And I said,
"Last week we saw 3 consecutive smaller triangles in the EUR/USD, all showed (predictably) false upside breakouts that went on to fail. The series of smaller triangles has now formed a bearish continuation Descending Triangle. My thoughts are this too will show a false breakout, but the implications of the triangle are more serious as they effect the trend."
"Here are my horrible trendlines again, but a descending triangle is found exactly where this one is, after a downtrend and is a continuation pattern (bearish implications). I would think just like the last 3 FX triangles last week we will see an upside false breakout and then as I have suspected since before the FX bounce started when the $1.30 level was first broken, the end of the bounce allowing the substantial $1.30 longs to liquidate their positions using the bounce from sub $1.30 levels.
Remember the Euro and the market have roughly the same correlation, so a drop in the Euro would be a market negative event."
In this post yesterday I noted the Descending Triangle (bearish) in the Euro.
I had said the following,
"Of course in technical analysis dogma a descending triangle is supposed to break down, but in the real worls we see these head fakes 80-85% of the time on obvious patterns and as I said last night (after 3 smaller triangles head faked 3 consecutive days in a row in the FX pair), this one would too, probably very early in the morning. It turns out it did so around midnight EDT."
So here we are now...
This is the larger triangle, a continuation pattern as the Euro is ready to start a new leg down. When $1.30 was broken mid December, I said that the market/Euro would bounce, there are too many long contracts at $1.30 and they need to dispose of them and they will need strength in the Euro/demand, to do that. Sure enough we saw the bounce above $1.30, but it was always anticipated this would be used to exit the long $1.30 trade and perhaps go short. As I said above, a break of $1.30 will mean trouble for the market and the trend as the Euro and the market are so closely correlated (which is actually a proxy for the $USD/Market inverse correlation as the Euro is the biggest FX component of the Dollar Index at 50%). Remember the head fake breakout, there it is in green, this created demand and allowed FX $1.30 longs to sell/short the Euro.
Here is the more recent and much more bearish descending triangle, again with the breakout that I suspected as the pattern is too obvious and the FX market too big for it to be ignored.
Yesterday on the breakout, look at 3C, that was the final nail in the coffin and one of the reasons I made my first video in probably 6 months on the probabilities of a Santa Claus rally.
Now that the Euro is under $1.30 for the second time (the first break of important support almost always sees a countertrend bounce), the market is in a much more dangerous downside situation.
With the Euro at $1.2931, it lost 141 pips in roughly 4 hours, a monster move.
I had said the following,
"Of course in technical analysis dogma a descending triangle is supposed to break down, but in the real worls we see these head fakes 80-85% of the time on obvious patterns and as I said last night (after 3 smaller triangles head faked 3 consecutive days in a row in the FX pair), this one would too, probably very early in the morning. It turns out it did so around midnight EDT."
So here we are now...
Yesterday on the breakout, look at 3C, that was the final nail in the coffin and one of the reasons I made my first video in probably 6 months on the probabilities of a Santa Claus rally.
Now that the Euro is under $1.30 for the second time (the first break of important support almost always sees a countertrend bounce), the market is in a much more dangerous downside situation.
With the Euro at $1.2931, it lost 141 pips in roughly 4 hours, a monster move.
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