The [short term] bear case on the EUR/USD. The problem with trying to decide where it's going to move in the near term is that the EURUSD and the SPX have a high correlation (but not always). Therefore I must come to some conclusion on where the indexes may be heading. The two conclusions I came to were a straight move to 850-860 on the SLP or a bounce to 900 then turning back down. Therefore these are just two scenarios for the EUR that could correspond to that. Then there are the times when identifying who the dog is and who the tail is important. Is the SLP wagging the Euro, or is the Euro wagging the SLP by way of commodities? Perhaps an event, such as Crude Oil, could wag both. What is the market doing? Trichet being stupid again? So many variables. Obviously these conclusions are going to shape where/when/how I play those or their derivatives.Now, this is my bias and even I know it would only take one out of the 'ten-hunert' things that can be said/done that will be the ultimate driving force on where ever it may go. It's me versus trillions... it would be silly to think I'm right until proven wrong. Furthermore, scenarios are nothing more than me playing with crayons. Predicting the ebbs and flows way in advance is not a way to invest/trade. Walk out with that thing over your shoulder in this market and you will come back a Gelding (There are some bloggers who will tell you this is all easy...then dissappear). It does help to anticipate a couple moves ahead though, both bull and bear. In this case, getting above 1.423 and I'm guessing the market is ripping (perhaps another leg up) and the above chart goes in the bit bucket and I reevaluate strategies from there.
This is a sophisticated way of saying that if I'm wrong, I covered my ass.
PS. Hearing Fauxbama spew right now about state sovereignty and there will be some objections to federal involvement (or something to that effect) it doesn't matter because I'm still going to talk about it. Sounds like the Cali bailout road continues to be paved. Barney Frank is probably already on the typewriter making sure there will be taxpayer protections. Next thing you know Pelosi (D-CA) will come up with the grand idea that if we make the banks take the IOUs, then Cali can voluntarily not make good on those IOUs, which sticks the banks, and recycle old TARP back to the banks to cover the loss and no need to fix any budgets. Those will land in some opaque lending facility at the Fed. Bernanke will give the nod as long as Frank agrees to stall the bill that would audit the Fed. GENIUS! Further bank bailouts will be under the premise that "we guessed wrong" about the economy (just several months ago).
Addendum: It should go without saying a bearish euro implies commodity weakness. Therefore those swing trades are going to all be short lived as a lot of the commodities I see show another leg dow. Imho, we are entering one of the most important earnings seasons so far in this bear market. I have a birdie on my shoulder that keeps telling me 'Calendar Put Spreads' but in the other ear I'm hearing 'Just a second there professor'.
