What's going on?

How is the past week? If you just read the numbers, it was pretty much flat. Dow opened at 11983, and closed at 12153. But if you check the intraday, you will find DOW actually travelled 1000 points in the past 3 days. And yes it was right after I posted my notes on volatility. Zerohedge has a good summary.

With today's volume over 30% below average (and the lightest since July), the week ended on an up note as the Dow managed to gain just over 1% having meandered well over 1000pts to get there.

I have to say I am a little bit surprised. Is it over? Is it totally fine now? After we compelled couple whipping boys to resign, now the entire world is clean and clear. BUT, we have a little bit tiny problems here. First let’s look at EUR/USD. We know EUR has good positive correlation with equity. The correlation was very high since summer, because the crisis is from Euro-Zone anyway. Why EUR is not as bullish as US Equity?

 

 In the chart, I showed my zone to short in oval, but EUR hadn’t made there yet. In other words, EUR had not recover from the loss from 11/9 yet, while SPX made over 1.5% gain if considering the overnight trading just happening now.Here is a chart I found online, which explained my thoughts.

I expect them to convergent in short period of time. The only thing I am not sure is direction. Recall my “conspiracy QE“, beat down EUR is an easing to the US equity.

The other thing is the quality of the rally of US Equity. This is another chart I found online.

The author, Kimble says, “So whats new today compared to Monday morning? Not much... some new leaders have been put in place in Europe and key resistance lines remain!”

add: My chart on DOW

This is a 30 minute chart of Dow-30. From the chart we can see how indecisive the market is. The peak line is pretty clear. If it is a channel marked by red line, then market should correct to 11,500 area. If it is a triangle marked by light blue, it will be a weaker pattern. It could either go up from now or retrace to the low bound of the triangle then go up.

My plan: I still need to cast more due diligence on the possibility of Year-end rally. Currently I still think it will come this year. I want to participate into a rally from 1220-1235 to 1400-1440 if everything is perfect.