The Market House Of Cards

The Key Charts To Watch

September hasn’t been much fun for longs. It wasn’t entirely unexpected, if you follow my weekly letter, I covered the probabilities on my 1st September - Letter Here but that’s in the past now, I’m looking to the future and you should too.

In this weeks letter, I’m going to share updated charts with the key levels I’m watching, some of the charts I think are close to a peak, and how that will potentially impact the markets.

So lets get on with it and lets start with the Dollar.

I hate to labour a point I’ve been screaming all year because the dollar continues to be a complete wrecking ball for stocks, and everyone calling a dollar top has been dead wrong (including the “smart money” over at GS, JPM, BAC etc).

I’ve been sitting here with my $120 target all year, but we’re now reaching a level to reasonably expect some kind of digestion.

Whether a pull pack is imminent, or whether we get it at $120 in a week or 2, I believe the dollar is going to cool off very soon.

The VIX is elevated, at the time of writing (sometime on Wednesday afternoon) we’re sitting firmly in the 30s

For me, it’s not an environment to play around in unless you’re

1. Dollar Cost Averaging

2. Day Trading (if you’re accomplished)

I am doing neither.

The correlation with the DXY is pretty obvious, so if the Dollar cools off, it’s reasonable to expect the VIX to cool off, and if both of those things happen, I think it’s reasonable to expect some kind of rally that many are calling for.

We all know the economy is a complete mess, I’m not 1 of those narrow minded Technical folks who don’t pay attention to macro economic factors, I think it’s useful to understand what’s going on, but ultimately price tells me what I truly need to know, and if we start to see areas of the market like the Small Caps sell off, I think that’s an environment where defensive action is sensible.

I talked about it at length at the weekend - YOUTUBE ANALYSIS HERE

We also have the SPX and QQQ charts pushing up against the 200 Week Moving Average, which as the chart demonstrates, has been a significant level in the past.

I like to pay more attention to price data rather than get caught up in “thoughts and feelings” and these are the charts i think are the most important to watch just now.

Conclusion

Our members bearish downside objectives have been met, we hit the June lows as expected, and now it’s a case of watching and waiting to see where we go next.

If we sat and had a beer together, I’d probably tell you I’m leaning toward a face ripping rally soon, because I do think the Dollar is going to get exhausted, I just don’t know it that happens now, or at $120 and like all good analysts, I’m also very open to the market breaking down and for words like “capitulation”.

The signal for me will be price, what’s going to be your signal?