Here’s Where I See The Most Potential

S&P’s: 1  Bears: 0

Yesterday’s late day rally (a.k.a. jam job, buy
program, bargain hunters and who can forget the short covering rally) rescued
the S&P’s from a certain black eye technically speaking.  I did not have chance
to mention it in yesterday’s column, but 1108 on the S&P’s is key.  It is a bull
trend-line extending all the way back to 2003.  A break of this level would
surely have set the stage in the days ahead for the Fib level at 1085.  But for
now, all is good. 

Today’s payroll number may shed some light on
future price action.  The market continues to have “knee-jerk” reactions to
every little word or report.  Yesterday was no different.  Naturally as day
traders this has little to no impact on trading, swing trading, particularly FX,
has been rather challenging as a result.  In fact the mere mention of the
Chinese economy slowing down by Alan Greenspan sent the commodity currencies,
AUD and CAD
tumbling.

It is unlikely that this scenario will die out
soon.  The market seems almost to not trust itself up here and is looking for
every bit of confirmation to let it know that it is OK to be long.  Madness,
pure madness.  As best I can tell, HVT is
the best edge in this crazy market right now.

FX (Forex)

As of now, this is where the most potential lies,
and consequently, the most risk.  FX has been challenging of late, there is no
clear trend, in fact a trend change is taking place, the result is no consensus
on when or even if the new trend will develop.  Technically this is what I see:

Dollar Index: 
the daily chart looks tired, but with support at the 50 ema, however, one cannot
get too bearish.  The weekly chart is showing signs of slowing momentum and
remains stuck in a downward trend channel going back to early 2002.  Verdict? 
My guess is the dollar trades lower in the weeks to come.

EUR:
 the complete opposite of the Dollar Index.  Weekly
momentum recovering, daily chart firming at or near 50 ema and the bear trend
line from February has been breached.  Verdict?  Let chart develop, let the
Dollar be your lead.

GBP:
 neckline break of daily head and shoulders pattern with
no recovery of that level as of yet.  Trading below 50 ema.  Weekly momentum
still weak.  Rate differentials remain positive.  Verdict?  H&S pattern and
daily chart point lower, but sideways action is also strong possibility.

The fact remains, there are no one way bets right
now in FX.  Until some new trend asserts itself, you will need to rely on your
trading skills and forget the trend is your friend mantra for the time being.  I
am hopeful that today’s employment data will bring us one step closer to better
trading.

As always, feel free to send me your comments and
questions.

Dave