ITS OWN THING - If you look at all of the major asset classes on Wednesday, nothing happened. Well, nothing happened except for one asset class. Once again, stocks continue to race to record highs, seemingly on nothing more than blind momentum. The push higher lacks substance and the fundamentals are not supportive, and yet, this is where we are. Unfortunately, this has put me in a drawdown with my SPX500 short and as per my analysis from a few days back, I will need to start scaling out if this market starts to try to establish above 2250.
PARTING WAYS - On Wednesday, the market was so extended that I was compelled to take a short term shot and sell, but this trade didn't work out and I took a tiny loss on that portion. I will say right now, that while I'm still in this trade, if we see another push into the 2250 area that shows the same type of intraday extension, I will take another shot with another very tight stop. But again, if this market looks to establish a daily close above 2250, it will be time for me to start parting ways. I will begin to scale out and say goodbye.
GETTING CLOSE - Moving on, AUDNZD has declined below 1.0400 and that sets up a trade on the horizon. I think we should see it a little lower now before jumping back in and I will continue to monitor. Right now it looks like a level closer to 1.0300 will be ideal. As far as the rest of the FX market goes, the focus will be on the Euro today as it digests the ECB decision. There has been a lot of speculation about this decision, with some expecting a more hawkish ECB talking about tapering, and others expecting a more dovish ECB. Of course, this leaves room for volatility.
SELLING HIGHER UP - The way I see it playing out, or better yet, the way I'd like to trade the Euro, is to sell it into a rally. I think this bounce is just corrective in nature and the trend continues to favor a deeper drop below the 2015 multi-year low at 1.0463. But having said that, it doesn't mean that we can't race up towards 1.1000 first, before putting in the next major lower top and heading back down. So with that in mind, I will be sitting back and waiting to see what comes of the ECB and looking for an opportunity to sell if we see an intense rally in the aftermath.