Chicagostock Trading

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As "X" marked the spot in the 30 year bond market on January 31st, the market had squeezed into highs of 14515 only to fail the "X" spot and turn lower.  The turn fell to retest the January lows of 14021 offering oppurtunity for smart shorts to take some profits off the table as the market fell into this low and held by 2 ticks with lows of 14023.  With this low failing to take out the previous month's lows, the market went into a short squeeze as it caught bears looking for the January lows to break trapped and forcing to cover.  This squeeze led the market right back to where it broke down from on January 31st being the 14328 old support now acting as new resistance off this high of 14515.  If this bond market bull is indeed strong then it will work through this range of 14328-14515 to squeeze out sellers and gain back momentum.  On the other hand this resistance offers sellers a level to defend these highs on this retracement and look for the double bottom of 14021/23 to break, squeezing out longs and targeting the December 13924 lows.  There is a lot of complacency amongst bond bulls and complacency is always a recipe to offer the most pain.  In this case the most pain is seen on a break of 14021. 

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Since the Euro's double bottom in January, with lows of 12627 on the 13th and 12628 on the 17th, the market trapped shorts who were looking for the breakdown and used as fuel to squeeze above 12884 being the highs from January 13.  This squeeze led to reversing the downside momentum and short covering as the market rallied through the year highs of 13085 and up to its next major resistance being 13237 from December 13 where this down leg started.  After hitting this resistance of 13237 and 6 handle move off the lows, the Euro went into consolidation period, building a flag for the move from 126-132.  This flag built right above the year highs of 13020-13085, being the new level of support as the year highs was conquered.  

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Since the US dollar put in its “Island Bottom” in October of 2010 with the failed breakdown of 74860, the market reversed to create an inverted head and shoulders with a neckline of 77855, targeting 8100.  After breaking through its neckline in November, this 77855 level turned into support and the short squeeze was on as the market squeezed into completing its inverted h/s at 8100.  Consolidation was seen at these highs with a tug of war taking place.  The market began 2012 on Jan 3^rd with lows of 79830 and highs of 80225.  Following this first day of trading, the market ran into new highs, touching off at 82045 on January 13, 2012.  This 8200 level turned into the last hoorah for the short squeeze, trying to get as many shorts out as possible, as the market began to roll over and broke its uptrend line from the October lows on January 18^th.  Following this break of the uptrend, the market began trading in a newly formed channel pointing down as it targeted the year lows at 79830.  These lows for the year were eventually taken out on January 23^rd, leading up to the January 25^th FOMC statement by the Fed chairman Ben Bernanke.  On the 25^th as the Fed released their FOMC statement, the US dollar had attempted to rally, however failed.  Putting in highs of 80505, only to reverse into lows of 79515.  Since this FOMC and break of the year lows, this level has now turned into major resistance for the past 2 weeks at 79515.  The year lows that was support at 79830 has also turned into major support as the market reversed its early momentum in the year.  At this point the market has reached its 100day moving average on the daily chart and has been in consolidation mode in a fight to hold this support as upside resistance is being tested.  Pressure remains to the downside now with the Jan 3^rd range of 79830-80225, followed by the FOMC high at 80505 as major resistance.  A push past these levels would be needed to get buyers back into control, however only leading to retest the next major resistance coming in at the year highs at 8200 where a failure would create a right shoulder.  The question is will the market rally up to test this high and give sellers an opportunity to get out or continue this chase to the downside.  Buyers who did not get out in time from last year’s rally are now seeing the pressure turn against them. Below the 100day moving average on the daily, next major support comes in at 77855 being the old neckline from November, followed by the October head at 74860 and year lows of 72860.

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