Going back to 2016, market indices like SP500, have moved in a strong correlation with the strength of the US Dollar but lately that correlation has been challenged. The dollar has dropped quite a bit, measured by USD/JPY, or the dollar index DXY. The latter is the measure of the US dollar in relation to a basket of currencies. Does this mean that the markets will have to drop? Not necessarily. The market can continue to rally while the dollar drops. Yesterday, it recovered some of its losses in the prior few days and gold subsequently pulled back. Oil is set to test $52 again, filling the gap from the prior week's drop.
After the sharpest drop in broad market indices like NASDAQ, SP500, and Dow Jones in months because of the former FBI director James Comey and President Trump saga, investors and traders waited patiently to see if markets would continue its downward momentum. In less the 24 hours, SP500 futures recovered half of its losses. It's safe to say that buy the dip has not gone away. The initial reason for the drop was the potential impeachment of the President. Given that no President has ever been impeached and that Senator John McCain turned down the opportunity to do so, it stands to reason the market will rally back.
Last night Godfather, one of our moderators, called the short on Gold (GC) from 1225.0 along with Justin, another moderator. They said gold futures would break under 1220 today. Using one contract you could have profited over $600 dollars with this trade, as its currently trading at 1218.9. We call these types of plays in forex-futures-chat channel almost on a daily basis. There are a lot of opportunities to make profits. Just a reminder future trading is instant settlement and you do not need 25k for day trading. Basically unlimited trading and its 5 days a week, 23 hours a day.
Two notable events happened today. First from yesterday's headline that President Trump fired James Comey, the now former FBI director, gold futures took off reversing almost the entire day's decline in a short amount of time as traders and investors flocked to the safe haven.
Likewise, equities represented by SP500 futures, took a nosedive.
But as you can see from the rest of the chart, prices recovered almost fully just a day later, resuming its longer term trend. In fact, the same thing happened again today. Except this time, it was news of a faulty Boeing aircraft engine. Dow futures, took a nosedive but recovered shortly afterwards.
The moral of the story is, in bull markets and era of Central Bank quantitative easing, headline risk is short-lived. It's better to not panic and buy the dip. If you are already in the position, and there is a drop because of a one-time negative event, it is more likely than not, to recover.
Gold spent most of the day right from open downtrending because of the Fed's language indicating a rate hike. Right when it reached a new low at $1214, it started to bounce and curl up. Minutes before market close, the North Korea ambassador announced North Korea's 6th nuclear bomb test. This shook markets. Equities took a shallow dive while gold added $6 in a hurry, reversing half of the day's drop.
As predicted by polls, Macron won the French presidency. SP500 futures popped right at the open on Sunday night to reach a new all-time high but the gap-up was immediately sold off. Typically Monday and Fridays are the slowest trading days of the week because most news is priced in before open and towards the end of the week, all scheduled news is out and priced in.
NASDAQ leads all indices with tech stocks like $AAPL making new all-time highs. Warren Buffet increased his stake while the Swiss National Bank continues to buy at any price.
Oil has finally come down from the highs. It seems Saudi Arabia's headlines have limited effect while hedge funds liquidate their long positions.
Just one remark is all it took for dollar to get beaten back down, getting close to pre-election levels. USD/JPY, a common indicator of dollar strength, broken 109. Gold futures added $10 in the final hour.
Welcome to the start of the Enhanced Investor Macroecnomic blog where we highlight macroecnomic trades. Tonight, we had some market making moves with the U.S. airstrikes on Syria, further escalating intervention. I want to highlight the importance of being in a successful trading environment with experienced traders.
Most of our members who trade futures were able to benefit from tonight's major upwards move in gold and/or large move down in index futures. We saw the news and responded quickly and provided our members with our personal views on the price action. Large jumps in price action usually indicates mean reversion at night but we told our members the upwards move was not likely finished just yet.