Good evening traders, what is up? Im sure many of you are asking yourselves what on earth happened today and why is the media not telling me the whole story. Well if you were accustomed to listening to to paul harvey i got the rest of the story after the break …
The answer is dollar bulls are swimming in this market, whether they are covering shorts, getting long or hedging positions they are here. This dollar carry trade has been unraveling for quite sometime even though the thesis behind the trade still resides.
Algorithmic correlation desks do not let go of money making strategies easily, history suggests a blow out event is the only reason behind a change of strategy on the desk. The drop today was inverse the carry trade which wreaked havoc on the strategy as the USD and equities divergence snapped back into line around afternoon hour today.. *whenever you see the dollar up .3-.5% or more in an day pre cash equities open you can expect an odd trading day with surprises around each corner.
The chart above to the left is a weekly chart going back to the 2008 bottom in the NDX. From the point the NDX has followed a clear uptrend with 4 prior solid tests of this line, each held. As for this week/today we are testing this line once again around the 2220 level. If this level does indeed fail to hold the NDX (which has led our markets higher for the last 2.5 years) very well could fall to 1755. Until then you must be trading in a very defensive mode, anything can happen.
After hours the NDX retraced today’s selling… again like the last 6 weeks, any retrace has been sold once real volume asserts itself.