Given that market action over the last 3 months has been closely tied to the dollar/currency markets, I spotted an interesting wedge pattern developing over the course of November. The bottom diagonal line is the trend line from the March low so it is quite significant. The top one has started developing over the past 2 weeks, but the horizontal line is the top which was established in late October. As you can see the currency action is getting squeezed in these lines. I believe that whoever wins this battle will dictate where equities go from here.
Some really funky stuff happened this morning. Coincidence? Consider:
Trichet’s comments caused a flocking to the dollar as liquidity is perceived to be drying up in Europe. It seems that the higher markets over the last couple of months has been liquidity based and not real economic growth (surprise surprise). As soon as his comments hit the airwaves the dollar, DXY, promptly shot up (as much as 9%!) and futures in the US markets tanked, but wait, what do we have here?
Lots of weird activity regarding the dollar. In a world like today, you don’t know what to expect but I bet there are a LOT of dollar shorts VERY nervous right now, especially if economic news begins to come in soft.
This isn’t the first time that fishy business has occurred regarding the dollar recently , but it seems to me that where there is smoke, there is fire.