- Posted by Greg Harmon
- on June 14th, 2012
What will happen with the Euro? Will Greece exit? Will Germany save Europe? And what about the other side of the pond? Is the economy slowing? Seems so. What is this I hear about a fiscal cliff? Could our government purposely lead us into a worse recession that what has already happened? All of these questions and more are weighing on the markets. The ratio chart of the S&P 500 SPDRs, $SPY to the Euro, $EURUSD, below shows that turmoil and uncertainty in a picture. Since March the ratio has been finding resistance against moving higher. And with each successive touch at that resistance the move lower has gone deeper. This expanding triangle or wedge, some would
call it a megaphone, reeks of a top and reversal lower. But it could just as easily end up breaking to the upside and continuing the current rising trend. With every dip lower and test of resistance the eventual move looks to be bigger. Currently break higher targets 1.13 or 7% above the current level, in favor of the SPY. A move lower under eh bottom rail has a target of 0.95 or 9% below the current level and in favor of the Euro. Smack dab in the middle there is no clear direction or even a hint of one. Even the Relative Strength Index (RSI) is oscillating around the mid line with the Moving Average Convergence Divergence (MACD) indicator doing the same around zero. It looks like a catalyst is required, and luckily there are plenty of them to come in the next few days, weeks and months. Until one moves it the markets just may continue to muddle through.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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