Dubai Debt Crisis Ripples Markets

The Dubai financial crisis news coming from the Middle East on a thanksgiving holiday weekend indeed was a treat to most of the investors celebrating their holiday schedule where a sensitive thin market place could easily been made a slaughter house from both sides of the trade.

And this has been the scenario in parallel with the closing of the month, opening of the new trading month of December on top of the position adjustments towards the end of the year; will make this market what it is - ' a dangerous volatile market swings '.

With that said, Gold have topped-out at the $1,195.18 and made a huge drop of almost $66.00 towards the last trading day of last week. Wherein the obvious long wick down on the gold chart have indicated market capitulation of long positions that covered the whole trading low of that week as traders and investors hurried to exit hoping to cash in whatever is left on their gains. But the daily chart shows more of a day to day down swing because of the technically motivated bar of a hammer / umbrella candlestick bar that indicates a down ward direction. The Gold market is isolated at this time due to the last Fridays movement making investors reluctant to take fresh positions. We have termed this as ' the mover & shaker '.

That news on the middle east was the trigger point to relieve the US dollar and provide some much needed lifeline to recover as market participants caught flat-footed made cash flow shift back to US dollar instruments. This rippled in the most major pairs as shown on the chart comparisons from the EUR/USD, GBP/USD, USD/CHF,USD/JPY and a couple more cross rates that made their dramatic move on both directions up and down.

Without going further to details as it is what it is; now to avoid being caught in such a volatile market is to either stay out or if the positions are already in the market, placing a cross hedge on whatever positions the traders / investors has it is advisable to arbitrary hedge regardless of the market condition. This way it will absorb any wild fluctuation regardless of direction and simply analyze the overall net effect on all trades.

Percentage trading has always been proven to be the best case scenario on such occasions. Considering point value, amount exposure, net coverage, net exposure and amount will relieve the trader of any such market pressure. If the net amount of all trades are positive a simple liquidation or settlement will make do. If not, the trader and strategist can calculate the tolerance levels and would have the time of waiting it out for the market to get its proper footing.

Be caustious as it can only get more volatile towards the end of this month.

Good Luck and Happy trading !