SPY, EUR/USD Make Lower Highs, Greek Referendum Analysis

SPY (the S&P ETF) and EUR/USD made lower highs recently after the S&P posted the biggest monthly gain since 1974 (was cut short on Halloween). They both peaked out in April and have been making lower highs ever since. On 10/31/2011, exhausted SPY and EUR/USD failed at 200-day moving average resistance, broke through the steep uptrend, and re-crashed through the March and June 2011 floor (now resistance again). EUR/USD even sold through its 50 day moving average, but regained that level today on oversold conditions. SPY is still above its 50dma, but it looks testable on this down move. We'll see. The surprise plan for a Greek vote on the EU bailout was the catalyst for the sell-off.

SPY at FreeStockCharts.com 

Greek Prime Minister George Papandreou's plan for a referendum on the EU bailout package for Greece sparked uncertainty in the markets again because it might not pass. On Bloomberg, Irene Finel-Honigman, adjunct professor of international and public affairs at Columbia University, said: "the problem with referendums is that historically we have to remember that referendums on EU and EMU issues have gone anti-EU and anti-EMU. From the 1992 currency crisis, which was basically triggered by the referendum on Maastricht in France, in which there was the tiniest little percentage that voted for it; to 2005, where we had the vote against the Lisbon Treaty through referendums in France and the Netherlands which created a policy crisis. History proves that it is not a positive vote". Very interesting.

On 10/20/2011, Tom DeMark, creator of market exhaustion indicators, told Bloomberg TV that his "weekly and monthly (indicators) are still in a down mode, so we're really operating against the trend". We'll see what he says next in the media. Also, Peter Brandt, who runs the Factor trading blog that I read, wrote in a post today that he thinks "the H&S (head and shoulders) top remains firmly intact. The U.S. stock market has completed a major turn. The trend is down. We are in a bear market. The 2010 low will eventually be tested and surpassed. The target is the 2009 low". See charts at his blog, good stuff.