Shifting Tides

FIRST TEST - I didn't want to give it too much attention on Wednesday and I still don't want to spend too much time focusing on it just yet, but we are starting to see early signs of a possible reversal in the US equity market. In my analysis over the past several weeks, I have said that we needed to see an initial SPX500 close below 2350 to get things going. On Tuesday, we closed below 2350. Into Thursday, the market remains under pressure and now we'll see if we get that important shift. When I talk about an important shift, I specifically refer to the price action. In an uptrend, a market is exceptionally well supported on dips, while in a downtrend, a market is very well capped on rallies. We have yet to see the SPX500 rally and be well capped and that first test of a legitimate bearish shift is when the market rallies and all of a sudden finds strong selling into the rally that takes it to a fresh low. And so, we will see how the market responds going forward. But if you see rallies well capped and then fresh lows, things are looking good. 

PICK YOUR SPOTS - I already tackled the key risk for today in yesterday's report, so I would urge you to go take a look. Today's big risk is the US House vote on Obamacare repeal. Looking at FX, the US Dollar hasn't been able to find its way back yet and is on the ropes fighting for its life. The Euro is trying to establish above the December peak at 1.0875, while Cable wants to hang out back above 1.2500. I continue to have my doubts about the sustainability of this Dollar selling, but it's important to recognize the price action and pick your spots well, especially if you are still inclined to try and buy the US Dollar, which I am. Until the Euro establishes above 1.0875, the overall trend does still favor the Buck. So naturally, the idea of fading an intraday extended Euro move around 1.0875 seems to be a compelling risk-reward play. In the interim, I'm holding my AUDUSD short that managed to stay alive after a near death experience on Tuesday and will be monitoring for any other opportunities that come our way. Stand by. 

Looking to fade $EURUSD strength around 1.0875. Via @joelkruger

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