A down US Stock Market Portends what for EU/US, US/JP?

Page C8 "overheard on the street" in Friday's end of 2010 Wall St Journal predicts that Jan 3 (Monday) may be the peak of the stock market in the US with a fall throughout 2011.

If this is the case I would presume this means a rise in EU/US and a fall in US/JP. Perhaps a rise back to 140 and a fall down to 79?

Concur? Disagree?

I see USD is getting stronger, Gold price falls and EURUSD to resume downtrend. However, Weekly and Monthly charts do not support my view ... ...

Whatever happens, I think there will be good volatility, which is good. Perhaps a US/JP drop below 80 will trigger an intervention to push up to 90.

This would carry EU/JP up as well, as a lot of players were caught short last year once the pair fell thru 120.

EU/US is the battle of the titans. It's easy to say the range will be between 119 and 152.

JPY index shows some more weakness also.

Nope.

The US stock market is generally positively correlated with EUR/USD and negatively correlated with USD/JPY. So generally, if the stock market falls, EUR/USD will fall too whilst the USD/JPY will rise.

Here is a simple explanation for such correlation:

"The (overly simplified) idea is that when the stock market goes up people who have been keeping their money on the sidelines in USD (as it's seen as a safe haven currency) are now selling their USD to invest their money in more riskier assets which may be EUR, GBP, etc. More people want to sell USD and buy EUR and as a result EUR strengthens vs. USD.

There's also the fact that USD is currently very cheap to borrow so it can act as a funding currency i.e. when the stock market goes up people borrow USD to invest in riskier assets and / or currencies in other markets which may offer a greater return on interest e.g. AUD/USD carry trade. They may then sell USD to buy these riskier assets. Though the Yen is probably more popular for funding given it's ridiculously low interest rates (0.1% I think).

There's a ton of other factors which is what makes the whole thing not entirely predictable. How strong the correlation between the DJ and EUR/USD is will move around depending on how the economic recovery goes. Nothing ever stays the same for long." - Source: http://forums.babypips.com/newbie-is...tml#post215187


I've attached a Dow vs EUR/USD comparison chart for the previous 6 months. (for such charts, just go to Yahoo Charts and click on "Compare" to add symbols)

Wow, thank you Marv. The new moon also coincides with the first hour of Tokyo trading for the year, for those who follow that cycle.

To me what's of interest is the idea implied in the WSJ article that the first major turn/bounce/fade of the year MIGHT be a mini-trend.

Here's the artcile:
http://online.wsj.com/public/page/ne...eet-heard.html

Jan. 3, the first trading day of 2011, could prove the Dow's peak, according to technical analysts at Citi. They say the trading behavior of the index mirrors three historical periods (1906-1910, 1937-1940 and 1973-1977), each marked by a collapse followed by a sharp rally that ultimately petered out.
If the pattern holds, 2010 will have marked the peak for the bounce-back rally, like 1909, 1939 and 1976 before it. Ominously, for each of the three previous periods, the following year's peak came on Jan. 3.
The Citi report says the Dow will fall 16% next year. It suggests the Dow may take another six to eight years to regain its 2007 highs on a yearly close basis. The report encouraged readers to get some rest over the holidays as they "may need it."
The report's author, Tom Fitzpatrick, is taking his own advice. He's out of the office until Jan. 3.

"PEAK"

SELL EVERYONE SAYS WSJ ,SO THAT THE aka smart money(big banks,funds and other crapers) could accumulate more cheaper,and we see another bull market there

LOL. of course there are double agendas. 3 dimensional chess indeed. Maybe even 4.

This is of course a rigged game with central banks in control, etc etc.....but if WSJ calls for a annualized 16% drop, and the "herd" complies, that's not a bad payday. Especially when you consider the +1600% coastline effect.* At that rate who cares that the big boys will come back in and buy lower. They always have. They always will? The past does not equate the future, not at 100% certainty.

If a 16% drop is part of a "larger plan" it depends in part on whether "they" plan a controlled flow downwards, or a spike, and for example, if they plan to begin buying again on April 1 or on April 1, 2012.

Always many variables....

* http://www.olsenblog.com/2010/01/how-to-trade-slow-food-of-trading/

who knows what big money will do,they always pump and dump stocks,and make good profit at it,
the thing with sp500 is that bad performers get kicked out of the index and good ones enter,thats why its allways had a 7% or so return before the crash
but if u look at h1 sp500 u see head and shoulders ,on d1 its an up trend

who knows,u might start to see big falls in the index,if big timers start to sell
but the thing with todays stock markets is that its 70% algo,so computers are trading not humans!we are the minority,hehe

if u look at the chart i posted theres a lot of support and resistance reversals,algos are programmed to detect this

That's a beautiful chart. Robots are even more predictable than humans!