Tuesday, June 14, 2011

Euro pattern playing out...dollar confirming bullish

I am currently travelling so, I do not have time to put up a lot of charts...but here are my thoughts. I think that there is a very good possibility that today's run is a flash in the pan short squeeze and will get little if any follow through. We need to get used to those by the way...especially since everyone likes to be calling bottoms. I am watching the euro like a hawk and the dollar which confirmed a high probability bullish setup today. The reality is that the currencies are going to dictate what happens here...even though rates spiked big today in the 30 year I do not view that as significant to the equity markets perse. I think currency action will dictate market action at this time. I think that Silver and Oil as well as quite a few other commodities retested today and have patterns setup with probabilities for failure. Its also my view that the new shorts that some of my systems started building near today's close may turn out to be prescient. As I indicated in earlier posts, I closed the majority of my shorts on the indexes which were initiated near this years highs a few days ago. I did find significantly better risk reward trades in other instruments like the euro and the dollar which will also likely dictate the action in the markets over the near-term.

As a side note, I do think that it is entirely realistic for shorter term treasuries to trade at negative yield and though I am not trading the interest rates directionally at this time as I view the trade could go either way depending on whether or not fear of risk assets hits more powerfully than fear of debt instruments or vice versa. Personally, from several months ago, I was partial to rates continuing to decline for a while which they have done...and I think that there is still a good probability of that continuing into the future for US debt. Certainly, as I indicated in a post about that same time, I guess about a month ago, that the 30 year treasury looked possibly A-B-C-ish and somewhat countertrend which could mean that it could be done on the upside soon.
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