Is the market ready for a shift?

The Dow’s uptrend has been the basis for much of my RISK ON attitude (think: a market psychology of greed) and this means expecting the U.S. dollar to remain in a range or be pressured and U.S. equities to climb. This has led me to focus on the yen-pairs like the AUD/JPY, EUR/JPY, and USD/JPY for swing buys on their respective daily charts. But now I sit looking at a Dow that cannot push to higher highs.

Do my expectations shift now? What is the risk environment? and Where is the Clarity in this market?

 

Trading is about having multiple scenarios in your head (or on paper) and then recognizing the signs that one of the scenarios (we can call ‘em “set ups” too!) are becoming a reality. As traders, we react on the reality of what price action reflects – which in essence is the psychology of the market.

The fact is that IF the Dow can’t press higher, I think that even the S&P’s climb through 1400 could be in jeopardy. Now I’m not getting bearish quite yet but I want to begin considering the scenario where the risk environment could turn neutral or even bearish (risk OFF).

2 comments

  1. Raghee Horner

    The dollar is in an interesting spot because on one hand, the possibility of QE is only a bit of pessimism, some weak economic data results, and an equities sell-off away. Add to that Europe and the Fed has a mess on their hands both here and abroad. 
    The dollar in it’s normal relationship to risk would benefit from the equities downturn we’ve seen but I think it remains in check (congesting) because QE would weaken it and there’s just too much concern for QE to rally the dollar through 80.00 AND keep it up there.

    Reply
  2. Pipkeep

    Hi, I would like to understand the equation: Market with risk appetite = $ under pressure = $ retaining its value hence ranging?

    Thanks. 

    Reply

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