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Strategies & Market Trends : Group Theories
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From: macavity2/4/2005 5:00:40 AM
   of 1017
 
Wither the Dollar Carry Trade.

I am unable to get to my data reports.

We are at an interesting junction with regards to the dollar-carry/reflation trade that has been in effect from 2003.

LT Charts:
LT leading indicators have gone bearish:
Weekly PPO-Histo / Monthl Lows breached / 55wk Stoch.
This has been against a background of a lower momentum high when measured versus the 2004 reflation high.
The first signal that something may be amiss with the re-flation trade was the non-confirmation between price highs of the mining shares ($HUI/$XAU etc) and Gold/Stocks/Currencies.
The mining shares are now trading below their (flat) 55wk EMA and have broken Q42004 lows, having peaked (it now appears) in Nov2004.

IT Charts:
These are all inherently bearish the reflation trade, but IT leading indicators have turned bullish last week.
As the LT Trend is essentially bullish/neutral we may have just seen an IT bottom.

We are now ST overbought in an IT downtrend.
Today is a bifurication point.
Do we.

i) Continue the LT reflation trend upwards having reached an IT low at support $SPX=1160-70
ii) Continue down following the bearish divergence in LT trend and the LT leading indicators are bearish.

-3 e-mini EURUSD @1.3198
-2 e-mini NQ @ 1518.00

I will put stops on these, as we are primed for a rally.
However I am of the opinion that there was sufficient technical damage done in January to suggest that we are heading down. I will consider adding to on any decline as my proxy for reflation - $SPX - is ST oversold in a neutral IT Trend suggesting that should we break down there is enough space for a multi-day decline.

- macavity
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