If we were to turn around and break down below the bottom of the candlestick from Friday, that would be an extraordinarily bearish sign.
The first one of course would be the psychologically important 0.60 level. There’s not a lot of structure there to suggest anything one way or the other, but it obviously will cause a certain amount of psychology to come into the picture. If we can break above there, then it’s possible that we could go looking to the 0.62 level. The 0.62 level was an area that was important previously, and of course we have the 200-Day EMA sitting just above there and dropping. Both of those could cause some issues for any rally that we see.
Quite frankly, not much has changed in the world over the last 24 hours, but it certainly looks as if everybody is ready to go bullish on risk appetite again. The crushing of risk appetite that Jerome Powell caused on Wednesday is all but eviscerated at this point, and this leads me to believe that the Federal Reserve will continue to get aggressive. Ironically, the weaker the US dollar gets, the more it suggests that there is going to be a lot of growth-oriented demand. It’s exactly what the Federal Reserve does not want and moves like this make them think that they have a long way to go before they are done flogging the market back into shape.
If we were to turn around and break down below the bottom of the candlestick from Friday, that would be an extraordinarily bearish sign. At that point, I would fully anticipate that this market drops down to the lows again. Think about the ferocity of a 3% move, and then seeing that wiped out rather quickly. If that would be the case, look out below. Rallies at this point are more likely than not going to be selling opportunities eventually.
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