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).