Markets pretty much flat to begin this week. I don't expect too much action today, but I do expect that a little bit of a retracement to the downside is coming, at least to 1319-1320. The question is, will we make a slightly higher high first.
Levels to watch today on the ES:
Resistance above at: 1337.50-1338.50, 1340-1341
Support below at: 1330.50-1331.50, 1327.50-1328.50, 1323-1324
Some points to observe regarding the US Dollar:
The dollar continues to make new lows and looks terrible. It has looked terrible for a long time so that is nothing new. But as the dollar continues its weakness, that supports a rise in equities.
The Central Bank of China said publicly last week, that Chinese foreign reserves exceed reasonable levels. "The amount of foreign exchange reserves should be restricted to between 800 billion to 1.3 trillion U.S. dollars," Tang Shuangning, chairman of China Everbright Group, told a forum in Beijing. China currently holds $3 Trillion in US debt. This new policy would suggest that China could dump $2 trillion of that debt. That would not not help the already weakening global confidence in the dollar. Something to think about...
There is still major support on the dollar index dating back to the lows of 2008, so I expect that the dollar will see a bounce to the upside when that support is tested. Maybe at that point, we will see another sell-off in equities that will simultaneously price in the fact that there will not be a QE3, at least not in the near term...
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