KRUGER INSIGHTS FRIDAY, FEBRUARY 21, 2014

By: Joel Kruger

The Luck Variable - Sometimes, it's better to be lucky than good. On Wednesday, I had established a fresh S&P short at 1838 and held on into the close, with the market showing good follow through and looking like it could easily deteriorate further. But given how unwilling this market has been to break down, I decided to exit at 1822 on the Wednesday close with a nice profit that would otherwise have been given back. Yet, my bias is unchanged and despite this latest bounce back over 1840 and the potential for a break to fresh record highs, I do not anticipate these gains will be sustainable, and instead just view the move as one more hurrah before we see a more significant corrective decline. Interestingly enough, if we take a look at the currency market, and we need to take a good look, I don't believe the rally in equities is being confirmed. While it is true that USD/JPY has bounced well back above 102.00 in recent trade, the market is still locked within a consolidation below 103.00 and really hasn't gone anywhere.

Think Again - Furthermore, I never like to look at USD/JPY price action alone as a barometer for risk, and think it is equally important to keep an eye on EUR/CHF. If we look at the price action in EUR/CHF over the past few sessions, the market is still very well offered and looks like it could easily establish back under 1.2200. The downside pressure here should be reflective of uncertainty in the market place and I believe reaffirms the bearish risk asset bias. Finally, we have seen renewed sell interest in the emerging markets this week, and should this continue, I would be looking for the S&P and USD/JPY to roll back over. Overall, the US Dollar is looking like it also wants to reassert, and with the Euro tracking at key resistance, we could very well see an across the board push in the buck's favor (Yen exception). At the moment, my only exposure is short Kiwi from above 0.8300, and I will be looking for another opportunity to sell into this equity rally. I have been traveling on business quite a bit this week and am pretty exhausted, so I am going to step away now and wish everyone a great weekend. Whatever happens today, just do me a favor and make sure you aren't forcing anything. Wait for the market to come to you. I promise it will. If you are patient, it always does.