The Only Way To Participate In This Market
A few really bad
economic numbers at 10 AM EST yesterday and a major intervention in
the FX markets left many (myself included) scrambling to adjust. When all was
said and done, all turned out OK.
“Those late to enter longs in
EUR/USD have been hit hard as a by product of the BOJ intervention. The
fact that the CB used its trump card in channeling the order through the Fed has
given the whole affair a lot more clout, however with this option now used up,
and clearly with the intervention unilateral, the next round is likely to have
far less impact. The damage in Eur/Usd should be even shorter lived with no
intent by any CB being made to weakened this pair.”
“The order to buy USD/YEN
looks to have landed at the feet of an US investment bank the first time around,
however this name was then seen buying Usd”s right across the board. This has
dealers asking the question as to whether there has been any additional covert
interest to take the steam out of the Usd”s decline in the bigger picture. The
major Usd buy up looks to have run dry now, and dealers say that everything has
quieted down.”
Source: MCM Currency Watch
You will recall that in yesterday’s column I had
suggested a long position in the Australian Dollar (AUD) if it broke above the
.6842 level. It did and went on to make highs at .6870 just ahead of near-term
resistance at .6880 and .6910 just before the widespread intervention. (And you
thought that specialists and market makers played games, look at the charts
below, that is some impressive work)
I did not add to the position after the
intervention, my entries remain at .6805 and .6840.
What continues to be odd is the
lack of follow through each day after the opening hour. The volatility simply
goes away. The only way to participate is to pick your spots based purely on
technical levels and place a stop loss. The momentum game, in the afternoon at
least, is absent. If you react to every jig and jag, you slowly destroy
yourself with commissions. My theme in this column in recent weeks has been the
adjustments one needs to make to an ever changing marketplace, this is yet one
more example.
Let’s frame the current market
environment though. Overall the damage of late has been minimal, yes, the
trendline has been broken, but the market has not even pulled back 38% off the
highs. So while it is easy to get caught up in the day-to-day moves, as of now,
this is merely a blip….for now. Keep an eye on 985 for good support.
| Support/Resistance Numbers for S&P and Nasdaq Futures |
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As always, feel free to send me
your comments and questions.