Tuesday, January 31, 2012

Head and Shoulders and loss of momentum finally showing up...

Head and shoulder patterns in Euro, Dow, S&P and many other markets…Looks like a reversal setting up for today. As an observation, the ultra low volatility grind up since December has been the lowest downside volatility rally in the history of the S&P500 for the data I have. It represents one of the few times that my systems were unable to optimally adapt to this type of market volatility for their postive risk management. I have already addressed the issue and it will of course turn a frustrating month into a great benefit. I expect the trades to close well…it is quite stunning the absolute lack of volume and the lack of volatility to the downside. The influences that have caused this action are clear…deleveraging and central planning. The markets are officially a mess, and have fulfilled their destiny to behave exactly like what they have become for the moment -  centrally planned vehicles.

In my opinion, the EURO is now on its way to the 1.12 target I have been presenting consistently. I also believe that the divergence between bonds and equities and the EURO and equities will resolve with equities reverting - not the other way around.

© 2009 m3, ltd. All rights reserved.