Wednesday, 6 November 2013

E mini Dow and USDX

Sometimes it's very easy to get bogged down in the detail of price in low and micro time frames and often its a good idea to step back and look from a distance, hence the chart below which reveals we are at a critical area. I am not saying that equity markets are about to fall and we must remember that they have the most impressive ability to bubble higher and higher for what may seem like an eternity but it is worth pointing out that we are currently at the first 100% reaction line of the mother of all pitchforks in the e mini Dow / YM. with what was a highly significant low as the P0 for this p-fork. Look how price behaved around the previous 50% reaction line and see how price penetrates and passes through the reaction line and then price is distributed as it falls in front of the line. This is why we use 'mirror lines'. I am also mindful of the pattern we are seeing in the Dow ( cash and futures) whereby a series of sideways tops are being observed with only marginally higher lows and marginally higher highs. It's a more positive pattern in the Spoo's but still we seem to be range bound and its a bitch to trade. All eyes on this Fridays (post Fed shutdown) NFP's but I can see one scenario whereby we could see one more effort to move higher and a new high and then top out and fall.Similar to the 50% reaction line behaviour we saw in 2011. Again look at the centre line of the pitchfork for support. Alternatively we could motor ahead and zoom through and clear this reaction line but i favor this less.

Take a look at the US dollar Index and this reaction line's a previous more detailed explanation:

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