Friday, January 6, 2012

SPX Can't Go Down

IBFX

Good Morning,
Just a quick article to wrap up the week.
We have seen this before. If the markets can't go down and retrace the massive move up, then there is only one way to go and that is higher.  We have sold off 3 days in a row after going up 200 points on Tuesday and the buyers have stepped in and the sellers are getting knocked backwards.
Think about the analogy of the pits. If you put your hands up and out, you are a seller. If you are selling to enter an order, you need the markets to go down for your trade to be profitable. All of a sudden hands on the other side of the pit go up and they are bringing their hands towards their faces - buyers. More and more buyers step in and the sellers dry up and the markets rally. You can see this and feel this on Wednesday, Thursday and for the most part today (we will see where we close today).
In the forex markets, the dollar was strong early and then all of  a sudden, when equity markets went from down 60 points to up, the dollar weakened. It wasn't a terribly busy/volatile day today during the American equity session for intraday forex traders, but if you understood the previous days where equity buyers stepped in, then you could feel/see/prepare for the bottom to come in on the GBP, the EUR, the AUD and the NZD as they retraced some (or all) of their earlier weakness. The only pair that wasn't able to retrace at all was the USD/CAD, where the USD stayed strong all day. Overall oil prices (see yesterday's post for the inter-market relationship between oil prices and USD/CAD), are pretty flat. A weird thing I am seeing is gas at the pump under 3.00/gallon, yet oil prices are above 100.00. Oil prices should go higher on the jobs news and the potential for an increase in equity market prices as a result.
Overall, as long as the news stays quiet, neutral, somewhat bullish, the equity markets should hang in there and try to sneak a bit higher. I have a 60-90 day projection of low volatility, but after that, it is anyone's guess.
Stay tuned for changes to this "optimism" as international fundamentals and market technicals dictate.
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

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