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Tuesday, November 17, 2009
Today we appear to have a dollar breakout in the works. You can see from this chart that we have broken a trendline down, after a false break to new lows yesterday. If you read my commentary from yesterday, I said I thought this could be a false breakout in stocks. It would follow that if that plays true, there would be a dollar rally. I have to admit I find myself pulling for a dollar rally for several reasons, many of which are obvious. If it does keep declining we are going to have serious trouble.
I noticed yesterday that in the Euro which is the most tightly correlated currency to the dollar index due to weighting, there was a tremendous amount of bearish divergence in one accumulation indicator I use. We are seeing that was a harbinger of a break down today. The Swiss Franc also had that same divergence, and both of those markets are down big today.
Will this be the sign of things to come, who knows. We can never know when a short term countertrend move like this will become something bigger. You just have to put on the trades and see what happens. I am not long this market yet, I will wait for a pullback after a trend change most likely, and this does not as of yet represent a trend change. It is something to watch especially after yesterdays wild day that really felt like a blowoff top in alot of places to me.
We have price and time cycles pending in equities here, that 1122 level I had mentioned is approaching, so it will be interesting to see what occurs if we reach that level.