Friday, September 30, 2011

Morning Market

Let's start by looking at the SPYs EMAs.  Think of each of these as a trend line representing various time periods -- that is, the 10 day EMA represents a short term (2 weeks), the 20 a bit longer (1 month) etc...  First, note the longest trends -- the 50 and 200 -- are moving lower a fairly sharp rates.  This tells us the longer trend is hardly positive.  Prices are intertwined with the 10 and 20, and prices are using the 50 day EMA as technical resistance.  Most importantly, the shorter EMAs are below the longer EMAs, which is a very bearish development.  Overall, the EMA picture is extremely negative and bodes for a further sell-off if the 112 price area does not hold.

The price action for the IWMs is a bit more negative, with the shorter EMAs moving a bit lower at a more sharp angle.  Prices are also closer to technical support.

Take a closer look at the recent action in the euro.  Prices have fallen sharply; they have moved through key support -- all the EMAs and a very important multi-year trend line.  All the EMAs are now moving lower, the the shorter EMAs are below the longer EMAs and prices are using the EMAs as technical resistance.  This is a very sharp reversal of fortune which was caused directly by the WU debt crisis.

In contrast to the FXEs we have the dollar, which has rallied through the 200 day EMA and broken through important technical resistance levels.  The 10 day EMA has moved through the 200 day EMA, with the 20 on the verge.  The 50 is moving higher as well and the 200 day EMA has leveled off.   The dollar has become the safe haven currency by default.