Weakening data unwinds headline news spike
Russian aggression across Ukraine has dominated the news, the markets, and our lives all week. It now looks like things are going to get worse as we go into the weekend, so any trades left open overnight are at risk of being caught up in some serious volatility come Sunday nights open.
In this morning’s video, I was discussing the benefits of using the short-term volatility to enter scalps, rather than attempting to hold on to a trade, as time in the markets increases risk currently. As soon as I had closed the stream a news headline from Russia came across the wires saying that Putin had noticed a positive switch in the negotiations. The DAX almost in an instant ripped 500 points higher. In the example, I went through I talked about the importance of not chasing price and showing patience in waiting for the price to come to you, so you could control the risk. Luckily for me, I was on a 1-minute time frame and my Stop Loss was just a few points higher than my entry.
As we come into the London close, the latest swing on the intraday chart as we came into 4 pm then set up the price action for the remainder of the London session. On the Nasdaq futures, the target was 13,500 for the London traders. The target on the DAX was around 13,680. The Nasdaq had previously unwound the move after the Putin news headline, but the DAX hasn’t got there yet. For the remainder of the US session, I am expecting the grind lower in the DAX to push through the news headline low and then possibly down to the London open price level. We’re now in the US session so US indices are leading indicators. The Nasdaq has already hit the measured move of the pre-London close and could be on its way to the 13,400 and the 1.5x Initial Balance level or possibly the measured move of the IB at 13,290.
Whether the moves continue lower, we’ll have to wait and see, but those traders at their desks still, will be looking to take profits and close out positions or start hedging. In which case so should we.
The Ukrainian Foreign Minister said zero progress was made in talks with his Russian counterpart. We have had warnings of false flag maneuvers by Russia to bring the Belarusian Army into the conflict. There have also been warnings of possible chemical and biological attacks by Russia on Ukraine. Sorting through what is a likely occurrence and pure propaganda is very hard, but the sentiment is growing more negative. Which will influence the mood in the markets.
The Uni. Michigan preliminary report showed consumer sentiment dropping from 62.8 in February to 59.7 in March and coming in under the market expectations. On a positive note but not market moving, the Canadian economy added the most jobs in 17 months with February’s employment totals coming in at 336.6k, despite the increased public health precautions.
The forex heatmap is still as confused as it was this morning. The Canadian dollar has remained relatively strong against its peers, especially with the decline in oil slowing down and the decent job numbers. Momentum and price action on the Brent cruse chart still signal further downside pressure to come, with the bearish hypothesis being invalidated with an H4 close above Monday’s low.
The EURGBP is attempting t change the trend direction. It swept the daily high of 0.84058 but failed to close above that swing high. On the downside, there was a lower close below the 0.82832 swing low a few days ago, so I would still favor the bears under normal circumstances.
My concern with going short the EG is that 63% of the traders on the ActivTrader platform agree with me. With this in mind, if 0.8300 holds on the test of the imbalance there, I may change my mind and start looking for intraday longs to see if we can build our way higher.