Monday, February 18, 2013

Weekly S&P500 and Dollar…hmmm

Everyone sees dollar head and shoulder patterns and a breakdown in treasuries…with all this consensus, should we not have a sneaking suspicion that new highs in Treasuries will come before they actually breakdown. In addition, everyone sees higher prices for equities. In fact, 70% of people see this week up as a sure thing and even more people see next month up as a sure thing. 

However, more importantly than any of this, the dollar has broken out AND retested a huge A-H pattern. This pattern projects in a way that does not allow for resumptions of the commodities up trends - which by the way, everyone is expecting also. As you can see from the chart below, equities have clearly come into their own but will likely soon need to acknowledge the excessive leverage, bullishness and ridiculously low volume not to mention argue with the dollar. This argument can be seen in the chart below…dollar is in green.

It seems to me that the minute a reasonably large block of shares in the financials index are offered at market - or there is even a sneeze - already scarce buyers will simply disappear all together…with the possible exception of one BURNanke…and this week is a slow for Fed liquidity operations... 
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