The Currency Connection

Now some things are making sense, this is why you have to look, look, look everywhere and compare, compare, compare="3C"

I don't know if the currencies had anything to do with the original move that started to be put together on Tuesday, but it looks like currencies will have some part in the end game.

By the way, that triangle I showed you in the SPY, if it is to break higher, don't be surprised to see a break below the triangle first followed by a move higher, it gives it more upside momentum on short covering.

Take a look at the EUR/USD which I have been saying at least all of this week, "This is under distribution".

 Here's the EUR/USD, I mentioned the initial break in a post last night, but that was nothing compared to the break down today, that's a parabolic decline.

Now it's true that the two emotions that move a market are fear and greed and of the two, Fear is stronger, that's why markets fall faster than they rise, but this move down is pure parabolic, it's an emotional over-reaction and they tend to be retraced, meaning expect a strong move right back up. In fact the turn to the upside is already starting; this would help commodities and stocks and nearly every other risk asset, at least for the short term while it moves up.

 This is the Euro Futures-no pairing, just the Euro futures on a 4 hour chart, the big picture! Note that the last run up was in to not only a negative 3C divergence, but a stronger leading negative divergence, this may reflect part of the reason the drop was so intense.

 On a 30 min chart we can see a relative negative divergence at the red arrow and a leading negative divergence (stronger) in the red box, this is what I was telling you about all week except on different charts and timeframes. In yellow you get a feel for just how parabolic the move down was.

 This is the Euro Futures 1 min chart, basically it's today and there's a 1 min positive divergence as the Euro flattens out from the drop, this is where we see accumulation and this is a 1 min chart so it can move the Euro short term, but it's not strong accumulation or a large amount, if it stays that way, it will only support a quick move to the upside which will likely be sold in to giving us a negative divergence and setting the Euro up for another fall and the market with it-THAT MAY BE OUR END GAME.

 This is the other half of the pair, the $US Dollar index futures, this is a bit different from just the $USD, but close enough. The longer term 60 min chart is exactly the opposite of the Euro longer term chart, it's positive suggesting the $USD move higher, that puts downward pressure on commodities, oil, and stocks. This is a strong leading positive divergence so today's move makes sense even though it is too parabolic for me to believe it will hold without seeing a downside correction (an upside correction in the Euro and a market positive move).

 The 1 min chart for the $USD shows a negative divergence as it flattens out and loses upside momentum, again this isn't huge distribution, but enough to move the currency for the day assuming it doesn't spend several more days accumulating in a base which I don't think it will.

 This shows the EUR/USD and the negative divergence as it went higher, it also shows how parabolic the drop was, I NEVER trust parabolic moves whether up or down, they are almost always tested in the other direction with a move nearly as strong.

Here's the EUR/USD pair on a 1 min 3C chart, notice distribution before the fall? Also notice accumulation right now?

This is essentially a perfect set up to lift the market to the new highs above the range, but as it stands, it's not enough to hold it there for very long, which is exactly what I said last night, I wouldn't be surprised at all if we saw an initial very strong move to the upside that fails quickly and is followed by a very strong move to the downside which essentially cracks out top here.

We'll see how it develops, but if currency traders are making the move right now as 3C shows, then bond traders who are better informed will certainly know and that's why they'd flood out of
TLT to take advantage of a quick risk on move.