This week, we saw exactly what Jim had warned about: the craziest volatility in euro-dollar (EURUSD) we've seen in years. To be exact, last time EURUSD jumped 400-500 pips in one day was back in 2008. But the latest price action topped that: Not only did the euro rally almost 500 pips on Wednesday, but on Thursday it gave up almost all of those gains -- for an almost 900-pip "roundtrip":
In other words, bulls and bears got their clocks cleaned. All that's left now is confusion -- in both camps.
may seem that the market "is out to get you" on days like these, the
market doesn't have vendettas with anyone. It's simply doing what it
should: taking money from the weak hands and handing it over to the
strong. As Jim puts it,
markets are doing what they are supposed to be doing: inflicting the
most pain on the most number of people. The majority always gets caught
on the wrong side at big reversals. Always."
point, everyone is in the same trade, like they are now in the euro
short. Then it reaches the point of exhaustion: There is nobody left to
sell the euro. Then
somebody will start covering -- and before you know it, it's like Black
Friday at your local Wal-Mart: Everyone is trying to squeeze through the
same door at the same time. The coming EURUSD rally will be like that."
Jim Martens, Editor of Currency Pro Service