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QQQ made both a lower low and a higher high on Friday versus the day before. That is often referred to as an “outside day.” Outside days are not terribly unusual. What is unusual is that it happened for the 2nd day in a row. In the past, I have shown that double outside day patterns like this have frequently been followed by short-term rallies. I last discussed this in the 11/14/13 blog. Below is an updated results table.
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The break of the 80.00 major psychological level would have been more significant had the support area not shifted lower from the previous 80.20/80.00 area to the 80.00/79.70 area. This move lower can be attributed to the strength of the euro on the ECB Press Conference. On the Fed front the dollar had the dueling forces of FOMC members Plosser (hawk) and Dudley (dove) but the euro damage to the dollar had already been done as stops through 80.00 eroded the support. It’s clear that traders are running to support as the market braces for Friday’s NFP and that this is as “safe” an area to retreat to in case the number disappoints. The Fed still holds to the current pace and size of taper but it’s unclear whether the soft patch of data will ultimately be “blamed” on the relentless winter storms in the northeast or whether this is an early sign of more weak data to come – which then would (very) likely alter the Fed’s current trajectory.
At Overnight Edges today I published a study that showed the incredible hot streak the market has been on during nights when the Employment Report was released. It got me to thinking…I know the market has done well leading up to the open, how has it done after the open? The answer is below.
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With an economic calendar stacked with dovish Fed members, this “dove parade” hasn’t done the dollar bulls any favors.
Price channel analysis since the equity market low in March 2009, using regression analysis, reveals a clear channel that has been mentioned in prior posts. The S&P E-Mini Continuous Futures Contract (@ES=11NN) is now once again trading in the top portion of the channel.
The U.S. Dollar Index has not been content to stay at 80.00 or below 80.20 for long.
This continues to show just how dollar bears back off holding a short position in this support zone. The reluctance to keep these shorts can be directly tied to the expectation that the Fed will press on with their $10b/month taper pace. However the more perplexing issue is why the Dow continues to rally if taper is still “a go” and the (overall) data is less than confidence-inspiring.
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