Wednesday, December 16, 2009
Asian Session Sparks US Dollar Short Covering Rally; S&P Futures Print 5 Wave Decline
The dollar spiked higher as we went into the Asian session following the Fed statement today. Perhaps the dollar shorts are getting a bit nervous now. This nervousness and short covering should be a contagious action that will build in momentum in a relentless spiral within itself, raising the dollar higher and higher for several months. Of course, with the short term wave count unclear, a snap back wave 2 type decline can occur any time though. But the evidence is quite strong that a significant US dollar bottom has formed, and surprises and the least resistance should be to the upside. Until the series of higher highs and higher lows is broken, the short term trend remains up. Any significant drop that stops me out will only have me looking to re-enter on the long side at a better price.
The dollar bullishness has put some pressure on the S&P futures tonight and has created a textbook EWP five wave impulsive decline as you can see from the attached chart. So it's possible the current decline may be the start of something bigger, but we'll have to see how the wave structure unfolds from here. The S&P bounced off the top of its range today, so with this 5 wave decline tonight it appears that at least in the very short term the trend is now down for the stock market.
So that's all for tonight. Just wanted to write a quick post on this interesting action I noticed.