Obviously enough, the US selloff that started in the US have rippled through the Asian region as most stocks and other industry sectors have declined. Financials especially banks have garnered the most loss in stock market prices that spread over the Dow and Nasdaq indices.
There were some chart signals before Tuesday's decline as prices on the USD and the DOW have been hovering at the higher range of their respective prices where a selling pressure existed when the USD index failed to move back above or near the 103.00 levels twice in a row. And when such market condition occur the best case scenario is to gradually lift market positions off the table. And profit-taking prior to the end of the 1st quarter trading is logical move. Whenever 'Uncertainty' is defined the best 'Hedge' is to have CASH on HAND and wait for the next best trade setup. This is quite a coincidence soon after the market drifted lower to this writing.
Practical trading strategies can best be practiced at times least expected like Tuesday's decline. And this is in-lock step with the USD decline below the 100 basis pt. market's lower range as described in our recent chart figure. Where a cluster of top heavy candle bars marked on its higher range had no further place to go but for a corrective move. For now, the DXY is at its mid-range and is awaiting other probable catalyst for a continuation or a recovery. Either way, a wider trading range is expected as volatility already began to emerge back in the market. And expect alternate pullbacks at the least expected trading market session until the end of the month of March trading.
The Foreign exchange market would be the first beneficiary as the market have started to shift back to the currency market from stock settlements. But we have to understand that this is just a mere start of a healthy correction widely expected by the market. However, there is still market uncertainty if a continuation of this selloff would continue or not. There would be a balancing force between these two markets. As reluctant as other maybe, traders would be threading a fine line where the best probable bet would be taken.
For now, we have level-off on equities and moved back towards the currency market nearing the end of the first quarter trading. This is in line with our market strategy and following cyclical patterns towards the middle of the year and the 2nd quarter of 2017.
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NOTE: CMT's and other analyst have long been calling for a technical correction on the DOW & the USD for sometime ever since prices have been at the market's overbought area for quite awhile. TEXT BOOK Technical trading can best be applied supporting a trade idea but not necessarily the main tool to make a trade decision.
ReplyDeleteOthers may disagree, but PRICE ACTION Analysis has been more effective thus far, following the rule that markets are deemed RELATIVE rather than ABSOLUTE. Although, respective trading levels really depend on every trader's comfort zone that may deliver the best results as they see fit. But market conditions change and so one should be willing to adapt.
Rebalancing Risk between Stocks and Bonds are what most financial planners do when correlation is discussed. However, other than Bonds; MegaTrade101 correlation with Foreign exchange is our preference as the FX market brings forth liquidity and volume far better than the Stock market.
ReplyDeleteBesides, since stocks are traded in different foreign currency denomination this is an approach that we have been far more effective where strategies are derived based on the total amount invested in the portfolio. And the USD is the dominant currency of choice.
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