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For tomorrow's chart (Monday) on SP500, I am looking at this as a possible scenario:
A retest of this weeks low, followed by a move back up to towards Friday's close.
Then I think for Monday overnight, or Tuesday, we might see a sell off back into the channel area. It is too much for one day, so it may take a couple days to get there.
Another scenario I am prepared for, but I don't believe is as likely, is as follows:
(a) Rally up towards Friday's open
(b) Retracement half way towards Friday's close
(c) Continuation higher, making a new high
I will be prepared should this happen, but I am currently putting more weight on the downward move continuing than this. However, if this does unfold, then I would be prepared for us to rocket up towards 1425 very quickly.
Used to be a time when correlation between EURUSD and ES/US equities was a given - thats been history for many months now, as the problem-child spotlight is cast onto the EU (which the US is all too happy to do), while US equities have been in quasi-rally mode, as the EURUSD suffers a seemingly slow death of lower lows, but yet unconfirmed downwards breakage.
There's not much to write home about from euroland from a fundamental point of view (not that things are any rosier in the US IMO), but that negativity sentiment spotlight remains on Brussels, with no shortage of issues: once though limitless liquidity drying up, banks drawing on more free money to pay off bad debt, to only add bad debt to their own and the ECBs balance sheets. (ie., taking out a new credit card, to pay the already huge and unmangeable existing credit card) None-to-few of the Greece/Spain/Portugal savings measures nor even the most basic of growth/GDP/employment numbers are materializing, while Germany's unscathedness becomes more and more meaningless. Globally, the recent (Friday) China numbers show absolutely no goodness; esp. when one translate that into the slowness that has engulfed the key Shenzhen manufacturing area. Should US equities start a sustained down move, the thus far spared EURUSD should start breaking down quite quickly.
Given where the EURUSD has been (months of lower highs), and the potential for USD/DX advancement as the least bad kid on the block (conveniently forgetting the money printing nature of the US betterment plan), I think we have further EURUSD downside to explore/confirm. 1.285 seems to fit in as a not terribly sad potential PA development over the next 5-10 days. Chartwise 1.32 was key and has now failed, now the psyche level of 1.30 looms. Looking back, this is where EURUSD was 2 summers ago, as the first bank stress results were released, and then a subsequent rally to 1.49 ensued. (Put your hand up if you think those banks and results are in any better shape today, ie., with their absurdly more swelled up debt levels). A lower EURUSD is in fact even better for the German locomotive, and Brussels, Germany & the ECB are ominously quiet about any textbook lip service for a "strong" euro.
