Value of Perfect Information

A quick review of last week’s guidance

Last week I said:  “The currency pair closed above 1.50 for only 1 day and sold off hard for the next two days.  This makes me cautious about expecting higher prices although so long as it stays above the 50ema, now at 1.485, I would expect higher prices for this pair.  A close below 1.482 would confirm at least a short-term top has been put in place.”

The currency pair closed at the low of the week, however not below the low of last week so the weakness could be short-lived – on the other hand, assuming the pair maintains is highly correlated movement with the major indices such as the SPX, a move down at least to 1.476 would not surprise me during the following week. I’m inclined to assign a higher probability to a break below 1.48 rather than a break above 1.52.

Regarding the SPX I said:  “… I’m thinking that if the ES can make it above 1098 and then 1100 (Monday-Tuesday), it’s very likely to make a new high for the year.  I would think upside targets in the range of 1020-1030-1035 could be in the cards by the EOW.  Conversely, if ES takes out 1088 then roughly 1082.5 at the beginning of the week, I would expect it to travel below last weeks low of 1067, first target would be 1060-1061 and then the low 50s if that level doesn’t hold.”

ES stayed above 1092.5 Monday and overtook 1100 on Tuesday, making a new yearly high on Wednesday, Thursday, and Friday. The high made was 1119, 1 point away from my high target range.

The coming week, I’m inclined to favor a probe down as my primary scenario.  Ill be looking for the ES to get below 1095, sometime Monday-Tuesday as a clue that the market is in agreement with my primary scenario.  I would look for a low for the week to lie roughly in the 1060-1070 range.  Alternatively, if the ES is able to close above 1119 early in the week, I would expect a high of the week to fall within the range of 1025-1140.

Some mixed signals:  Dow Transports closed the week very strong, all other major indices closed in the middle of the range, and the US Dollar closed the week near its weekly high.

One chart is attached with commentary:

Fig. 1 – SPX VPCI system chart with long term VWAPS

Categories: Charts , Commentary , Exclusive , Markets