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Equities Have 3rd Down Day, Will They Rebound? Jan.14, 2015

Stocks To Test Historical Bounce After Third Down Day

With the increased volatility in the equity markets yesterday showing a third down day in a row I have to remind myself that for over a year now we havent seen a fourth down day in stocks. There has always been a rebound afterward even if it was only for a day. If we look at the daily S&P we see that in all reality there wasnt very many third days down and for the most part any two day drop resulted in new highs not long after. Having said that I also have to recall that the dynamic has changed with the Fed switching off the printing press and the ECB only being able to threaten to fire theirs up the free money floating around has not increased as of late, making it easy for investors chasing yield to push stocks higher. What will be interesting to see is if the PPT (Plunge Protection Team) comes in to save the day since we all know they have an unlimited supply of cash to do it with. If we do manage to see the forth day in a row down today you can just about guarantee that there will be some Fed or ECB member in the very near future talking more QE expansion. Maybe even the BOE since they are getting very close to deflationary figures as well. You never know maybe all at once but I doubt that will happen.

EUR/USD First Long Term Push Down

The move on the EUR/USD yesterday qualifies as a first long term push but also looks to be a clean second intraday push as well. At this point its best to stay on the safe side and be open to trade the long from the lows but I should also say that the support at 1.1754 is weaker than the next level down around 1.7000. I will be bias for the short today looking for the test at 1.1785 for the set up. There is the chance they push it higher running stops above 1.1800 which would make the run down to test 1.7000 a more profitable push for them but with the ADR hovering at 80+ pips right now they may not have the desire to get those stops. If they cant test higher during Asia and widen the range to the downside then the Asian high is valid as well but I would prefer to see them leave the box closer to the lows giving them more room to manipulate.

EUR/USD Hourly Chart 1-14-2015

GBP/USD Rejects Bad CPI Release Push Plus Some

The worse than expected CPI release wasnt really bad enough to create a sustained move the way I saw it yesterday so as we were leaving the London training session I was looking for the set up to go long the GU after blowing the ADR for the day. It did exactly as I wanted after the large set of legs and pin and took the long from 1.5094 just below the previous days low. Once it threw out the next set of legs I was pretty sure they would start the push and sure enough it shifted on the next candle allowing me to get the stop to break even and go spend time with the family. I never did move my take profit leaving the default 50 doubting they would test the highs just to come back before bed to see they did. Still a nice trade. Good job to the members who caught that one 🙂

Today nothing has changed on direction leaving the same levels valid with the exception of the 1.5112 Otherwise Im thinking that the short from the highs has a better chance due to proximity to current price. The probability for them doing the same movement for a third day is extremely low. If they do intend a push up (which I doubt) they will likely go from 1.5142 and I will miss it due to the added risk of trading mid range with no direction.

GBP/USD Hourly Chart 1-14-2015

EUR/JPY Runs 200+ For Third Push

The 200+ pip move from yesterdays highs on the EUR/JPY does show the risk aversion trade setting in a bit deeper now seeing both the EUR/USD, USD/JPY and equities drop at the same time. Normally I would expect the GU to follow as well but the weakness in the EUR/GBP helped that pair rise yesterday.

Today I am open on direction on this pair and did take the current three pins to the lows set up long from 138.43. I am a bit concerned that the risk aversion will continue but the set up was clear. If it cant shift soon then I will close since its getting close to the two hour time limit from the start of potential manipulation. One more candle to go.

If I do end up closing I will want to see conviction below yesterdays lows to go with a short bias during the London session.

Update: I closed my EJ short -15 and waiting for London

EUR/JPY Hourly Chart 1-14-2015

 

Forex News Today

The calendar is slow during the London session today but steps up with US Retail Sales just after the NY open. Expectations are for drops close to the zero level so movement should be determined by how large it misses if its not close. A drop significantly below zero may get them thinking QE but it will need to be close to 1% and even that may not create a sustained move. There is also a Fed member speech a half hour before so I see that having more potential to get them moving if Plosser hints toward QE.

Happy Trading

Chad

MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!

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