Wednesday, February 22, 2012

Are We There Yet ? Part 2

The ever so slow trend change is yet to be confirmed. The Advance Decline line is sitting just above the 13 DMA.
After a long time today all the three indexes were in various shades of red, none severe. 
DeMark set-up gave a Trap Sell confirmation on SPX today. It is not one of the strongest of signals but taken with everything else, it does increase the chances of a correction. In the absence of any other trigger let us look at the FX today.

After the Greek drama, there is nothing much left for EURO to move higher. From a low of 1.2975, it spiked to 1.3291 on the news that Europe has been fixed.

After that it seems to have lost its MOJO and like the cardiogram of a dying patient, it is losing momentum. Sooner rather than later, gravity will pull it down. Its counterpart, USD has surprisingly come back to life.
From FXCM: "The dollar breached key resistance at the confluence of the 100-day moving average, former channel resistance dating back to January 13th, and the 50% Fibonacci extension taken from the August 1st and October 27th troughs at 9850. The index encountered resistance at the 50-day moving average at 9884 before closing just lower at 9880. Note that the daily relative strength index broke above former RSI support dating back to the October 27th low suggesting further dollar advances may be in the cards in the days to come."

AUD is on a sell signal and a comparison of SPX vs AUD shows that SPX has some catching up to do:

But if AUD cannot break down 1.06 level, then we may see it run above 1.0840 and SPX runs higher along with it.

While all these points to further downside in the short term, LTRO-2 will commence by end of the month and more liquidity will be pumped in. So unless we see some big drop in the next four trading days, we can kiss the correction goodbye for another two weeks. 

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