Fundamentally, there haven't been a lot of fireworks (news) which is keeping equities bid given the central bank agreement to strengthen equities. The news also keeps overall volatility low (see last week's post on the VIX). We do have speakers and data ahead, but as I have mentioned many times, the Fed is taking the excitement out of these releases.
Technically, buyers are in charge in equities and sellers are in charge of the the USD. Trends are in place and if you are going against them, you must go against them in very, very specific places with very specific exit strategies if the trend continues and puts your position under water. In addition, trading size is important - if going against the trend and "hoping" it changes direction, trade smaller size. If the trend changes, it may change forecefully for some un-anticipated reason. If it doesn't change, your losses are small. Finally, if you do have a winner due to the trade going your way, you may want to lower stops/take profits because even though the trade goes your way just a bit doesn't mean that the trend has changed. A small retracement in a large trend does not mean much to the overall trend.
Technically, we can take a closer look. Equities were off quite a lot yesterday around the world. The US equity market was almost off 1% at one time. Check out yesterday's SPX chart and the move that we made to retrace the early losses. We basically retraced 100% - a very strong retracement by the end of the day:
Past performance is not indicative of future results
What does that mean to me? The trend has been up, some sellers came in and obviously the sellers were wrong. The early downtrend changed course and the markets rallied, rallied, rallied. If you are short, think about your profits. They are dwindling, dwindling, and dwindling. Then, you are under water. With no news overnight, the markets say "we got those shorts pinned" and futures as of this writing are pointing to a higher opening.
Now let's look at the USD against the GBP. Here is yesterday's trade with the USD strong in the Asian/European session, then weak in the US session as US equities rally. Then, what happens as Asia and Europe open? They wag the tail of the dog and follow in the footseps (quite often) of the US equity session. So buyers step in and drag the GBP higher and higher against the pound as international equities move higher in anticipation of the US equity session following through on its "V" pattern and hopefully opening higher on Tuesday morning. Well folks, so far we are.
Past performance is not indicative of future results
Equity futures are off and running on Tuesday morning in the US and The GBP is much higher than yesterday's close. The white vertical dotted line is the "period" separater and shows each new trading day - you can easily put this property in place by going to your chart properties.
I will post intraday on IBFX Connect at the "thelocalstake" and also host a free IBFX webinar on Trading Psycyology and YOU as a trader this evening.
Happy Trading and Be Environmentally Cool
Coach Brian
Forex 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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