BACK TO QUIET - It looks like we may be settling into a bit of consolidation now, with the USD correcting a bit in a very light calendar week. Unfortunately, this translates into some quiet trade and little in the way of new trade set-ups. I caught a nice USDJPY short at 115.17 last week and exited for a good profit on Monday. I still think we should see additional corrective activity, which takes the pair down into the 112.00 area. But given the intensity of this uptrend, I am happy to take what the market has already given, with very little stress. My only open exposure now is EURCHF and the SPX500. Both positions are tracking out of the money, but I believe both have very good potential for follow through in the weeks ahead. EURCHF has dropped closer to that all-important SNB 1.2000 line in the sand, and at some point, we should see a central bank response.
THE PAYOFF - Meanwhile, the SPX500 has shown no sign of reversal from record highs just yet, but with the market having already rallied well over 10% since mid-October, and with the bond market not confirming the stock market's exuberance, the price action feels more like a pre-capitualtion, melt-up rally than anything grounded in sound fundamentals. In fact, with the Fed leaning more to the hawkish side, and with recent US economic data continuing to come in on the healthy side, there is a good risk we see the Fed move rates higher sooner than later in 2015. I don't think there is any denying the impact ultra accommodative monetary policy has had on stock markets. And so, when the Fed does start to make its move, stocks are expected to come off quite a bit. Right now, we need to sit back and wait. But I think both the EURCHF long and the SPX500 short will pay off handsomely if we are patient.