I have been watching the correlation between S&P and Eur for a long time. And I believe it is worthwhile to point out this relationship to my readers. Since March 2010 S&P and Eur were traded in a very high correlation pattern, with Eur leading S&P for at least several days. I highlighted the leading of Eur in red box and the green-blue dotted line. Obviously the trend development of Eur needs to be watched closely enough for traders who want to get ahead of others in trading US equities.
Both Eur and S&P closed below the head and shoulder neck line last week. The signal is crystal clear, short the market is the right way to go.
4 comments:
The mkt has been down for 2 wks, although in the early half of last week, it actually went up a little bit. I'm in the bearish mood as you are, the question is how long it will last? Unlike May and June, a bunch of negative news dragged the mkt to year low, the fundamental of the mkt hasn't been worsen, rather I would call it stagnant. Yet, private sector has been adding jobs, which gives some hope. Therefore, how likely the mkt will experience a waterfall and how long it may last?
Btw, I didn't intend to reply to everyone on that networking group, maybe I hit a wrong button. I knew many people there, and it's easy to find me on facebook, just search xiulin shen and befriend me. Again, I want to say thank you and nice posts here! They are educational~Keep it up!
Thanks a lot for the nice comment Liz!
Well, technical analysis usually leads the economy. Stocks market bottoms before you see fundamental deteriate.
In terms of fundamental, European debt issue is an on going issue, US unemployment rate is still high, bank is not lending, consumer sentiment is wanning, economic cycle index points to another recession. Just to name a few of them.
I will make timely post when I see market changes direction.
NP! I was bullish in Q1, although I longed, I wasn't sure why the mkt could go up for such a long time and so consistently. Now the bear mood came after the onset of European crisis, and many others as you pointed out, I also heard voices from the other side. Unemployment rate is high, yet researchers said the job adding speed is a lot faster than previous recessions. European crisis are not as bad as people think, Germany is leading the way out of the blue. Interest rate is still at historic low, and the gov is thinking about another round of stimulus...But all in all, as you said, TA guides the direction. So I'd better be a loyal reader here =)
Just think why government needs to add more stimulus, you will realize that the fundamental is no better than the crisis time.
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