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Thursday, January 21, 2010

January Gyrations

As the first month of the new year passes the mid-way mark and corporate earnings season gets into full swing, the trading landscape has turned somewhat treacherous. Wild price swings in recent days have sent many to the sidelines, while others are calling "the top" of the rally off the March lows. Whether we are indeed probing "a" top of some duration or are once again in a rough, sideways consolidation range remains to be seen  as the battle between bulls and bears wages on near price levels of long-term resistance. The dollar is up; the euro is down; and stocks are all over the map. Let's get to some charts.

The recent plunge in the euro has been nothing short of breathtaking.

The dollar, in its obligingly inverse relationship, has staged an impressive rally effort in recent days.

The Dow briefly pierced its long-term primary rally trendline on Wednesday, but closed back above it-- just.

The Dow Jones Transportation Index and often-watched market barometer turned back to test key horizontal support that should be monitored near-term.

The Russell 2000 has come under some pressure as well, but is still holding comfortably above horizontal support and is well within its rising channel.

A look at the /ES over the past week or so crystallizes the steep waves that have been rocking stocks and is starting to look eerily reminiscent of the volatile trading patterns that characterized the sideways consolidation range or rectangle in mid-November to mid-December.

However it eventually plays out, surf's up. Catch the waves if you can, but protect your capital at all costs up here.

Trade well.

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