September Mini-Crash In The Dollar?
On Friday we wrote
to expect a pullback from the 88.90 level as that marked the 50% retracement of
the previous 3-week slide. Monday’s sharp retreat stopped cold on the 88 handle
and we suggested that according to our two-week outlook we might expect another
bounce up to the 89 area before a possible "September Mini-Crash." Subscribers
to our weekly report know what level we are closely looking at to initiate
shorts on USDX in case of this.
As stated, we covered half our long USD/CHF
position from 1.2485 last week at 1.2765 on Friday and moved our trailing stops
up on the remaining position to 1.2585. USD/CHF remains the consumate dollar
bull outperformer. A move above 88.30 today in USDX would be bullish. But only a
move below 87.50 would be bearish.
Stocks: No change:
The August-October months are historically the worst and considering that the
S&P500 reached our key Fibonacci target of 1245 this month suggests to us a
downturn lies dead ahead. Meanwhile, the VIX continues to climb since we added
to our position over two weeks ago – making for a nice 20% gain so far.
Bonds: No change: Last
week we said, "The impulsive looking decline in yields from key resistance in
the 10 and 30 year contracts suggests a move back to 4.2% for the 10 year. This
level needs to hold to stave off further decline in yields (rally in bonds)." We
reached the 4.2% level on Tuesday and bounced off of this level. If this area
holds there is a good chance for a renewed advance to the key 4.6% level. But if
stocks decline over the coming months (as we expect) then yields may decline.
Regards,
Jes Black
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.