Yesterday we say the pre-market activity acting against the retail trade however it is looking like both retail and institutional investors are on the risk-positive side. As always, looking carefully at the risky currencies AUD, EUR, CAD, and NZL versus USD, CHF and Yen. Strong USD, Yen, (and to less extent) CHF look for S&P 500 reversal. Otherwise it’s going to be a strong Up day.
As before, our overall intermediate term bias remains negative – a market high today may provide an opportunity to pick up a longer duration put option as a “flash crash” hedge. Once you own it leave a trade trigger (or trailing sell order) on it for a tidy gain should May 6th repeat itself and forget about it. Premiums are high due to the high VIX so be choosey – or if you can’t buy a fair priced put… sell a shorter term cash covered disaster put instead and pocket the premium. If the market drops, your cash put kicks in and you buy the market at a steep discount to today. If the crash doesn’t happen, you pocket the premium. A win win in today’s market.
Forex Market Showing Signs of Risk Aversion at Open
Whelp, here we go again. Market up in pre-market trading only to sweep up suckers while they begin share distribution to the retail fools. Although major indices showing +1.0% early, we’re looking for a fall from here – watching the USD for signs of strengthening. At present USD weakness is all that is holding back the flood gates in a market sell-off. Market continues to rise as USD and Yen remain weak versus strong EUR and GBP.
Forex Market Afternoon Update
No sign of a turn in the retail forex market trading sessions. It’s all risk full speed ahead as of 1pm so unless folks decide to swallow some lemon juice it’s looking like a strong close brewing. I am keeping an eye out (as always) for strengthening dollar in the afternoon as reason to take profits on the run up.
In Case You Missed It – USD Flip at 1pm EDT
The US Treasury auctioned $21 billion in 10 year notes, pulling dollars out of financial markets and into the treasury. Demand for USD goes up (as in the case of the auction), S&P 500 goes down. Sure enough if you were watching the market when the auction results came out you saw the reversal take place. Lock that tidbit away for the next treasury auction.
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