Do you trade the USDX? If yes, watch for this potential mini-crash in September
FX:
Yesterday we reminded readers that we took profit
on 1/2 our long USD/CHF position at 1.2670 and the subsequent dollar collapse
took out our trailing stop at 1.2550. Only a move above 1.2700 would have
confirmed the next leg higher and the fact that it didn’t reach our ultimate
upside target suggests our “September Mini-Crash” scenario is right on target.
Even if it came a day early!
In the chart below note how the wave pattern held
up nearly perfect into a “wave B” high. Having taken profits on two long USD/CHF
trades in both rallies from channel support was what we were expecting.
Unfortunately, we had hoped to short USDX from higher levels. So now that the
dollar is trading below it channel support, it suggests that USDX is completing
“wave 1 of C” down. The next move should be a correction back to the underside
of this channel support followed by the “mini-crash” in “wave 3” down. Only a
move above 87.50 would negate this outlook and suggest something else was
developing.
Stocks:
In Sunday’s report this weekend we said to expect
a “bounce off of the 1,200 level. As long as this holds we favor a continued
correction for the next couple of weeks followed by a break below here which
will see intensified selling pressure.” So far so good on this forecast. SP500
hit 1204 and the futures dipped just below 1200 before staging an impressive
rally over the past few days. Key resistance for the bearish scenario is 1245
Bonds:
No change: As we have said for the past few
weeks, an expected decline in stocks would likely force more players to go long
bonds, which they are doing now as the 10-year yield pushes back to 4.0%.
Regards,
Jes Black
FX Money Trends
613 4th St Suite 505
Hoboken, NJ 07030
Tel: 646.229.5401
Jes
Black is the fund manager at Black Flag Capital Partners and Chairman of
the firm’s Investment Committee, which oversees research, investment and
trading strategies. You can find out more about Jes at
BlackFlagForex.com.
Prior
to organizing the hedge fund he was hired by MG Financial Group to help
run their flagship news and analysis department,
Forexnews.com. After four
years as a senior currency strategist he went on to found
FxMoneyTrends.com – a research firm catering to professional traders.
Jes
Black’s opinions are often featured in the Wall Street Journal, Barrons,
Financial Times and Reuters. He has also written numerous strategy pieces
for Futures magazine and regularly attends industry conferences to speak
about the currency markets.