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.
Earlier as I pointed out in the video tonight, December hasn't been as solid a month as we usually see in a Santa Claus rally and most troubling is the defensive nature of the market with the Dow being the best performer (internals as well). Small Caps should lead a move like this and the R2k just isn't acting well.
In any case, most of Wall Street won't be back until after the New Year so volume will be very light which has the potential of setting up some big swings (as we saw the market levitated on no news, no real divergences-on Friday afternoon-it was hard to take that move seriously after the rangebound market most of the afternoon, an easy to spot manipulation of the market in a light volume environment) , news could also play an important role as there are few financial releases of any importance. Most of the potentially bad stuff that may arise out of Europe will start mid-week through Friday.
As for the triangle above, I'm guessing that it breaks out sometime in the wee hours of the a.m., possibly on the European open. The price pattern implied target would take the Euro back below the psychologically and technically important $1.30 level. Should this happen, this will further exacerbate the strength in the dollar and may make for a quick short trade in gold which has been performing nearly exactly inversely to the dollar index.
A quick 1-2 day trade in DZZ may make for a little extra spending cash while the longer term position in gold would be severely degraded.
