SPX - If It Can't Go Down... and European Euphoria!

Good Morning,

Let's pound it into our heads one more time - if you a chart can't retrace, it will keep going. 

Rule Number One: The Trend is Your Friend

Rule Number Two: A big move followed by a small or no retracement is followed by another big move

Let's face it, there are too many shorts and there was too much risk priced in that fair value is obviously higher. Let's compare it to an earnings event. Have you ever seen a stock go to the moon after reporting earnings? If so, and that move is warranted, then the stock goes sideways and maybe retraces about 23% (this is why I love Fibo's because they tell me where I am in space) and then, ultimately, the stock shoots higher. 

This is the same thing we are seeing with the markets: a huge "earnings event" (Europe) where people were expecting the worse and the markets shoot higher and then, you have today. 500 points up in two days on top of a 15% move to the upside over the past few weeks and then you get a "down day" and that down day is either taken back the very next day (see Wednesday/Thursday) or the downmove is reversed that very day. 

We have seen this over and over and over - relentless, relentless buying. The bottom line is there are more bulls than bears and no body knows how far this thing can go - all we know is the following points based on the charts:

1. 1300 (nice psychological round number and right around the 200 moving average - more on the 200 ma in a bit)

2. 1340-1350ish - our old highs

Why am I not "excited" about the 200 ma and not putting too much weight on it? Because as I said in my webinar on Wednesday (click here for a link) and as one of my clients put it so eloquently: TECHNICALS SCHMECTICALS. Nothing matters other than European Euphoria

And another thing you can throw out - economic data. I have said this a thousand times - the Fed is the biggest player and can play "forever" and definitely much longer than you can stay solvent.

To the charts:

A nice modified BUFFALO BOUNCE  combined with old resistance in the GBP/USD:

Past performance is not indicative of future results

And of course the SPX. People will draw the Fibo's differently, but the move is so big that however you draw them, the 76.4 line (the line of death) will come in pretty much the same. Again: TECHNICALS SCHMECTICALS so take it for what its worth.

Past performance is not indicative of future results

We are going into the weekend with our reasonable hedge still in tact and will reassess at the end of next week.

Speakin of technicals, the webinar in 11 days will be on Fibonacci's!

A look ahead at next week shows a packed data calendar including the Fed. Trade the economic data at your own risk...

Happy Trading and Be Environmentally Cool

Coach Brian

Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.