Thursday, January 12, 2012

Divergence - contradiction - coincidence?

The correlation between the euro and indices was weakening the last couple of weeks. But early in the morning, we even saw a complete opposite move. The euro was spiking (and so did oil & precious metals), but stocks were going lower. What's next, pigs that fly, hell freezing over?? Or maybe we just got a reversion to the mean. Stocks were getting overbought and maybe the euro is oversold at this point. Let's call it a silly coincidence for now...

Anyway, we started the session with a small gap up. This gap got sold immediately, but when price was about 1% down, it bounced on yesterday's low. And from there on, the market went higher toward the high of the day. Except for the S&P, the major indices all made new highs towards the close => bullish.

5m-chart SPY:



Daily charts DIA, SPY, QQQ and IWM (ignore the horizontal line on SPY (= entry of my trade):



Metals were going higher, while stocks started to reverse lower. Later on, it was the other way around. Stocks bounced and metals started to go lower, making new lows for the day. Except for copper, which traded sideways.

Oil went up with stocks in pre-market, but $103 was resistance. Then oil started to sell off, even losing the $100-level. The EU-embargo on Iranian oil got delayed by six months, causing the sell-off.

The euro spiked hard, and was up 1% intraday.

Trades
With gold moving over $161, I've put my stop-loss just under breakeven and sold half my position @161 (in from 158.75).
I went long SPY 128.79 after price bounced exactly on yesterday's low (SL at low of day).

Articles for this evening:
What's the Deal with Natural Gas?
Would you watch your ex-girlfriend making out with her new boyfriend?
Stop Worrying Yourself Out of Profits

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