Aspen Trading Group
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It is not uncommon for traders to focus in on one type of analysis - be it fundamental or technical. And if one is just starting out, this is a logical and practical approach. However, using a one-dimensional approach is often not adequate in the long-run. Markets are too deep and complex for just one analysis tool. Granted, no approach will ever mitigate the unknowns, but if you can examine the market from many different angles, it can certainly increase your odds of identifying better quality/higher probability trades.
So, the goal of starting this thread is to encourage a dialog that allows for a good flow of information that expands beyond just looking at charts or fundamentals.
Let me kick it off with some thoughts on the market today.
The action is real interesting today simply because of the divergences we are seeing, here are a few observations and charts worth noting:
- The S&P's, as of Friday's close were clearly locked in a bearish wave count that projected prices to push towards 1150/40
- However, if we overlay that S&P forecast on the FX market, we are not seeing clean across the board correlations. This has been an issue off and on over recent weeks, and frankly, it is not clear why there are these divergences. Let's just do a quick snapshot of % change this AM:
S&P 500: -2.08%
EUR/USD: -0.38%
AUD/USD: -1.62%
AUD/JPY: -1.73%
Dollar Index: +0.41%
- So while the correlations remain intact, i.e. lower stocks = high dollar, the magnitude of the move in the underlying pairs remains uneven. If not for the ugly technical backdrop in the S&P's, one would seriously have to consider long positions in EUR/USD just simply due to the fact that despite the worst of all possible news in recent weeks, it has held in real well.
- Maybe it is time to consider that EUR/USD is destined for lower levels - the market is certainly positioned to the short side and given how price action has been lethargic to the downside in recent sessions, perhaps the wave count below is something that we might need to consider as a potential. The market would be very caught off guard by a rally in EUR/USD.
We are not suggesting being contrarians for the sake of being contrarians - we are just surveying the landscape and seeing some 'red flags'. Let's get the dialog flowing - love to get others perspectives.
So, the goal of starting this thread is to encourage a dialog that allows for a good flow of information that expands beyond just looking at charts or fundamentals.
Let me kick it off with some thoughts on the market today.
The action is real interesting today simply because of the divergences we are seeing, here are a few observations and charts worth noting:
- The S&P's, as of Friday's close were clearly locked in a bearish wave count that projected prices to push towards 1150/40
![11.21.11.png](/proxy.php?image=http%3A%2F%2Fwww.aspentrading.com%2Fuploaded_files%2FNovember_2011%2F11_21_11%2F11.21.11.png&hash=dbb916f67d9d634a9f38fc019d92aefe)
- However, if we overlay that S&P forecast on the FX market, we are not seeing clean across the board correlations. This has been an issue off and on over recent weeks, and frankly, it is not clear why there are these divergences. Let's just do a quick snapshot of % change this AM:
S&P 500: -2.08%
EUR/USD: -0.38%
AUD/USD: -1.62%
AUD/JPY: -1.73%
Dollar Index: +0.41%
- So while the correlations remain intact, i.e. lower stocks = high dollar, the magnitude of the move in the underlying pairs remains uneven. If not for the ugly technical backdrop in the S&P's, one would seriously have to consider long positions in EUR/USD just simply due to the fact that despite the worst of all possible news in recent weeks, it has held in real well.
- Maybe it is time to consider that EUR/USD is destined for lower levels - the market is certainly positioned to the short side and given how price action has been lethargic to the downside in recent sessions, perhaps the wave count below is something that we might need to consider as a potential. The market would be very caught off guard by a rally in EUR/USD.
![11.21.11EURUSD4hrII.jpg](/proxy.php?image=http%3A%2F%2Fwww.aspentrading.com%2Fuploaded_files%2FNovember_2011%2F11_21_11%2F11.21.11EURUSD4hrII.jpg&hash=fb19e2211cf75d5b00271a0bfffbc858)
We are not suggesting being contrarians for the sake of being contrarians - we are just surveying the landscape and seeing some 'red flags'. Let's get the dialog flowing - love to get others perspectives.