Perhaps the most bizarre aspect of the financial year so far is the price action of the Euro currency. Despite literally hundreds of scary news reports/rumours, the Euro has managed a very strong rally since the 1.20 (to the dollar) lows in July, to the current 1.31, although we are only fractionally higher since the 1.30 opening level in January.
The weekly chart looks disturbingly like it could be a bullish flag/pennant of some type. If that is the case, then the target would be somewhere between 1.37 and 1.43 in early 2013.
I have no doubt some Euro members will leave the currency union at some point, but that could literally be some years away. To my own surprise, there is now a distinct calm across the Eurozone. Yes, there have been some notable social disturbances in many countries - not least Spain and Greece. However, there is very little fear in the actual currency markets, traders seems very content with how things are right now.
A further wave higher
The current uptrend does look set to continue. Only with a break back below the weekly 10MA - currently @ 1.28, would I be able to consider that the current up cycle is complete.
If the up trend does continue though, then the outlook for US equity market would most certainly have a very strong currency motivator.
After all...Euro up...dollar lower..and generally, that should allow the algo-bots to melt this market higher into early 2013.
All those bullish maniacs still touting sp'1550/1600 by year end are STILL on track with their 'everything is alright with the market and the global economy' outlook.
The last thing that comes to mind..is the 'fiscal cliff' issue, but hey..the political lunatics will merely delay that for another year or two, right?
Goodnight from a Euro-less London