So, what’s next for Stocks
Let me start with my day in the office. It was a mixed bag. I had one trader tell me that this was no big deal. “The Dow hasn’t had a correction in month’s”. Another said to me “This is a correction, pretty sad one at that”. Then the guy’s on CNBC seem to be looking for the next move down. This is a sentiment I heard over and over again from many traders on the street. But what if it doesn’t come? I certainly was not a fan of today’s bounce. Although relatively broad based (75% of S&P and 17-30 Dow stocks were up today)it did not have substantial staying power and only a 12% retracement. I think that if you are bullish you should be legging into longs. Buy in regular intervals, an equal amount each time. This is called Dollar Cost Averaging. If you are a bear, sell your holdings and move to Treasuries. But remember that stocks tend to rebound (remember 1987 and 2001)and if you get out totally you miss the growth (if it occurs) over the longer term.
For Foreign Exchange I am equally confused. One friend of mine said that the Euro had some catching up to do. Meaning a sell off in the Euro. This was certainly against my thinking. The U.S. economy is slowing (see previous post with today’s number’s)and Stocks and Emerging Markets are under some pressure. This is not a market that I want to be long Dollars. Yes, i know the old saying about running to dollars in times of crisis, but it would seem that the dollar should suffer in this market (it has been under pressure for the past few years). For now I have been trading dollars from the short side but with a very short lease. Not my style at all. More number’s tomorrow. Most analysts expect further weakness, which in turn should put some pressure on stocks.
So, what’s next for Stocks
Let me start with my day in the office. It was a mixed bag. I had one trader tell me that this was no big deal. “The Dow hasn’t had a correction in month’s”. Another said to me “This is a correction, pretty sad one at that”. Then the guy’s on CNBC seem to be looking for the next move down. This is a sentiment I heard over and over again from many traders on the street. But what if it doesn’t come? I certainly was not a fan of today’s bounce. Although relatively broad based (75% of S&P and 17-30 Dow stocks were up today)it did not have substantial staying power and only a 12% retracement. I think that if you are bullish you should be legging into longs. Buy in regular intervals, an equal amount each time. This is called Dollar Cost Averaging. If you are a bear, sell your holdings and move to Treasuries. But remember that stocks tend to rebound (remember 1987 and 2001)and if you get out totally you miss the growth (if it occurs) over the longer term.
For Foreign Exchange I am equally confused. One friend of mine said that the Euro had some catching up to do. Meaning a sell off in the Euro. This was certainly against my thinking. The U.S. economy is slowing (see previous post with today’s number’s)and Stocks and Emerging Markets are under some pressure. This is not a market that I want to be long Dollars. Yes, i know the old saying about running to dollars in times of crisis, but it would seem that the dollar should suffer in this market (it has been under pressure for the past few years). For now I have been trading dollars from the short side but with a very short lease. Not my style at all. More number’s tomorrow. Most analysts expect further weakness, which in turn should put some pressure on stocks.
Chinese Stocks better overnight
The Chinese Stock Market rebounded last night as apparent bargin humters entered the market. The Shanghai index closed up almost 4% last night. Is this the end? I am not sure. GDP numbers were just out and were basically as expected. Fed Fund futures are now increasing the probabilty of a rate decrease in the 2-6 month region. I think that overall it was a big move yesterday but remember, what type of retracements have we had over the past 12-24 months. No thing really major. I would not enter into stocks at this time as we will probably have better buying opportunites in the days ahead. To many “talking heads” saying that this was not a big deal. Another weak Chicago Purchasing Manager at 47.9 (expected 50.0) will certaimly not help.
Good Luck and if you are looking for me I will be under my desk.
FXTRADINGIDEAS@AOL.COM
Stocks, Currencies and Van Halen all come crashing down
Stocks today led by China overnight have come crashing off. The Shanghai (China Exchange) was off 8.8% on the back of restrictions put in place to stem hot money flowing into the country. This has caused a spill over “panic” to the Western Stock exchanges which came under intense pressure. The Bovespa down 7.3%, Bolsa down 4.4%, Nasdaq -3.75%, the Dow down 3.75% and the list goes on and on. Couple this with Emerging Market currencies coming off (hard) and you have the makings of a melt down. I am getting calls from alot of people asking me “What do you think?”. I think you are caught just like me and all the rest of the Yield Monkey’s. I cut all of my spot risk (actually stopped out!) but I continue to run my interest rate risk.
Hold on this ride is not over yet and with the calls I am getting there is going to be more blood on the street.
This and the Van Halen tour has been canceled.
Can’t we all just get along ?
FXTRADINGIDEAS@AOL.COM
EM under Pressure…..
Mexico is opening above the top of the channel at 11.1250. The markets certainly do not “feel good”, and I would look for more of a melt down as the day progresses. The dollar is under pressure from all corners, with is slipping to 1.3205 against the Euro. I will continue to look for a weaker dollars across the board and also look for an opportunity to re-establish, and add to existing EM risk.
These are the FX Trading Ideas for today.
Good Luck and Good Forex Trading
FXTRADINGIDEAS@AOL.COM
-
*************************
