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Price & Time: What Happens When Everybody Thinks the Same Thing?

Price & Time: What Happens When Everybody Thinks the Same Thing?

2013-11-19 13:10:00
Kristian Kerr, Sr. Currency Strategist
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Talking Points

  • Frothy equity market sentiment making us nervous
  • Euro fails at key Gann resistance level
  • Cable closing in on important resistance

Looking for a way to pinpoint sentiment extremes in real time? Try the Speculative Sentiment Index.

Foreign Exchange Price & Time at a Glance:

Price & Time Analysis: EUR/USD

PT_NOV_19_body_Picture_4.png, Price & Time: What Happens When Everybody Thinks the Same Thing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • EUR/USD traded to its highest level in over two-weeks on Tuesday before reversing near the 1.3540 7th square root progression of the year’s low
  • Our near-term trend bias is lower in the Euro while below 1.3595
  • The 1.3430 area is immediate support, but weakness under the 4th square root relationship of the year’s high at 1.3360 is needed to signal a broader downside resumption
  • Today is the tail end of an important cycle turn window
  • A daily close over 1.3595 would shift our near-term trend bias back to positive in the Euro

EUR/USD Strategy: Like the short side while below 1.3595.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

EUR/USD

*1.3360

1.3430

1.3500

1.3540

*1.3595

Price & Time Analysis: AUD/USD

PT_NOV_19_body_Picture_3.png, Price & Time: What Happens When Everybody Thinks the Same Thing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • AUD/USD has moved steadily higher from last week’s cycle turn window
  • Our near-term trend bias is now higher following the daily close over the 4th square root relationship of the October high at .9360
  • A Gann angle convergence near .9475 is a clear upside pivot with traction above needed to signal the start of a more important move higher
  • Today is a minor turn window in the exchange rate
  • A daily close back under .9360 would turn us negative on the Aussie

AUD/USD Strategy: Like buying on weakness over the next day or two against .9360.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

AUD/USD

*0.9360

0.9400

0.9415

0.9425

*0.9475

Price & Time Analysis: GBP/USD

PT_NOV_19_body_Picture_2.png, Price & Time: What Happens When Everybody Thinks the Same Thing?

Charts Created using Marketscope – Prepared by Kristian Kerr

  • GBP/USD touched its highest level in over two-weeks on Monday
  • Our near-term trend bias is now higher following the break of the 50% retracement of the late October/early November decline at 1.6055
  • A convergence of Gann levels near 1.6215 needs to be overcome to signal the start of a more important advance
  • Today is a minor cycle turn window
  • A 3rd square root relationship of the year’s high at 1.5950 is important support and only a close below this level would turn us negative on Cable

GBP/USD Strategy: Looking to buy on weakness.

Instrument

Support 2

Support 1

Spot

Resistance 1

Resistance 2

GBP/USD

*1.5950

1.6050

1.6085

1.6160

*1.6215

Focus Chart of the Day: S&P 500

PT_NOV_19_body_Picture_1.png, Price & Time: What Happens When Everybody Thinks the Same Thing?

The frothy sentiment in the US equity market is beginning to make us a little nervous. On Friday the Daily Sentiment Index (a daily survey of short-term futures traders) in the S&P 500 touched 93% bulls. This is higher than what was seen at the peak in October 2007(before the Financial Crisis) and the peak in April 2010 (before the Flash Crash). Now we are not saying that a flash crash event is imminent, but when sentiment becomes so lopsided an extra bit of caution is always needed. We say this because to get to 93% bulls the equity market has to pretty much price out all outside risk. Historically, such thinking is a powder keg as any challenge to the view can spark a very messy and aggressive unwind with the whole market so clearly leaning all in the same direction. In the SPX, both 1813 and 1833 look important from a Gann perspective. Under 1742 at anytime would warn that top of some significance is in place.

To receive other reports from this author via e-mail, sign up toKristian’s e-mail distribution list via this link.

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

This publication attempts to further explore the concept that mass movements of human psychology, as represented by the financial markets, are subject to the mathematical laws of nature and through the use of various geometric, arithmetic, statistical and cyclical techniques a better understanding of markets and their corresponding movements can be achieved

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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