Oversold USD & Overbought Equities?

Friday, Apr 13, 2012

Good Morning,

After a 28 point move to the upside in SPX in two days on poor economic news and the HOPE that quantatative easing will return, the market looks to be booking profits and/or having new shorts enter going into the weekend.

Here is the chart of the SPX that I posted yesterday with an updated Fibonacci coming off the bottom. The more we retrace back down (the move from 1360 to 1388), the more likely it is we will test the 1360 lows and possibly go through them if economic data continues to worsen.

Past performance is not indicative of future results

Another fun ETF to look at (and a great segway into forex) is TBT. It basically follows yields. Look at the suppor that comes in around 18.00 and also just above 18.00 if you are using the trendline to act as support.

Past performance is not indicative of future results

Purchasing TBT is like purchasing a downmove in bond prices as that will get yields to go higher. So when you are purchasing TBT, you are hoping that interest rates rise. We know how low interest rates are, but they have also stabilized, reflecting the support at 18 and have provided some good volatility. Selling puts is a fun strategy if volatility continues to pick up and option premiums increase.

Moving into forex, with a trend day in equities, we are seeing the USD trend stronger as it is the "flight to quality". If equities get weaker, could we see a BUFFALO BOUNCE in the EUR/USD?

Past performance is not indicative of future results

Next week we have:

**earnings

**retail sales

**Empire state manufacturing index

**unemployment claims

**Philly Fed manufacturing index

Happy Trading and Be Environmentally Cool

Coach Brian

Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

Posted By: 

Brian Kahn

Brian provides regular commentary focusing on the relationships between various financial markets. An experienced trader and portfolio manager with over 15 years in the markets, Brian relies on fundamental and technical analysis to create trading plans for each and every market entry.