IIFT Daily Note with Peter Brown

More talk of a correction.

Posted by:  |  Time: 7:42 am  |  Topic:  |  Comments: 3
Trading Is At Your Own Risk - Read Our Terms & Conditions

Market sold off late on poor retail company results and comments from the fed that interest rates may rise sooner if the economy accelerates. Market now talking about the famous correction from this long bull run. Normally a 5% to 10% correction is normal in bull markets. We have not had one for over a year. the main reason is there is nowhere else to put client money as rates are zero. So can we have a correction in these circumstances?

Firstly this talk will cap the upside so the market is a sell on rallies. Whether we can have a meaningful correction is doubtful. We have been here before and the market seems to bounce back on any dip. At present I favour a ranging market for the summer, even if the range is 500 points or so.

On FX the key is USD/JPY . This pair is hovering above key levels at 101.00   I move lower will cause stock selling. There is a battle between the expectation of growth and interest rates in the US. Market is split but if expectations for growth diminish the dollar is doomed.

Today is a key day, plenty of news and the FOMC later. Danger is the downside  for stocks and the dollar.

Conditions today are Choppy

Levels are :- S&P (JUN) 1884  1872  1860  Wall St (DFB) 16400  16300  DAX (DFB) 9680  9580  Euro 1.3730  1.3680  Gold 1305  1285

 

3 Comments

Ger

May 21, 2014

arrow

Hi Peter,

I have a quick question for you regarding a sell off today on the Eur/USD. Once it hits a certain level would it be wise to take profit and then bet again on a the sell to continue? Or not? It depends on the scenario and the maths I guess. Any thoughts on this?

Ger

Peter Brown

May 21, 2014

arrow

Hi Ger,

Hi Ger,
Two ways to trade this.

One. just leave it until Draghi speaks first week in June.
Two. Cash in at the support levels and re-enter on a bounce to resistance.

This strategy can gain more points in the long term because you have the chance to earn the same points twice.
Downside it may not stop and you have to re- enter at a lower level.
We cannot get tops and bottoms, so missing a few points does not matter.
At present it is oversold so a cash in makes sense.
Never a bad thing to book a profit.

Peter

Ger

May 21, 2014

arrow

Thanks Peter