Friday, October 28, 2011

Like an island…in the middle of the atlantic…the tsunami comes

perhaps its the pacific - its much colder water too. However, the reality is that yesterday’s gap and the patterns it placed are confusing many. The presumption is that the market is bullish…when we covered a month ago it was bullish…however, we did not go long that move. Now we sit precariously perched in a market looking for divergence and bullish extremes…and we also sit at very high probability reversal levels.  However, it is important to understand that the scope of a larger downtrend…divergences and bullish extremes often do not have time to build. This case looks to be no exception.

There are now complete patterns in the that should be scaring the pants off anyone who is approaching long that particular currency. The setup in the EURO postures for a move of epic proportions…perhaps 1,000 to 2,000 pips down in a matter of a few days. The risk markets are likely to correlate to the movements in the EURO as they did this time. In any case, as I indicated in yesterday’s post…the euro points to parity with the dollar and I think that that progression may likely happen faster than can reasonably be anticipated.

Also, of note is that the already strong buy trigger that triggered last week for US 30 year bonds is still intact and bounced off it…they are about to trigger another risk on desicion point…for the long trade ofr the UST 30 year.

It appears to me that we are setting up an Island top…and I think the water will not be of the nice calm Caribbean sort.
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