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This morning’s stock market price action is turning into a tasty breakfast for bears. While the indices and many stocks initially were only slightly down, the selling pressure is picking up as I write this. After yesterday’s negative reaction to the FOMC announcement, the bears are surely going to give their best collective shot to press us down here.
The Euro remains under pressure, while the Dollar and bonds are in the green. Being a stock trader, I usually focus solely on stocks. However, the Euro/Dollar relationship looks to be weighing heavily on global risk appetite lately, which is why I continue to monitor it. Bulls are pointing at a less threatening VIX as a bullish divergence than what we have seen in recent months, although that could simply denote that fear has yet to hit the bulls.
With the S&P 500 now back inside, once again, the sloppy summer trading range of roughly 1120-1220/30, I am putting all new longs on hold. I am still using a heavy cash position as a buttress against this type of indecision in the market. Our CRM short inside 12631 is still working very well. Coming into this week, the bulls had an opportunity to pounce on improving charts. However, a slew of attractive setups in a market that has not yet proven itself is insufficient for me to dive in head-first to the market via a heavily long strategy. Instead, I chose to wait for confirmation. Clearly, we have not seen follow-through to the upside this week.
Accordingly, we are essentially back to square one in deciphering where this market wants to two day from now, let alone two weeks.
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