One down-day almost takes back three up-days, hence the phrase: "buy a creeper, sell a leaper." Even with today's down day, we didn't close on our low and we are only about 300 points from a new high, so I am not ruling out the bulls yet. I am glad to see that the 61.8 area held and we sort of "double topped". It is a very messy top, but so far, it is holding and we have stronger resistance just below "the top" from early May.
On a side note, I am looking forward to tonight's Interbank FX Webinar at 9pm Eastern - click here for the link. I will cover those ever-impressive inter-market relationships that came back in play today as we had a very large selloff in equities and a very large rally in the USD. I will take it a bit further than the past webinars and dig deeper into optionsXpress showing you option plays that can protect your long term equity investments. I will also explain the "back to basics" theme, which is easily proven with today's EUR/USD move versus the GBP/USD move.
As I lead into the charts, the big question is should we be buying at these levels or are there too many chinks in the armor. Again, the risk is to the upside, so if you aren't picking the very tops to be bearish, it is hard to become bearish down here. On the other hand, there are some trendlines that have been broken and you have to go back to the thinking: "is this deal really a deal". I compare it to real estate: If I buy the house now, I could get it for 500k. If I am patient and wait 6 to 9 months, I may get it for 400k. To the charts! and the first one is DIA, showing you the short term resistance:
Like I said, it is messy, but you can see the tops from the past 10 days. Next up is the SPY - check out that trendline. If we can break it, we may have some room to go on the downside:
The SPY chart shows you: "is a deal really a deal". And to further prove that, check out SLW - it didn't bounce off the trendline that much and I warned that if we sell off in equities, this seems to be acting "weak". How so? Well, I call it a laggard because the broad equity market indices climbed back towards their highs and SLW stayed right on last weeks low. Sell off in equities equals larger sell off in commodities. Plus, the dollar was staying strong, so either equities were wrong or the dollar was wrong. I guess equities were wrong today!
Into the socially responsible investing realm we go and I just love the covered call play with WFM and a sideways stock like TSL:
TSL gives you a good look at a MACD and how it works nicely in sideways markets. Is this a buy down here at support?
As I mentioend, the dollar stayed strong - let's prove that with a longer-term chart of the EUR/USD:
Then you combine that with a large sell off in equities today and look at the intra-day chart, showing BUFFALO BOUNCES:
Looks like volatility is picking up and the average trading ranges are starting to expand. We still don't have rocking markets everyday, but you can count on more than one trading opportunity per week - today we had about 8 across the 6 USD pairs. Another BUFFALO BOUNCE:
And finally, a DOUBLE FALL LINE TRADE:
These last two charts show you a great reason for calling the webinars "Back to Basics". Look at the early morning divergence where the GBP had incredible strength against the USD and the EUR couldn't rally much at all.
Should be a great webinar this evening and I look forward to your participation.
Happy Trading and Be Environmentally Cool
Coach Brian
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