Tuesday, January 19, 2010
Make or Break Time for the Bears; Risk/Reward Favors the Short Side
Just a quick note this morning; the markets have surged higher this morning sharply, bringing the major indices close to last week's highs, however none have exceeded those highs. The S&P is only 6 points from doing so, so it brings about a great risk/reward opportunity for the bears here whether to establish a short position or just add to it. I would place a stop at 1151 or higher. The possible profits of catching a major top here and risking only 6 S&P points is quite significant so I would think it's worth taking. A break above 1151 would get the index marching towards the 1200 level.
The EUR/USD has declined in 5 waves on the hourly charts but has not made a new daily low beneath 1.4217 yet, but I believe it will do so quite soon. Although the EUR/USD is tanking hard, the AUD/USD and GBP/USD have remained quite buoyant and have not followed the EUR/USD. Although the EUR/USD just completed 5 waves down, it may be the finishing 5th wave of a multi-month impulse decline starting in November, and the risk of sharp snap back rally in a wave 2 is too great at this point. Currencies are a bit "dicey" right now and not exactly clear where exactly we are in the wave count so I remain on the sidelines in the currency market right now.
PLEASE NOTE: THIS IS JUST AN ANALYSIS BLOG AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. THE DATA HERE IS MERELY AN EXPRESSED OPINION. TRADE AT YOUR OWN RISK.