The last comment I wrote in yesterday’s members’ section:
The reality is, I expect a very nice bounce here — with that 2030 level (1:54 update above) looking good for the next big move. But, the headline risk has been pretty substantial lately. As such, I wouldn’t carry any position overnight unless you have the means to hedge and/or monitor it closely.
The initial ramp job after the market closed was spectacular, with ES gaining about 23 points. Then, the SNB peed in the punch bowl, essentially decoupling from the euro. ES dropped 42 points in a jiffy, and is only up a few points because of the plunge protection team’s efforts — a rally of 28 points.
Is it legitimate? No. Does it make sense? Hell, no. Will it last? Ah, that’s the question. Probably not. Here’s where we left off yesterday, with nearly every intra-day call working out beautifully.
A rally up to 2030 made sense because of the key Fib levels and channel patterns in play. But, the Swiss just removed a big chunk of the carry trade architecture. So, while their move increases the likelihood of ECB QE (why else would they hit the panic button like this?) it puts a dent in the portfolios of those who were short the swiss franc (CHF) as part of the carry trade.
I’d fade this morning’s rally at the first opportunity, with an initial target of the SMA100 at 2007, and a secondary target that .886 at 1986.35 that we didn’t quite tag yesterday. I suspect they (and by they, I mean every central banker) will be working overtime to contain the damage.
I say “contain,” because lower prices were already in the script — just not yet.
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