IIFT Daily Note with Peter Brown

High Volatility but direction remains confused.

Posted by:  |  Time: 7:59 am  |  Topic:
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Another crazy day on the markets. Certainly the Gold selling has sparked a period of extreme volatility. Yesterday the Euro markets got the hit. Dax was first up on rumours of a German downgrade. The first candle yesterday morning was 200 points, amazing for a stable product like the Dax. Then we had the speculation that EU policy will change from austerity to easing on the back of lower inflation figures. The Euro then fell 160 points. Then we had the sell off on the S&P 300 points. What a day.

Has the market got a clear direction? No.

We could rally back today as we did Tuesday or sell off further. The secret is to wait and see and go with the flow.

On the Euro we have conflicting macro views. Up on the back of flows from Japan and down on fundamentals from The Eurozone plus a easing in policy and a rate cut. I favour the latter and will be selling any bounce.

On the equity markets it is a wait and see. i think we can get the direction from the Dax this morning. Maybe a small bounce and then lower. I will wait and see on this one.

Gold is finding support in the low 1300’s .If these maraket keep selling, Gold might find some support. Money has to go somewhere and if the market is selling stocks then gold should get supported.

On the S&P it is likely the bull run is over. Whether we correct much more I don’t know. But this volatility is dangerous and could lead to a rush for the door as investors lock in profits gained so far this year.

We had a down day on Monday, up Tuesday, down Wednesday and today? The moves are so big you need to go with the flow. Trying to fade this market is not a good strategy.

On the levels, technicals are difficult due to the large trading ranges.

Gold 1400 1340   Euro 1.3080  1.3000  S&P 1570  1550  1538 USD JPY 98.40  97.50 (still overbought on the weekly chart, might remain range bound, macro view still much higher)

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