Counterintuitive on the Surface


ABOUT RALLYING MARKETS - We've got the ECB decision out today and as always, the market will likely move quite a bit on the event. I have to say, I do believe there is a US Dollar rally coming, which could last a lot longer than the market thinks, but the technicals are keeping me on the USD bearish side right now, with EURUSD having yet to test that massive falling trend-line off the record high from 2008. Once we get up there and finally test that trend-line, which comes in around 1.2600-1.2650, I think that will be when we can finally start looking for the Euro to retreat and the Dollar to recovery. Many of you have asked me about this, with respect to me being bullish the Dollar but feeling better about it only when the trend-line is tested. There is a feeling that it would be more bearish Euro if we aren't able to test the trend-line. And while there is some sense to that, it's not how I feel.

cartoon march 8

RUNNING ON EMPTY - The basic logic is this. If there were a race where someone had to get to a certain point by a certain time, that person would be pushing as hard as they could to get there. But it would be a long journey to get there, that would take up a lot of energy. Once that end point was finally in sight, there would be a burst of adrenaline to get them to the finish line, despite the exhaustion. Now you can imagine how they would feel after using up all that energy and all that adrenaline. Not exactly ready to start with that next race. Yes - in time they would be looking to keep going, but initially, they would relent to the exhaustion and crash. And so, this is how I see that trend-line. The Euro wants to run up there and will exert a lot of energy trying to reach that milestone. But when it finally gets there, I think it will be a great time to start thinking about that big pull back.

I am more bearish a market that pushes up through a critical level, than a market that stalls ahead of it. Here's why.


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