Today’s gap down in FXE now places it on the SELL side of our 8/8 hi lo channel, supporting a previously noted reversal trend that commenced on Oct 15th. At the open it looked like the VIX was going upslope to further support a bearish stance but as of mid day the VIX has given back 50% of its pop.
Not surprisingly, the FXE is not alone in this chart pattern with EEM, EWC, FXI, BZF and others displaying a similar dip. SPX, DIA, IWN and the Qs haven’t reached the reversal threshold as yet although the DIA is close. Whether this global pullback is the product of Chinese interest rate adjustments or symptomatic of a more fundamental overbought basis remains to be seen. Meanwhile, earnings reports continue to muddy the waters and the best course of action at this junction, IMHO, is to trade small and fast. If FXE does continue deteriorating over the next week or so, 133.50 looks like a good bet to provide solid support. That’s a long way from the current 138.00 level but that’s where FXE was only 3 weeks ago, so not out of the realm of possibility.
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