The Winter of Our “Disconnect”?

• Posted by UpsideTrader
• on January 7th, 2012

“Now is the winter of our discontent / Made glorious summer by this sun of York” .-Richard lll

This may be just a temporary disconnect. I have said that it will happen eventually, but it seems way too soon. There is something afoot though. Have you noticed that the euro has finally broken weekly and daily trend line support and the dollar is ripping higher, but stocks are gong up anyway? One of the reasons just may be the plain vanilla funds “have to” buy stuff at this time of year, so they are just ignoring the strong dollar/weak euro dynamic.

Eventually the U.S. market will just say no mas to Europe and just start trading on its own, barring of course a major disaster over there (which of course is still possible).

It is also possible that global markets (flush with moolah) will just view the U.S equity market as the best house in a bad neighborhood and will recklessly plow in money and take us even higher. This is all very interesting and could just be a new year anomaly.

The dollar is back and stronger than ever. $UUP

The euro has finally snapped like a carrot.

What is next for the market could be very is interesting. Here is a possible scenario. The euro is probably getting oversold a bit (sometimes crowded trades remain crowded and can stay that way, I covered my euro short on Friday though), but what if the euro catches a big dead cat bounce over the next couple of weeks and the dollar sells off?

Watch out above.

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