Thursday 5 November 2009

Right Shoulder pt IV

BOTTOM LINE: Expected corrective strength in "risk" and related assets and corrective weakness in USD materialised. I expect these to continue into early next week, as the "right shoulder" is market on the charts. This will set up the plateau for some serious weakness into end of November and December.

Below is a daily chart of the German DAX. This index, along with most G10 equity indices, will probably correct higher for the next few days. Given the nature of the decline from the October 20 top, it is very likely that another sell-off is ahead of us, which should be at least as big in terms of price as the first one. Longer-term, it is likely that the bull market of 2009 is over, and prices will work their way towards and beyond March 2009 low.

This is a daily chart of EUR/USD. It is likely that EUR topped against USD, and will trade substantially lower into December.

This is a daily chart of Crude Oil. As I repeatedly said, I expect at least a marginal high above $82, possibly extending to $85. This will likely happen soon, and set up a plateau from which crude should decline back to at least $65. In all likelihood, this will add as additional pressure on equities, and will coincide with a strengthening USD.

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