Monday, 5 December 2011

EurUsd and Dax/CAC/FTSE...Crisis? What crisis!

I have just returned from a long weekend in the UK for a wedding and was not in the office for US data on Friday and now I still am uncommitted about the future direction of markets after the shock of concerted C- bank intervention last week which sent all my charts and views into chaos . I spent the flight over and back reading the UK business papers relentless coverage of the Euro zone crisis. Many wise words infact almost too many wise words of all shades and opinions both covering possible total meltdown or disaster and then the opportunity that maybe there. One article caught my eye as the charts below did. It said that with cash piling up everywhere and no fund manager would want to be infamous for missing the start of a new run up which could be a sackable offence.
My point is that press coverage has hyped this up to the point that is is being made out to be the most shocking event since WW2 yet just look at the charts below. This recent sell off is nothing more than a shallow retracement and indeed hardly visible in the cash S&P charts below and at it's worst was just over a .382 Fib RT form the March 09 low to this summers high:

Perhaps more visible in the right hand chart but still miniscule compared to 2008/9 falls.
The CAC40 and DAX and FTSE have all held at critical levels and then there are some worrying forks. Whe i say'worrying' what i mean is that although i have no long term position i do not want to miss out or be surprised by a sudden move in the opposite direction to what everyone expects. The equity markets are seriously disjointed from the fundamentals and as i keep mentioning operate with a long or BUY mentality. Looking over the european indices this morning i noticed some major forks where price has failed to get to the CL. Andrews says that price will reverse etc. Please look at this...both the CAC40 & the DAX ( both Dec 11)

On it's own to be honest i wouldnt trust this centre line failure as a signal but in both these cases ( and i am sure i could run through the North American Indices if i had the time and find the same equivalent forks) price has reversed and we are now at or above the UMLP of each of these forks so in effect its a long way down for a second attempt or retouch.
In addition the Euro ( below) which there is no doubt is in serious trouble has struggled to get below 1.30 against the USD. It's found support on a ML ( LMLP) that is truely historic and dates back to the early 1970's and one of the original pivots you can chose ( there are about 3) from the start of this instrument being charted when the Euro or ECU was calculated using mostly the DM value

Now we have what used to be called a nice 'double bottom' with the right hand pivot having a higher low...bullish in the short term if i say so myself. We may have another cycle up and a failure and come down to retest the old thick LMLP and go lower but i am just begining to wonder....perhaps not. I wonder what the market would do with good news now at these levels? That is the TRILLION Euro question... The 'T' word could take us knocking at the door of 1.40 in hours perhaps minutes and God only knows where the S&P/Dow?Dax etc would end up- how much higher? Perhaps beyond where we were in July?
All this and yet we are told that we are days away from a meltdown. I have to tell you that i am disappointed with the downside -so far. Lots of 'noise' since the summer but not really the critical effect/fall on the markets we were told. So my advice is dont get caught short becuase this looks suspiciously like the begining of a stampede UPwards. Of course its to early to be sure and we wont know until some more time passes but this option seemed out of the question a few weeks ago and now its a viable scenario.There is also the fact that this is a political problem as well as a fiscal one and to follow politics on mainland Europe you need the patience of Job and do not expect any resolution soon on that front.

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