Looking at this chart, I think it’s possible that we have a lot of volatility ahead, because just as it got overdone to the downside, it’s rapidly getting overdone to the upside.
If we do break down below the candlestick for the day, it could end up turning it into a “hanging man”, which of course is a very bearish indication. On the other hand, if we break above the 200-Day you make we could go looking to the 1.06 level. Breaking the 200-Day EMA is a big deal, even though there’s no fundamental reason whatsoever for this to happen. The market is vicious at this moment, as it had been leaning in one direction for so long that the snapback was almost inevitable when you look back. However, that doesn’t necessarily mean that it can continue going higher.
A lot of questions we asked this week, and it is even possible that we get a false breakout and then turn right back around. The fact that the market is moving on pure emotions these days means that at any moment, you could see some type of ridiculous move. It is because of this that you need to look at this through the prism of a potential overbought condition. Looking at this chart, I think it’s possible that we have a lot of volatility ahead, because just as it got overdone to the downside, it’s rapidly getting overdone to the upside.
The European Union will continue to struggle with energy and other economic conditions, and of course the Federal Reserve will do everything it can to keep monetary policy tight and fight inflation. I’m waiting for some type of negative move to start shorting, and right here is an area where you would expect to see a lot of noise. With that being said, I think this is a situation where slow and steady wins the race.
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