Charts I’m Watching: Feb 4, 2013

The US dollar bounced off the .886 of its Sep – Nov 2012 run…again.  This is the fourth time it has found support in the 78.725 – 79 range, though each subsequent bounce has been lower than the previous one.

The result is a descending triangle that arrives at the bottom of an uptrend (the white channel below) and a 2nd back-test of the latest channel (red) that was originally broken out of on Jan 2.

The primary driver has been euro zone weakness, with the EURUSD back-testing the midline of the white channel after a bull run that equaled that of this past Aug-Sep.

Though, the yen is also pitching in — reaching our secondary price target well in advance of the forecasted date range.

SPX was off over 10 points this morning, making our decision to short Friday at 1514 appear to have been the right move.  SPX is heading toward the next lower purple channel line, where it will likely get at least a bounce in the 1500-1501 range or the .886 Fib at 1498.77.

The question is whether the market is just taking a breather or beginning something more significant.  I’ll spend the next hour or so examining the road ahead.

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