U.S. indices in the same situation, my final critical support at 1,074.77 in the S&P adding to the tease with a deep correction higher that could easily break key resistances that would begin to raise the bullish flag again. However, quite how that would leave the apparent bearish break lower in the Asian indices also contributes to the overall confusion.

I don’t want to react too quickly at this point. Whichever direction these markets decide to choose the impact would appear, at this early stage, to potentially be quite dramatic. A new low in the Dollar maybe? By that I mean above 1.4940 EUR, above 1.7042 GBP and below 0.7066 CHF? Equally this would suggest a return to the May highs in the U.S. equities. I really don’t want to make that call just yet but I find it hard to see a scenario that would lead to corrections only.

At this point I’d rather see how the next move develops. I do feel that we’re due a correction to the Dollar losses seen and would like to see just where these stall… or not… I can still generate Dollar bullish scenarios also but equally I’d like these to provide some firmer evidence for justifying the upside. I think one issue to watch is the U.S equities that ideally should have been finding highs last Friday. If so then it would appear that we’ll need some sharp Dollar gains to knock the equity markets back on the downside.

There’s a fine line… Be aware of the impact of the alternatives…

Have a profitable week
Ian Copsey


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