June is historically the worst month for the stock market. Judging by the last few hours of Friday trading, June apparently came early. A bigger stock market setback probably occurs coincident with a decline in the US Dollar. Why? Long USD and long stocks are both crowded trades. In times of panic, crowded trades get destroyed.
USDOLLAR technicals have pointed us in the right direction of late. Entering May, we were looking for a broad based USD rally to complete 5 waves up from the September low. The reversal off of the Elliott channel (2 reversals actually…5/23 and 5/29) now warns of lower prices in the weeks ahead. How low? I don’t know but I do know that estimated support is 10655 and 10597. Of interest as well is the top side of the former resistance line that extends off of the 2011 and 2012 highs, and of course channel support that defines the advance from the September low.
Bottom line, look lower in the USD over the next 1-2 weeks but into a low. From a trading perspective, I’m looking for short term bearish USD opportunities. USD resistance is estimated at...
EURUSD 1.2934
GBPUSD 1.5128
USDCHF .9618/50
AUDUSD .9620
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