Getting Back On The Momentum Train
Markets in momentum phases rally, pull back, and often continue higher. Knowing where to either add to a position or where to re-enter can be one of the keys to successful swing trading.
Let’s look at the recent action of the yen and consider its likely activity —- if it is indeed in a momentum phase. The Yen is on the Momentum-5 List.The yen pulled back today for a second day after spiking for two consecutive days last week to multi-month highs. Pullbacks after momentum pulses are normal.
Markets often find support after pulling back approximately one-third of recent rallies. They also will bench their activity off an important day’s activity. May 23 was an important day in the yen. The June contract gapped up and traced an expansion bar. The market consolidated at the midway point of this bar before shooting to its recent multi-month highs. But now the market is testing both the one-third pullback area as well as the mid-point of its May 23 expansion bar. Look for support in this area and for a possible continuation.
OPEC did what was widely expected by maintaining output quotas at its regularly scheduled meeting. Crude oil traded within a narrow range. With inventory levels in the US approaching the five-year moving average and the recent upward pressure from Iraq’s threat to withhold oil from world markets waning, fundamental traders may begin positioning for a test lower in the energies.
Bonds
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PowerRating) traded higher on new economic data showing manufacturing activity continues to wane. Factory orders fell 3% last month, more than the 2.7% predicted by economists. Lower productivity and the lowest National Association of Purchasing Managers report for non-manufacturing goods also worked to solidify the view that the Fed will have to remain on the offensive to keep a manufacturing recession from turning into a broader economic recession.