Kimble Charting Solutions Blog

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On 1/17, Standard & Poors down graded European debt and the "Power of the Pattern" was suggesting this could be good for Europe and the Euro in the short-term. (see post here)  

At the same time the U.S. Dollar was forming a bearish rising wedge up against resistance, suggesting a two-thirds chance that the Dollar would reject higher prices and move lower. (see post here)  

The 4-pack below reflects what has happened to the Euro since the downgrade and the Dollar since it hit the top of the bearish rising wedge at resistance.

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Since the downgrade took place the Euro is up around 4%. Since the rejection post/top of the rising wedge, U.S. Dollar is down around 3%. 

If you read the word Racecar from "Right to Left" what do you get?  The same word! 

The Euro hit a short-term low as the downgrade was being announced.  This is a prime example that when a story gets a little too popular in the news you have a choice....go with the popular story of the day or look at it in the opposite direction.

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The "Power of the Pattern" suggested to be a buyer of the Regional Bank ETF (KRE) on a breakout (see post here). 

Today a pretty darn ugly chart pattern is taking place as support is being broken, at a key resistance level.  Would POCKET THE GAINS/HARVEST  right now.

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The health/condition of the broad market can not be overlooked or overstated.  In "Focusing" on the broadest measures of the stock market (NYSE/Wilshire 5000), the chart above reflects that they both remain inside of large flag/pennant patterns.

A great deal of attention is being focused on the S&P 500 as it deals with the 800 pound resistance line (see post here). From a even broader market perspective, don't lose sight or focus on the NYSE/Wilshire patterns.

Should these NYSE/Wilshire break resistance...a VERY GOOD signal!

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Shared the chart above with Premium Members a few days ago, sharing that you would want to be on board the breakout.  The above chart  reflects that once SLV edged above the Gap fill at (1A) a breakout was at hand.  A positive besides the breakout is the break above falling resistance in On-Balance-Volume.

SLV has an unfilled gap at $32.64 (which must be respected) and a huge gap at (2), which comes into play at $38! 

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It's not the odds of something happening that is important, its the impact if it does! 

The odds were low that IYM was creating a bullish right shoulder in late November (see post here) , yet the impact of this pattern has been big for non believers...either by missing out on the 60 day rally (two month rally) or being short while the 500 index has moved 10% higher.

The odds might be low that the U.S Dollar could be making a bearish Head & Shoulders topping pattern, yet if this pattern is true, the impact on portfolio construction will be huge!

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Sentiment numbers are at multi-year extremes in the Dollar and Euro right now. 

With sentiment at these levels, if the H&S topping pattern is correct, the impact would be HUGE in the currency markets and greatly impact portfolio construction!