Source: FinViz (edited by Short Side of Long)
Be careful when an extended trend in a certain direction breaks out even further extending itself, just as every man together with his dog are discussing it in various banking reports, blogs and/or media television outlets.
Last week we saw the Euro break out towards two and half year highs, only to reverse rapidly and disappoint majority of the Johnny Come Lately’s (hedge funds piling into an already extended bull run). I was present as certain friends of mine went short during Draghi’s press conference and alerted me of an outside day reversal. I too opened a very small position, but nothing to write home about.
Tonight (Asian time) we have another and a possibly more important reversal taking place. Wall Street celebrated at the start of the week as record highs were talk of the town… and then it all turned around in a split second. Since I am not smart enough to know what happens next myself, I will quote a very wise man to help you out:
Usually but not always, when a market does a false break in one direction, there is a violent move in the opposite direction. ~ Marc Faber
p.s. Notice how US equities have not made any progress since the taper was announced. At the same time Treasuries have been rallying rather strongly. Some of you should remember that I discussed this development in late April.