IIFT Daily Note with Peter Brown

Critical week ahead.

Posted by:  |  Time: 7:42 am  |  Topic:
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Good Morning

Are you ready? This is likely to be a crazy week. FED meeting on Wednesday and the famous rate decision on Thursday. On the way we have plenty of other data to keep us amused. This is going to be a very volatile week.

We start this morning with weak Chinese data and the markets in sell mode. How the Chinese market finishes should determine the mood at the start of Europe. We also have the migrant issue, will that spill into markets?

It is going to be a week of small stake size and big stops for the swing traders or mood trading for others. Plenty of action so no need to get into Thursday analysis yet.

JPY is down as we anticipate another attempt at igniting the Japanese economy and the dollar is slightly lower because the majority do not expect the rate to rise. So we have a spike in the Euro and gold is soft.

No macro view on indices yet, short term bias to the sell side.

 

DAX fade will be tricky this morning as there is a lot of action prior to

 

 

On the calendar today:

Nothing of note

http://www.iift.ie/economic-calendar/

 

 

S&P (Cash/DFB)

We can say the mood is negative but likely to switch quickly. So we are in for a very volatile, fickle market this week. It is not reasonable to expect tech levels to work well in this scenario. To start we are bearish.

Conditions: Hurricane Resistance: 1,975 Support: 1,933

 

 

Wall St (DFB)

The levels are wide but sentiment as above.

Conditions: Hurricane Resistance: 16,530 Support: 16,170

 

 

DAX (DFB)

These indices will all be correlated and rise and fall together. Mood to start is down and it is hard to see where the positive will come from. The problem is we can get a two hundred point bounce and still be negative.

Conditions: Hurricane Resistance: 10,300 Support: 10,080

 

 

FTSE 100 (DFB)

The market is a bit lower on the Labour party result but mainly following international sentiment.

Conditions: Choppy Resistance: 6,200 Support: 6,110

 

 

EUR/USD (DFB)

If the indices stay bearish the Euro will rise, mainly against the JPY but also the dollar. The expectation is a big stimulus effort from Japan. We are in a global currency war so we could see some more upside ahead of Thursday.

Conditions: Choppy Resistance: 1.1400 Support: 1.1300

 

 

USD/JPY (DFB)

Big week for the dollar. Thursday will be a major FX influencer. In the meant time I think this one is sidelined.

Conditions: Choppy Resistance: 121.75 Support: 118.45

 

 

AUD/USD (DFB)

We now have political unrest in Australia to add to their economic woes. Sell on rallies is going to be the strategy here for a while.

Conditions: Choppy Resistance: .7200 Support: .6900

 

GOLD (DFB)

Gold is range bound and directionless. We will get a better view on Thursday. It is only the dollar outlook which is driving the price.

Conditions: Choppy Resistance: 1115 Support: 1100

 

 

SILVER (DFB)

Going nowhere fast but has divorced from gold moves. Range bound still.

Conditions: Choppy Resistance: 15.00 Support: 14.00

 

 

The following are a description of some of the Trading strategies that are used and may be referenced to through-out the week.

 

Latest Trading Strategies:

 

Dax Fade Trade

 

This trade is working really well, mainly because there is no big news story to make the first DAX move a big one. Some days the trade is only worth 20/50 points but it is happening frequently. Good way to make money in a quiet market.

We have noticed that after the initial 8am market move the DAX is reversing that move on a consistence basis. Look to fade the initial market move either higher or lower after the first 15/30 minutes. Unlikely to work on days where there is a big story in the market (rarely at present) or where my condition call is Hurricane. Trade is worth 40/80 points.

 

Dow/S&P Gap play from below.

 

A downside gap occurs when we have bad news in Asia or Europe so we are not getting many at present. However if one does present itself the chances of success are very high.

The gap play has a high success rate when traded from a down gap. Look to set trades between 11.30am to 12.30pm. Be careful if there are major news releases in from the US at 1.30pm. Market may wait until then to start the move. If the gap close has not completed by 3.30pm square up.

 

Straddle Trade.

 

I am looking to use the straddle trade technique for the next few months. I think the market conditions are perfect for this technique. I will recommend trying the straddle on various economic releases some in unusual products. Remember 20 point stops are the norm although on some of the products I may recommend more. I am hoping for feed-back from other traders who are using this technique. I will update the strategy from the calendar each day.

 

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