IIFT Daily Note with Peter Brown

Will low volume lead to a correction?

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The stock markets continue to rise yet volume is very low. Some commentators feel this is a sign the market is set to correct. However to get a correction big players have to sell. If you were a fund manager in the US would you put your clients into cash at zero return on the hunch you think the market will correct?

Even if we expect a 5/10% correction it is impossible to predict and what will happen after the correction, a bounce! So the motivation is just not there. Low volumes indicate that most of the big players are invested the late comers are the ones that are buying, risky I admit but as yet there are no signs this market is set for a decent fall.

The euro sold off yesterday and in fact was the only product to have a decent move. Euro has shown it’s direction but the move down will be very slow. 1.3500 will be a big level to crack. Trend is down, but look for bounces to enter.

We had a very calm day yesterday, a few news releases this morning should make the market a bit more busy but nothing hectic.


Latest Trading Strategies.

  1. Dax Fade.

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.

  1. 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.


Wall St (DFB)

.A very quiet day yesterday driven mainly by the overbought position. Also the activity of last week prompted the market to take a rest. We are not expecting any major moves today so likely we trade inside the range.


Conditions:Calm Resistance: 16960 Support: 16900



S&P June Future

There is more volatility in the S&P than Wall St. Punched a new high yesterday at 1954.This level is now good resistance the support is hard to fine technically. 1940 is a bit wide but the best I can find.


Conditions:calm Resistance: 1955 Support: 1940




Again 10,020 proved the top. Market looks a bit negative this morning so that level should be a good medium term top. Support come in at 9980 and I expect that to be tested.


Conditions:Calm Resistance: 10020 Support: 9980



FTSE 100 (DFB)

Market tested the high again but failed to break through towards 6900. Market should be range bound but overall supported by fundamentals.


Conditions:Calm Resistance: 6880 Support: 6840




Well it did not take long for the sellers to re-emerge after the bear squeeze of last week. 1.3650/75 is probably the top for some time. If we get a bounce this morning that level or slightly below will be a great sell. Support is at 1.3575 and the question is will that hold for a while. If this market sets off red this morning we will fall towards 1.3500 where we pick up large support..


Conditions:Calm Resistance: 1.3625 Support: 1.3575




Range bound while the outlook for the dollar remains mixed.


Conditions:Calm Resistance: 102.60 Support: 102.00




Market looks bid and a test of .9400 is expected. This will break the long down trend a may set up a rally towards par. Watch this level closely a break out triggers this trade.


Conditions:Calm Resistance: .9400 Support: .9320




Quiet day for gold yesterday but an interesting market ahead. I like the 1240 buy trade if we reach that level, the top side at 1260 is the vulnerable side.


Conditions:Choppy Resistance: 1260 Support: 1240




Support held in very well and we have had a serious bounce. 1920 is key and another spike in Gold will be needed for that level to break. Silver was too cheap and we will likely trade in a 1920 – 1880 range provide gold is steady..


Conditions:Calm Resistance: 1920 Support: 1880



Market Conditions

Potential Moves:

  • Calm = 20/50 pts
  • Choppy = 60/80 pts
  • Hurricane = 100+ pts

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