By now, this is old news, but apparently the world isn’t doomed just yet. The Mynas missed. The fiscal cliff got a temporary postponement. And the Bush tax cuts become the Obama tax cuts by moving the income cutoff for the top rate from $250 a year to – wherever it is now – $400 something I think. Just like that, the federal government did their job for a few days, market uncertainty took a breather and all of a sudden the markets are on a tear. (On a side note: an overpriced commercial building in Coronado I’ve had for sale for 6 months had previously only had one significant showing and I’m showing it three times in January. So even though the fiscal world isn’t ideal, it is warming up temporarily.)
I’m not going to have a political discussion about how those who provide the most to our economy are also punished the most. This week also isn’t a time to throw out warnings about the debt ceiling, or not having a budget (for how many years in a row), or continued crony capitalism from Washington, or even Greece for that matter. Those are all good topics, but not for this week.
For now, things look to be in the clear. (This is of course subject to change without notice.)
The charts are having fun. The S&P closed at five year highs last week. The Dow is hitting significant daily resistance and the euro hasn’t decided what it’s doing just yet. Risk is on. But…
The euro has settled into a 150 ish pip range between 1.325 and 1.340. If equities take a breather I would expect this bottom level to give way in similar price action as we saw on Jan 3. Fib retracements of the most recent daily swing move higher from 1.299 to 1.340 would be buying opportunities. So long as this daily trendline holds, I will remain bullish this pair. But like usual, I don’t care for buying tops.
On the other hand, as equities continue higher it’s interesting that the euro didn’t follow suit last week. While I’m bullish I think caution is prudent. In addition, there is a bit of a bearish divergence in the daily RSI, but this needs price action follow-through to really matter.