Again, I'm watching the US Dollar through the EUR/USD. The EUR/USD is considered the "anti-dollar" and basically moves the opposite of the US Dollar. So I tend to say dollar bottom and EUR/USD top interchangeably. Even though they don't always find tops and bottoms together, for the purposes of our discussion here on the blog, they both mean the same thing to me.
With that in mind, I'm watching the EUR/USD to find a top. The last top was at 1.4843 and you can see the decline was very choppy and hard faught. This looks very corrective and was a concern from the jump. However that concern was overshadowed by the big reversal day and solid negative internals in equities. But again, it appears the US dollar, or EUR/USD, are leading the way. The market gods are telling us that we really need to just follow the dollar for the direction of the stock market. So that's what I'll do. And I'll do it by watching the EUR/USD.
So notice the choppy overlapping hard faught waves down which look clearly corrective, then look at the rally from the lows into today's rally. Notice how smoot and easy the gains are. This tells us the trend is still up in the EUR/USD. It also tells us a new high is most likely coming, above 1.4843. It's only 100 pips from that level at which it can turn and reverse at any time, however I see 1.50-1.51 as the key resistance levels. I'll be watching it closely.
When the EUR/USD tops, so will the stock market.
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