DOW Has Worst One Day Crash Since 2008 – August 25th 2015
What a crazy market we had today. The DOW hit more than 1,100 points down in the first few minutes and then rallied 1,000 points off the lows. Overall, the DOW had over 4,500 points in market movement between the multiple swings both up and down. If you read back through the commentary I have talked about the future market crash a minimum of once or twice per week over the last 3 months. Why was I warning people to go to cash? Its really quite simple and its something I said yesterday. Equities should reflect the general health of the economy and when they don’t one will correct. In this case there was no way for the economy to correct and therefore that only leaves one option…a market crash. When the Fed is scared to death to raise rates a quarter of a percent that tells you something is seriously wrong.
There has been no real growth in the jobs sector since the crash of 2008. If you take away people taking multiple part time jobs and people taking on another job because of wage cuts the gains are non existent. Nothing about the current economy is real and we haven’t seen nothing yet. I’ve told people for months that the coming crash is going to make us beg for what happened in 2008. The trouble with what is happening now is what can the Fed do. Are they going to cut rates? Are they going to start QE4? They have played their hand and lost, no more bullets in the gun to fight this war.
What can you do to protect yourself? One practical step I have preached for literally years is having at least a month’s worth of storable food. There is a 95% chance you will never need it but what happens if that 5% comes to pass? What about basic supplies? Next, make sure you control your income not an employer. This one is a biggie and will be the down fall of many Americans during this coming crash. If you have been dabbling with learning to trade and have never really taken it serious then there is no better time like the present. Market turmoil often offers some of the greatest opportunity you will ever see but only to those who know what their doing. I’m not talking about trading with BS indicators, EA’s, or any other main stream trading strategy. If you can read about it on forex factory then guess what….it doesn’t work.
The only thing that matters in this market is what smart money is doing. They control the volume and thus they control direction. That is how we have produced over a +21% average gain each month during May, June, and July. I made a video at the end of each month and I just posted July’s trade results here. If you didn’t see it yesterday I would recommend checking it out. The bottom line is learning to trade a proven trading strategy is one of the best ways to take control of your income stream. Anyway, on to the market!
EUR/USD Creates Major Exhaustion Reversal
I made an article a few years ago about exhaustion reversal forex trade setups. It talks about what occurs during the exhaustion type of reversal move and how to trade it. In this type of market anything is possible. The Euro could run 1,000 pips to the upside. With that being said exhaustion reversals are historically very accurate at predicting the next day’s price action. It does not mean that we just take a random trade in the direction of the reversal but it does give us a stronger bias down for certain.
The entry would still come from a stop run of an upper manipulation point. Obviously we will have to wait and see if that occurs or not. In this type of wide range entry is extremely important. So many times retail traders get themselves into trouble by taking trades without having the ability to risk off of a certain level. Another words then enter the market without first defining the point at which they will exit the trade and call the setup wrong. This is why we ONLY trade from pre-determined points. Being able to define risk means I know exactly what I’m looking for BEFORE I enter a trade. If you cannot say that about every trade you take then you are not using a trading strategy that will be profitable long term.
Today I’m biased short on the EUR/USD and as such will only look to short from the upper manipulation points. For those of you who are members make sure to check out tonight’s daily video preview for further discussion on the possibility of a long and what I would need to see to make that valid.
Pound Finally Breaks Above Range
After a week of being in a range the Pound finally breaks out to the upside. This move above the highs leaves me concerned however. One thing that is concerning is the way the EUR/USD is favoring a reversal down for at least tomorrow. While that is not a guaranteed setup it does have the bias short until yesterday’s highs break in my opinion which would create pressure down on the Pound as well. Another concern is in the catalyst for the break higher today. Today’s break higher was in part due to the run up in equities, and not a “natural” move. At 7:30 equity futures began to break down aggressively. When this started to occur the USD began to weaken as well thus causing the EUR/USD and GBP/USD to rise rapidly.
Today I do not have a directional bias on the Pound and will be taking any valid setup from our pre-determined manipulation points. Like I mentioned with the Euro, if equities begin to aggressively sell off like we had occur yesterday you are going to want to avoid any trade that would conflict. If your unaware of how equities effected the EUR/USD and GBP/USD then I would recommend pulling up a DOW chart and seeing the correlation between the moves.
Forex News For August 25th 2015
German IFO Business Climate 4:00 AM Eastern: This month 107.6 is the expected number. Over the last two months we have had a deviation from the expected number of at least .7 and it has created not only a 15+ pip spike but continued price action in the direction of the spike for the next few hours. With the equity market getting most of the attention right now make sure the direction of the news is in line with current equity direction if you expect to trade the follow through to the news.
US Consumer Confidence 10:00 AM Eastern: Last month we had a very large deviation from the expected number and as such a large spike. In general Consumer Confidence is really not a big market mover unless the deviation is large. This month 93 is the expected number and a deviation of 7 +/- is generally required to create a 15+ pip spike.
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