By forming the candlestick that we have, you could make a little bit of an argument for a shooting star. The shooting star of course is a very negative sign, especially sitting just below this moving average. If we break down below the bottom of the candlestick it is very likely that we could go back into the previous consolidation area. Nonetheless, it is also worth noting that oil initially fell, only to turn around and form a bit of a supportive candlestick as well.
If the market does take off to the upside, clearing the 200 day EMA it could open up the possibility of a much bigger move, and perhaps even a major trend change. The US dollar continues to pick up a little bit of momentum due to the fact that people are throwing money into bonds, thereby driving down yields. With that being the case, the market is likely to see a lot of noise on the way up, but it certainly looks as if we are going to make a huge attempt to break out. On the other hand, if we do break down a bit, we will more than likely find support at the 50 day EMA.
It is below the 50 day EMA that I would go looking towards the 1.20 level underneath, which is of course a large, round, psychologically significant figure and an area that has been massive support on the monthly charts. The question now is whether or not we can continue to go higher, and a daily close above the 200 day EMA would be more than enough reason for me to get long and hold onto a major position.
At this point in time, we are more likely than not going to see a lot of choppy behavior as traders trying to discern which direction we should go. It is worth noting that the most recent pullback has seen buyers at a much higher level than previous trading. It suggests that the markets are trying to pick up the momentum, but obviously we have a big fight on our hands just above current trading levels.
