This is the last post for the year. The price action for the last month indicates, that equities and currencies are not moving in the tandem as they used to. Despite the rise in the USD, equities were able to add more to their gains. So, my target of 1130-1140 has been reached. Now I am at the crossroads, as some indicators are pointing to a pullback in January, while others for a more run and bump price action to come.
The above chart of SPX indicates, that the rising trend we have witnessed since March, is losing its pace. The only thing that might help this thing to go higher is a violent buying, as one we’ve seen in July. Right now, nothing suggests that this is going to happen, in fact the there are good chances that we might see 1080 by the end of January. Using Wyckoff Schematics, I have 1030 as my second target. This is nothing outrageous, as 9-10% pull back would be healthy for this market. Though there are some things that suggest, that bull is not dead yet.
The first bullish indicator is XLF. Financials have been lagging during the latest rally but the chart below indicates that they have finally found solid support and have a good chance of rising as high as 15.50-15.75. This is actually a pretty save play, as you can buy at 14.40-14.50 and place a stop below 14.20, giving you a nice R/R.
It may sound odd though, but XLF is also the sector that may trigger the reversal of the broader market. In this case we need to watch 14.40-14.00 area losely, as a drop below 14.00 might lead to a sharp selloff.
Other indicators of the reversal are GOLD and EUR/USD.
To support the bear’s case, EUR/USD must stay below 1.4480-1.45. To get more confirmation, I would like to see 1.4070-1.4050 by mid January.
The same thing is about GOLD price action, as long as it is below 1110-1115 price tag.
So, all in all this makes me a cautious bear, as the chances of another run and bump action in SPX are strong. Who knows, maybe the big layers, have dumped EURs, just to accelerate the rise in equities later? I don’t know that, so as a trader the safest option is to trade what I see… But HEY, enough of this, there will be a lot of trading days going forward, as for now:
it also looks like EUR/USD has also reached the bottom for awhile. The pullbacks are keeping being bough back, MACD shows divergence.
This is a nice buy here a 110-111, with the stop below 105 and a next weeks target at 122. Short term target is ~116. You may also want trade through ATM Call options, as they offer a better R/R for a trade.
