Where Are You Mr. Catalyst?


NOT CRAZY AT ALL - It's really quite something to sit back and watch this Euro price action. The chart has been showing a clear uptrend but at the same time, is also showing this possibility for a big head and shoulders top formation that would open a drop down into the 1.1200s. It might sound crazy but when you break it down, it really wouldn't be that big of a deal. If you take a glance at the weekly chart and imagine a drop to the 1.1200s, you'd see that we could easily find support there and then get back to trending higher. Fundamentally, with the Fed seemingly committed to its course for another rate hike this year and more to follow, and with the ECB moving back the other way, this would also suggest we could easily see a period of Euro weakness into the 1.1200s.

cartoon october 17

NEVERTHELESS - But the important point here, and I know it will be a let down, is that I'm not confident enough to be trading it this way. I definitely wouldn't be a buyer here, but I also don't have enough to be selling. Last week, I said I would be happy to sell up around 1.1900 and while we did get close, we fell short and so, no trade. For me right now, what needs to happen is we need to see a shake up in global equities that is led by a capitulation in US equities. I'm not saying this because of my bearish view, rather to make the point that nothing is going on out there as far as volatility to risk goes. Financial markets are for the most part still one dimensional and one tracked, with too much focus on the stock market and influence of Fed policy. We need to get away from this. It's been the longest running hijacking of all time.

The way stocks ignore the current environment is the same as a person ignoring a massive elephant in their house.

THE TRIGGER - I had thought the catalyst would come from higher US inflation readings but last Friday's CPI print threw a little cold water on this idea. But that isn't to say the catalyst for a shakeup can't come from many other areas. This week's calendar is stacked with political risk around the globe, that includes geopolitical risk, with North Korea, Iran and Catalonia all capable of making waves. Even Brexit has the ability of infecting the global economy if the negotiations run south and all of that nervous tension comes racing back. Bitcoin? Yes...here as well. The flood of speculative money into this space has been absurd and if this bubble goes pop, it could infect the rest of the market with a fear and panic that takes us to a place we actually need to get to if we are ever going to get out of this 2008 post crisis hijacking that is about to celebrate its tenth birthday. I continue to look for that next trade but as you know, it needs to find me and I will let you know as soon as it comes knocking.


Only in Their Infancy

We have some new trades open but they will need more time to really get going.

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