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At the time of writing this post in afternoon trading today (Thursday), the EUR/USD Forex pair is down around 112 pips and up a bit from its low of the day, which is fractionally below the upper 1/3 Fibonacci retracement level at 1.3372, as shown on this Weekly chart below.
The next level of support is further down around 13255ish at the former large "diamond" apex. A close below today's low of 1.3369 may send it down to that level, or lower, depending on the markets' risk appetite (or aversion to it) at the moment, on the heels of ECB Chairman Draghi's pre-market press conference today.
Warning Flags For High Yield
In a Slope post Wednesday morning (“An Interesting Divergence“), Tim highlighted a comment by Dollar, citing a market technician who warned that the price action of the junk bond ETFs HYG and JNK, relative to SPY, could signal a stock selloff ahead. Also on Wednesday, over at the CFA Institute website, fixed income manager David Schawel argued, essentially, that high yield bond price action offered warnings of its own for high yield investors. Schawel focused on two specific risks for high yield:
– Valuation Risk. Schawel quoted Loomis Sayles Bond Fund manager Dan Fuss on the state of high yield:
High yield is as overbought as I have ever seen it. This is absolutely, from a valuation point, ridiculous.
Incidentally, Fuss made a similar point about the bond market in general to Bloomberg recently, saying that bonds were more overbought than any time in the last 55 years (Fuss has been in the industry for 55 years).
The case for a retracement here hasn't been growing stronger as ES has continued to hold the 1491 to 1511 range over the last few days. The helpful double-tops on EURUSD and CL have both played out to target, and it may be that the downtrend on both has ended. Meantime ES has been holding above the 50 hour MA since yesterday morning, and that needs to break soon for the bears to be in with a chance today. The 50 HMA is now at 1506, trendline support from the 1490.25 test is at 1504.25, and if ES can get below those there is further support at the 200 HMA in the 1500.50 area, a level not generally broken in uptrends and it held at the low yesterday morning. Until we see ES back under 1500 the obvious next move is up: