Dollar Index Euro and us markets running in opposite directions as Fed Feather reports and traders come back from holidays.
The Dollar index Euro and US markets are in a complete disconnect from normal trading patters. As the S&P500 emini futures has breached the 1400 psychological ceiling and has been holding it as support we see that the US Dollar index on the futures markets.
For the past three days traders have been selling the dollar which normally pushes up the Euro. The chart reflects the price action but there is a disconnect with the price action on the S&P500 emini futures. We will go more into the price action on the S&P500 emini futures on the next chart.
Monday the S&P500 rallied to new highs and breaching the resistance at 1418.this is when the dollar index pushed down through the floor at 82.500 and dropped almost a full penny in the next session. The Euro is also showing a rally fro 1.23.67 where it rallied through its resistance on the 50MA and proceeded to move up to 1.2535 the following two sessions. If the S&P500 emini futures were to have followed the same trajectory, traders would have expected to see this move to 1433-39. The Euro has powered on and kept the direction moving to the 200MA where we could see some support coming in.
The dollar index and the euro move hand in hand and can be seen moving this way. Temporarily they will disconnect and we will see one consolidate and the other begin another move. Do not think that there is a directly quantifiable trade from this, just take note for an indication of what price could do.
The S&P500 emini futures contract has hit resistance and is building energy for it’s next move to gain direction.
The S&P500 emini futures has battled its way up through the psychological resistance of 1400 and now has settled above it making it the floor or support. Although the last two days has had increasing volume the price range on the S&P500 has been around 9 points for today’s market session. The previous days saw a move to new highs and a quick turn around by sellers taking back the move up and closing lower than the open. Two Days of increased volume with no direction.
Buyers could take this to previous highs around 1424 and put in a double top. If we see enough commitment on the buyers side, day traders could move this through to an extended high of 1333-37, approaching the previous resistant trend line. The Point of control for this next trading session is 1412. If sellers are committed to take this, normally we would look for a morning sell off into the session where the 1400 psychological support will be tested for a further extension to 1395 on a weak move or an extension to 1391 then 1384.25. If there is a lot of sell pressure we could see a reset of the mid term trend and a touch off of 1365.
There is a lot of news coming up as Greece will be pursuing hand outs and extensions of it’s interest payments, Voters in Austria decide this next month which is best for them “staying” or “going”, and Spain’s Banks will be seeing more pressure and financial disclosure as they line up at the trough.
I am also expecting to see bond prices and gold increase with these conditions as the Risk off trade has not yet entered the market place and investors are testing their first buys in to the last quarter of the year. It would not be unusual to see a small correction to wash out the short term buyers here and then a rally into September, all news withstanding. Our markets could hold with some more QE in Europe but it will not last.
Trade what you see, Don’t listen to any body. If you can’t see the direction in the market, do not trade and never risk capital you can not afford.
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