The Real Slim Shady

Pressed for time this weekend – let’s get right to it. The battle of the titans looms as we have reached a fork in the road. And as the late Yogi Bera** put it so aptly:

When you get to a fork in the road – take it!

Arguments for the bears:

The Dollar bear squeeze has had the carry traders on the run. But it’s now reaching an inflection point where the Euro baby’s got decide what it wants to be once it grows up – become a bear (i.e. let this turn into a third wave), or grow some brass balls and turn into a raging bull (i.e. the drop we saw since December was a merely a-b-c retracement). Either way, I don’t think this thing is done yet as the divergence painted here on my Euro/Equities chart looks like an equity bull trap me.

Let’s zoom out of the actual Euro futures chart and for a second digest what’s been happening in the past few weeks. We basically retraced seven months of painstaking upside progress in a matter of two and half months. That’s quite a drop and it’s been quite violent. Yes, there is the possibility that it’s only a retracement but it sure ‘feels’ like something else.

Now let’s hear from the bulls:

If I drink my own kool aid I should be anticipating Minor wave 2 snapback in equities here, at least very soon based on the 10-day MA channel the CPCE painted over the past 10 months or so. This is the chart that should make the bears very nervous as the snap back will most likely be very violent. If it comes, let ‘er ride and don’t go short too early. However, once we drop towards the 0.55 range again get positioned for Minor 3 of Intermediate (1) of Primary {3} – it’ll be fun.

Nothing really sensational on my wave counts – everything is still in play. As I said last week – Minor 2 will be confirmed at 1,104.75 – the difference is only intellectual as theta burn and drops in volatility hurt one’s options either way 😉

The orange scenario requires new lows and a drop through 1,045 – if we get it what follows could be very ugly for anyone holding long positions, so make sure you’re properly stopped/hedged.

Next week will be very important – it’s OPX week again plus we are rolling into a potentially bearish time cycle. Which is why I’m a bit skeptical about the bullish scenarios but felt it to be my duty to offer a counter perspective. Expect some volatility, headfakes, and general craziness until the tape decides upon a direction.

Just to remind you guys that Monday will be Presidents Day in the United States (originally dedicated to Lincoln’s Birthday but they have to honor every asshole these days – who’s that Washington dude anyway), so the cash markets will be closed. I think the futures might have an abbreviated session – not sure actually.

Bottom line: Chances are we will pull out of this limbo territory soon as it is now time for the real Slim Shady to stand up:

Cheers,

Mole

** He’s aliiiive – alliiiiiive I say!!!