Evening Forex Thoughts

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Good evening to you, Slopers, one and all. I confess to feeling a bit shell-shocked from the two-months+ unrelenting rise. It seems trading days come in only two flavors now: (a) trend days up; (b) modest dips, just to tease the bears, and then roaring rallies to new highs. It seems today was type (b).

The sea of charts I observe is looking more and more alien to me. I'm seeing fewer bearish opportunities, and the bullish opportunities I see are, on the whole, so elevated as to be unsafe. I'm already starting to dimiss the idea of any kind of meaningful drop taking place this year at all. Perhaps all we can hope for is a modest dip. One of the key reasons I have a "Bull Pen" watch list is to keep an eye on when these issues will drop to more attractive support levels. That time, if it comes, will probably signify the terminus of any gentle pullback that might take place.

So instead of spending time on sky-high long setups or never-seem-to-work short setups, I thought I'd just share a few FOREX charts. The first thing I wanted to point out is that the Euro seems to have changed its relationship to our equity markets starting about thirteen months ago. Until then, it had a very strong positive correlation; look at the black (EURO) versus the blue (S&P 500). Until the tinted area, they were in lockstep. Afterwards, the S&P seemed to acquire a much stronger grade of thruster fuel. The Euro still has a gravitational pull on stocks, but it only serves to retard the explosive rise (as opposed to making the market actually – gaspfall any meaningful amount).


What's key is the level I've noticed below on the horizontal line. If we broke above this line, I think it's really off to the races for bulls. If by some divine miracle we break 1.3, it could change the game, at least for a few weeks.


One slight glimmer of hope is that the US dollar looks like it could be revving up for some serious strength against the Yen (BDI wrote about this at length with his ridiculously popular post yesterday). The chart below, the USD/JPY, is strongly bullish.


Well, brace yourselves for the earnings-induced buying orgy in the morning. I'll see you then.