We saw a new high on Friday, and it is very likely now that will be
followed by further new highs over the next few days. Looking at my SPX
channels chart the next upside target is in the 1232 to 1235 area on
SPX, if we reach it this week. It will be somewhat higher if we reach it
next week as the trendline is rising:
In the very short term though, we may well see some weakness early this
week as we appear to have established a new short term rising channel on
ES, and we are near the top of it:
That said, it is definitely a day to be cautious on the short side as it
is Monday, and as I posted the other day, 26 of the lasted 30 Mondays
have closed green. Of the four red closes, two of those closed down less
than 2 points and the other closes were only down 12 and 14 points
respectively.
Within the last 30 Mondays though, the two longest series of positive
closes were of 8 closes in a row, and one of those series is the last
eight Mondays. Even by recently bullish standards therefore, we are
overdue a red Monday and we may see one of those today.
I'm expecting to see more consolidation in USD during the next few days,
but again, that may well not apply today. Over the last few days on the
60 min chart, DX has been forming a broadening ascending wedge that is
still holding well, and if it reaches the next upside target, that will
be near to a new high. After (and if) the wedge breaks downwards, I am
expecting a retracement to the 80.6 area before the next USD wave up
begins:
I've been having a look at GBPUSD over the weekend, and it has been very
marked how relatively strong Cable has been relative to the Euro in
recent weeks. I'm not expecting that to last and after some further
upside with a target in the 1.56 area I would expect to see a strong new
wave down towards a new low below 136.94. I have put an EW count of
where I think we are on the daily chart along with the current rising
channel:
There are some other reasons to think that GBPUSD can expect further
weakness though in that there is a general election at the end of next
week that looks likely to produce another weak and divided government
with little or no commitment to putting the UK's fiscal house in order.
That matters a lot as over the last thirteen years the incumbent labour
government, which is largely funded by the unions, has gone on the
largest spending spree in UK history. A million new government employees
were hired, government spending ballooned from 38% of GDP to 52%, and
the budget deficit is 12% of GDP, which on a par with Greece. This has
resulted in a situation where over half of the UK population receives
over half of their income from the government, either in salary or
benefits, and the parties competing for power are largely doing so on
the basis of maintaining government spending and increasing taxes on the
dwindling number of UK residents with assets in order to do so.
It is hard to see this situation ending well, and unless there is an
outright majority for the opposition conservatives next week, which
looks very unlikely at the moment, then the situation is likely to get
worse until the UK has a currency and debt crisis as it did in 1976
under the last labour government.
Good luck trading today everyone.
