Trend Day in Forex Amid Breaking Equities

Thursday, Mar 22, 2012

Good Morning,

We have a trend up in the USD and a trend down in SPX. Will we get the "famed afternoon rally" to kick in once again? Fundamentally, it is a light week. Bernanke is behind us. Claims were better than expected, so until further notice, fundamental news is still improving. The question is, technically, have we overshot where fair value is and the SPX is going to "fail" sometime in the near future. Quarter one has been pretty amazing as far as the equity markets go - with the markets continuing there upside run. If you were managing money, would you book some of those profits given the windfalls that could potentially be out there as we head into Q2, Q3 and GASP, the election. Yes, that is right, the guy who focuses on the "now" and not the "what if" scenarios of politics that are 8 months away, just mentiont the ELECTION. I am just saying...

So technically, for an uptrend to continue, higher highs need to be accomplished. Right now, 1408-1411 is on my radar and if we come in with a lower high in the next few days to weeks, price action will give me a new outlook. I will also combine price action with one of my favorite indicators, a Fibonacci Retracement to look at opportunities to protect the downside risk if we do roll over. Stay tuned for future posts as I draw Fibo's on this most recent downmove and the impending retracement back up.

Relating it to forex, equities down, USD up. Based on past performance, I would think we would need to see another leg down in equities (down 125, 150, etc...) on the day to see the USD make another leg up. Based on past performance, every time equities are down, they rarely, rarely finish on their lows of the day, so that gives a bid to the equity market as the afternoon rolls on and a sell side to the USD.

A busy week of data next week with Bernanke, Durable Goods, Claims and CHIPM (check out the unemployment and new orders subcomponents of the CHIPM number). Oh Yeah, I will be looking for the "run Joey run trade" tomorrow.

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.