Key Maybe the Euro/USD

There are a lot of price formations that could be and probably should be head faked to the downside, the difference between a head fake move and a real move is in the signals, all week we've had signals suggesting that we see a range in the market that acts as the reversal area, but before almost every reversal there's a head fake move of some sort, if the market were to break to the downside for real, there would be a head fake move above the range, a reversal to the upside and we'd expect a head fake move below the range.

We can see clearly why a move below AAPL's bearish descending triangle would bring in shorts; this is one of the reasons head fake moves are so prevalent-the shorts act as the fuel for the early momentum when the reversal comes as they are at greater losses they cover providing more demand and sending prices higher-this is 1 reason for head fake moves but there are many. IThis particular reasons though is often expressed in the saying, "From failed moves come fast moves" and it is the exact mechanics of a short squeeze on a reversal (the fast move) that make this saying true.

So why the ranges? Simple, a rectangle, which is what the SPY, DIA and QQQ ranges are, is a consolidation/continuation pattern, with the downtrend from the reversal of last week's highs, these rectangles are interpreted by technical traders as consolidation/continuation patterns, continuing the downtrend. This is where we see technical traders taken advantage of so often as Wall St. knows exactly what they will do and often sets them up to become the primer for the reversal, "The bear or bull trap".

 I was just looking at the Euro/USD and saw some interesting things, first the USD is not moving up the last few days so it's not part of any downside pressure on the market, the Euro has been moving down and it has a positive correlation with the market, but it just tested and potentially set up it's own bear trap today. While the USD isn't moving despite the Euro moving down, a reversal in the Euro would move the USD down and put positive pressure on the market.

Take a look at the Euro and USD charts, something interesting happened today (many interesting things have happened since yesterday).

 The EUR/USD pair broke the psychologically important $1.29 area today, but then popped back above it.

Here's a closer look at the break below and back above as well as the US open at the green arrow and a triangle consolidation at the green rectangle.

 Here's that same triangle consolidation today in the Euro on the FXE chart.

 Looking at a 1 min chart, there's a negative divergence on the open yesterday morning, today there's positive divergence but on a 1 min chart that's enough to cause a consolidation only such as we see or it could be for a move higher, we'd need to see longer timeframes to decide.

 The 2 min chart's leading positive divergence makes it look like more than a consolidation

 The 5 min chart's leading positive divergence makes it look like a reversal, we saw the same thing only negative last week which brought the market down from the mid-week highs.

 A larger view of the 5 min chart since last week's highs and this week's range shows a positive and leading positive divergence in the Euro.

 While at the same time UUP -the $USD intraday 1 min chart shows a leading negative divergence as UUP has stayed in a range.

 The 2 min chart USD also leading negative, the opposite of the Euro in the same timeframe.

 The 10 min chart positive at last week's market highs and dollar's lows and a negative divergence in to higher prices as well as the dollar's range this week.

In essence, a break higher in the Euro could be exactly the trigger for a break higher in the market on $USD weakness.

Here's the change in the Euro tight triangle since I started this post. This will be important to watch.

Longer term, as I posted earlier today I'm bearish on the market in a big way, the long term 1 day USD chart has a leading positive divergence suggesting upside in the Dollar and downside in the market.