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On 1/17, Standard & Poors down graded European debt and the “Power of the Pattern” was suggesting this could be good for Europe and the Euro in the short-term. (see post here)
At the same time the U.S. Dollar was forming a bearish rising wedge up against resistance, suggesting a two-thirds chance that the Dollar would reject higher prices and move lower. (see post here)
The 4-pack below reflects what has happened to the Euro since the downgrade and the Dollar since it hit the top of the bearish rising wedge at resistance.
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Since the downgrade took place the Euro is up around 4%. Since the rejection post/top of the rising wedge, U.S. Dollar is down around 3%.
If you read the word Racecar from “Right to Left” what do you get? The same word!
The Euro hit a short-term low as the downgrade was being announced. This is a prime example that when a story gets a little too popular in the news you have a choice….go with the popular story of the day or look at it in the opposite direction.
Yes, I’ve been following your dollar analysis. Excellent.
MS…Yes earlier reads looked like a positve pattern on the Dollar (Cup & Handle)
Then what happened? Do markets ever change or become overvalued? After the upside move in the Dollar, the Dollar did what? It formed a “Bearish Rising Wedge at Resistance.” (see post here)
Results..if investors followed the cup and handle breakout, they were on the right side of the move. If investors followed the odds of the rising wedge at resistance, what would they have done? Harvest long values within days of the high of the dollar.
These markets remain fluid, which requires investors to remain open minded that the market can move in both directions. At the top of the Dollars bearish wedge, the Euro was forming a bullish wedge, joined by the largest short postion in years. (see open minded/Euro bullish pattern here)
Have I been wrong in the past and will I be wrong in the future? Guaranteed I will!!!
The suggestions to be long the dollar on the rally and then to sell at the top of the wedge so far has been a decent guess on the upcoming directions of the Dollar.
per your earlier reads of the USD chart, the power of the pattern was suggesting a strong breakout. But the power turned to powder and slammed USD. It is then a simple matter of drawing a wedge and showing another pattern. Fake out.