Another Day In The Madhouse

It seems that the greed of market participants, at least in equities, has reached exponential levels where even the Dollar carry trade correlation is blatantly being ignored. Take a peek at my Euro/S&P futures chart:

Make sure you are wearing your 3D glasses so that you can see all the detail on this chart. What’s apparent is a rather weak Euro against a rather impatient S&P. However, the madness is not just limited to the S&P – the Russell pushed up strongly today – apparently the boys are trying to hold the position in the high beta indexes and are now rotating into small caps to keep this turd afloat.

I’d call that a nice clean gap fill on the Dollar – we did see a slight drop in equities this morning but they snapped right back. So now we’ve got the Dollar up along with equities – geeeh, I wonder how long that’ll last. It’s obvious that Dollar bears expect new lows shortly – and heck – maybe they are right, but after 9 continuous days up in the ES, I am a bit surprised to see so much confidence by equity traders. Maybe they know something I don’t – and admittedly we’ve been around 3% Dollar bulls for almost two months now – who knows how low they can push this thing and for how long.

I just wound up 2sweeties’ DXY odds calculator and apparently we have currently pushed slightly past the 75.46 retracement level. The odds on that one are only about 49% – but that’s relative to my 100% mark which I placed very conservatively at 76.88 (i.e. near the recent highs).

In terms of frequency we are above the 15 percentile until well past 76. So, I’d wager that it’s possible we see a run to 75.73 before we see a push back. Again the DXY odds calculator has been exclusively provided courtesy of retracementlevels – head over there and take a look at some of 2sweeties other offerings. I personally am quite partial to his hourly ES and daily SPX odds calculators.

Well, since I started to write this post the market has given up a lot of upside, so I guess I wasn’t halucinating after all 😉 Alright, I shall be back shortly with an updated wave count.