This is because traders become uncertain and there will be large clusters of take profit orders and exotic options around the technical level. Remember when EUR/USD hit 1.50 ? Many were saying it would power on through. But it couldn't and did not. I was there at the time and chose not to take a buy order and did not regret it.
Why did this happen at 1.50. Because of the profit orders, options and so on (remember the famous barrier option around 1.50). But more than this, uncertainty set in. Why was the Euro so highly valued ? Some key comments from governments were enough to reverse all this. Now look where EUR/USD is.
Something similar happened at 50% Dow. Why was the market valued like this ? The way the market has shown volatility since is to be expected. What the market needs is fundamental proof to rise above 50%. And it isn't getting this. It seems interest rates will rise, thus all the cheap money pushing the market up is ebbing like a vast tide (which is what happened at Euro 1.50 essentially).
So this cannot push it up and over. However those profit orders are being cleared and if the market feels a future recover is really here, as the market can compute on expectations, then it could still burst up as the buy programs surge forward.
© 2010 Guy Barry - All Rights Reserved.
