Optimist: [op-tuh-miz-t]; noun
An individual who begins a new diet the day before Thanksgiving.
Last year I wrote the Monday forex article for SFO magazine saying:
“While markets likely will lack normal liquidity, that isn’t to say there won’t be significant movement. Last year [2010] the euro/dollar (EUR/USD) gave us a 260 pip candle the day before thanksgiving, while Black Friday 2009 gave us a candle with a 186 pip range.”
Last year the euro sold off nearly a 200 pip the day before thanksgiving, took a breather and then experienced an additional 115 pip selloff the day after.
MORAL OF THE STORY
The moral of the story is while many institutional traders are out eating themselves into food comas this week; historically we have experienced significant directional movement the day before and after Thanksgiving.
Last year, we entered a consolidation the week before Thanksgiving. This pattern retraced 50% of the prior minor swing move lower before continuing short to the 1.5 fib extension. While inter day moves can be choppy in low liquidity situations, this isn’t to say larger daily moves don’t still respect technical levels (at least on the euro).
What does that mean for us?
First thing is: I’ve been writing articles long enough to quote myself.
But second, the euro entered a consolidation pattern on the 15th just after settling on a significant daily .382 retracement and only slightly above the 100 day moving average. We are currently below the 200 day moving average and last week, anyone who took my advice to short off this indicator could have pulled a few pips from the market. In addition, this current consolidation, below the 200 day moving average, stopped on the .618 retracement of the most recent minor swing move lower from 11/6 to 11/13. Should this level and the moving average above hold, we may look to fib extensions around 1.26 for support. On the up side, fib retracements of the larger daily swing moves lower should offer resistance.
BOTTOM LINE
I would look at a convincing break of either the 100 or 200 moving average to show us which direction things want to go. Expect the first part of this week to go slow, because it has for the past three years. If the past is any guide for the future, volatility should pick up either the day before or after Thanksgiving.
Happy Turkey day!
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