Darshan's Blog

Darshan's Daily Market Ponderings

US Housing Starts Drop by 11%!

Thursday 19th November, 2009

Morning all!

We are almost at the end of this very dull rangebound OpEx week. Yesterday, we dropped and then rose back up - in other words we stayed within the trading channel. Another day, that proved that news means nothing to the gamblers on Wall Street. US Housing starts dropped 11% month-on-month. Remember, the Fed has been telling us that the housing sector is recovering - well I'm sorry but a 11% drop month on month can only be called positive, if we agree that Fast And Furious is a great movi (It's not!). Of course, the reaction to this lasted for a few minutes and then it was all forgotten. How nice!.

The key here is that resistance above is causing this range bound trading and the USDX is definitely basing (but really taking its time!) - just look at the Volume near the 74.75 area - definitely some sort of accumulation going. Nevertheless, if you think that the big money is going to telegraph the big move - then you're in for a surprise. Today the dollar is taking a break and rising, the futures are falling. By next week, this will be going the other way. There is still unfinished business above and they will want to take the markets higher to sell to the retail punters. No doubt about it.

Nevertheless, in the meantime, there is nothing stopping the Dow from travelling to the bottom of the rising channel towards 10000 and then lifting off into the end of November and upwards into the beginning of December. It's at that point, we will see some violent action as things reach a climax. For now - it's all about Options Expiry tomorrow. For november expiry the highest open interest is around 1100 on the SPX. So we can expect the markets to just hover around this area and perhaps even expect to be bored.

So go out and play! If you want to trade - the better action might be positioning yourself long against the dollar for next week. Cable looks like a good shout for a final blow off towards 1.70 next week. Of course, if you prefer to keep your powder dry until next week - then that is fine and actually advisable. No position, is better than an underwater position. Hence why this note is short - not much to say really today.

Good luck!

Darshan

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