Tuesday, June 22, 2010

Watching the euro's as good as any clue if the SPX holds 1090

We've gotten the bounce in both euro and equities we expected from $XEU making a low under 121 with that positive divergence. But will it last? The chart pattern (see FXE below) suggests a possible bullish reverse head and shoulders, if it makes a higher low. Meanwhile we are also seeing if the SPX gets support at 1090 and its 20-day dma!

The FXE chart, which I'm using as a way to check volumes, isn't showing the kind of volume buying behavior I'd like to see for a trend reversal. And its OBV indicator had turned south. The SPX indicators including the $NYMO McClellan Oscollator has turned down from overbought. It's possible that the SPX, along with euro, can make a higher low and stabilize and complete a reversal pattern for another big wave up. But I'm not reading these tea leaves as saying it's guaranteed.

While I don't want to make trading recommendations ...! I will state that on a swing basis I'm net short equities, waiting for confirmation by a move under SPX 1090. If the SPX instead betters today's high, and especially yesterday's high, then I'm stopping out and feeling bullish again.

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