US Equities Surge Higher Towards Key Levels – 9/9/15 Forex Commentary
As you can see in the chart below the S&P 500 is surging back towards that all important 50-70% retracement area. Historically, after a substantial drop like what occurred in late August, what happens once the 50-70% retracement area is reached determines overall direction. The vast majority of major market crashes and corrections have provided this retracement. Now that we are getting a second test into this area we should have our answer shortly. On August 28th 2015 the market set a high of around 1995 which gives us a key level to look for a stop run. Should the market come back into this level and create a stop run of it my opinion will turn bearish. Remember the key is to define a plan and then let the market either validate that plan or not. I would imagine that if this is setting up for the next correction down they will more than likely run the market past the psychological barrier of 2000 as well. The rest of the week will be very important and I will make sure to keep any major changes updated in the commentary.
EUR/USD Remains In Inverse Trend Channel
If I had to bet on direction for the day I would say downside is the likely option. As I always say an opinion is just an opinion until the market provides an actual stop run from a valid pre-selected level so don’t get too caught up in a downward move until something valid sets up. We are still in what I term as an inverse trend channel. Essentially this is a gently sloping channel that moves opposite the last major move. Since the last major move was down this is gently sloping up. The likely purpose of this is further accumulation of a desired position. As the market begins to make slightly higher highs and higher lows buying activity increases. Generally these moves are capped off with one last false push that gets hammered back down. That last exhaustion move might have occurred today thus setting us up for the move down.
The trouble with catching this move is we don’t have a great deal of level from which to do so. The best option is what we term as a backside of the level setup. Essentially this is a break point that is retested from the opposite side once the break occurs thus creating a stop run on the retest. If your a member make sure to check out today’s video preview as I walk through the likely areas I would look for this to occur from.
Pound Surges Higher Against USD
Out of the two pairs the GBP/USD was the one that offered a valid trade setup. For full disclosure, as I mentioned in today live training room, I was not in this trade. I was probably being a bit too conservative and it kept me from entering the short on the extended market. Essentially what setup was a classic New York reversal day trade. The only issue I took with the trade was the level. The level was created at the beginning of the month and the more time in between the creation of the level and the retest, the less I trust it. When it comes to a daily chart swing point, time decay is not an issue. When your talking about intra-day short term levels then time decay is very much a concern. Congrats to those of you in the room that did take the trade.
As far as today is concerned, we may see the third push to the upside but I’m going to look at trading the manipulation points to both sides of the price. considering my bias on the EUR/USD, if that begins to push to the downside the GBP/USD is likely to follow not far behind. Therefore leaving my options open to take any trade from one of the valid pre-selected manipulation points is in my opinion the best choice.
Forex News For September 9th 2015
UK Manufacturing & Industrial Production m/m 4:30 AM Eastern: Both Manufacturing and Industrial Production have the ability to spike the market more than 15 pips by themselves. This month we have the pleasure of getting both numbers at the same time. While this is good in the sense that we don’t have two days screwed up by news it does complicate things for those looking to trade around this number.
I really wouldn’t give one more importance than the other and historically whatever one has the larger deviation from the expected number is what wins. If there is a conflict the likely direction will be towards the bigger deviation. If both deviate in the same direction expect a large move, and expect any entry within 20 pips of pre-release to more than likely be a profitable trade provided you are not at a manipulation point. Industrial Production is expected at .1 and Manufacturing Production is expected at .2 for the month.
Notice how both charts below show a decreasing actual number. While the decrease has been slow and gradual it does exist. The likelihood of a large surprise to the upside is far less than a surprise to the downside in my opinion.
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