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Last Thursday I did a quiz (see quiz here), which was addressing what looked to be a repeating pattern in the U.S. Dollar and that a breakout looked to be at hand. In the subject line of the post I added…”Potential Game Changer was at hand.” I remain of the belief, that if we can get the direction of the currencies correct, portfolio construction becomes easier and more rewarding.
Speaking of currencies, the Swiss Franc was up against a 30-year resistance line and had formed a rather large bearish rising wedge, suggesting lower prices were ahead. When an asset is up against resistance investors will want to harvest their long positions and if aggressive, attempt to score on defense with a stop just above resistance. In todays trading the Swiss Franc at (2) had one of its largest single day declines in decades!
A 1% rally/decline in a currency is a pretty big single day move. The Franc declined over 7% today (for those that shorted the Franc, they had a GOOD YEAR, TODAY… Congrats!!!)…See Franc ETF (FXF) Quote here….Can one say Holy Cow? This makes the bearish wick in the Russell last week looks like child’s play!
The currencies have been quiet over the past few months (Dollar trading sideways). Listen to the messages of the currencies going forward. Remember once the Dollar broke falling resistance in 2008, the waterfall in prices took place….now the Dollar looks to be breaking resistance again! Watch, liseten and respect what the currencies are saying!!!
Chris, it seems that Gold also has had a rather bearish wick today and perhaps your thesis on the US Dollar as potentially once again being the ultimate safe haven may ring true.
Any thoughts on the VIX breaking out of its daily consolidation triangle/wedge pattern to the upside today? Next leg down on “risk” assets domestically maybe?