Market remains range bound, but I now think there is short term risk to the downside because of recent Euro strength, which I'm expecting to reverse tomorrow. Euro hit my target of 1.4550 and has been stuck there pretty much all day. I'm expecting Euro weakness tomorrow on the Sarkozy/Merkel meeting, and Euro debt issues will return to the forefront of the market's attention. As long as the Euro stays in this range, I will be more cautious going long as it tests resistance and will be more bullish as it holds support.
Euro intra day:
Euro since April:
The one mistake I made today was not trading energy aggressively enough. I saw the initial breakout in the Euro and noticed commodities were not reacting accordingly. I equated this to weakness whereas I should have loaded up in anticipation of a "catch up" rally. Oil and gold, for instance, rallied 3% and 1% respectively.
A week ago when it felt like everything was going to zero, the market was obviously oversold and I was anticipating an oversold bounce. During the past three trading days, we have experienced that bounce and now SPX is testing some serious resistance levels to the upside (1215 is the next one). This week it will be important to differentiate an oversold bounce with a sustainable rally. I think the Euro/USD will be an important indicator - if it can break the range its been stuck in since hitting yearly highs in May, I expect to see further dollar weakness and a serious rally in commodities. Until then I remain cautious. Tomorrow may be the pivot point.
No comments:
Post a Comment