May 1st. Interesting day yesterday. I ended up closing both my USDJPY (66 pip profit) and my AUDNZD (166 pip profit). Although neither hit my raised stop loss I felt compelled as they came close enough and I wanted to book some profits ahead of NFP’s later this week. Yesterday’s BIG Fed day confounded us all as the market likes to do. Nothing much happened and indeed we got a record close on the Dow.
Should we expect to see the S&P follow suit? Doom mongers have been continually left covering their short positions on the S&P. It’s one thing to believe the market will drop and I am one of those people who genuinely thinks that we are in for a significant pull back because of the tapering process of the huge quantitative easing we’ve had. It’s quite another to fight the tape. I have not done that. I find it a bit puzzling that 10 year bond yields in the US are falling instead of rising and to be honest I am not too interested in some clever explanation as to why, clever people don’t always make good traders…………ahem! All I need to know is don’t fight the tape.
It is starting to feel like the S&P really wants to break that 1900 barrier and with so many short positions out there betting on this pullback, it could be a painful process for them and deeply uncomfortable for them to see the Dow at an all-time closing high. In favour of the bears I would say now that April is officially over, the monthly Japanese Candle for the S&P is both an outside candle and a Doji. Might we look back with confidence and say that candle was a clear signal of a change in direction. The difficulty with Outside Candles and Doji Candles is that I tend to take my lead from the subsequent candle. If we break lower then sell short with your stop at the high. For the record the monthly low is 1809.10 and the high is 1899.10. A 90 handle stop loss is not small. A break of the high and I sure won’t be buying it. Still, the market likes to wrong foot as many people as it possibly can so perhaps a fresh bout of buying is exactly what we need to clear all of those stops sitting above 1900. Maybe then we can finally have a decent drop.
Gary –www.fxlight.co