Stock investing and stock trading,

In yesterday's post (see copy below), it was indicated that the strength of the US dollar of the last few days would affect the stock market resiliency, and that the stock market would position itself in preparation for today's stock market economic calendar report (there is a market moving report to be released before the stock market open). Both scenarios took place: stock experience some selling the like of which has not been seen recently.

In addition, both the US dollar, and the stock market have positioned themselves for the economic report due in few hours in such as way to permit for higher volatility and headfakes, after the report release. The dollar is currently trading against the euro at 1.38, but the forex pair price could spike around the release of the economic report in the area of 1.39 and 1.37.

Our current thinking is that if the market gaps up at the open, we would be looking for a closure of the gap, since yesterdays stock buyers who bought at the stock market open, and who did not close their positions, might be looking to close their currently losing stock positions at break even to stop the pain that typically accompanies stock losses. Therefore, there is a possible supply of stocks that would work in favor of limiting the stock market upside if there is any.

From the price dynamics in stocks and in the US dollar, it appears that big money may have been caught unprepared by the sudden rise in the US dollar which was against what one may have expected after the Fed announcement. This site was of the view of a dollar rise after the Fed announcement as indicated in last week posts. It is possible that big money took a few days to wait and see, and since on Monday the dollar continued its march higher, big money may have decided to be cautious and do some selling.

The synchronized selling in the stock market and the buying of the US dollar is something that was not seen recently until today.

In relation to today economic calendar report, the US dollar smart money might use the news of this Wednesday to disorient the recent traders who may have started shorting EUR/USD only today towards the end of the day, now that the move of the US dollar is easier to see. Therefore a weakening of the US dollar particularly towards the open is not to rule out.

Today could therefore be an important day in the stock market as well, as it should test whether the profit taking would gain momentum, and whether the stock market stops orders have been tightened. If the stock stop losses get triggered, then the stock market session could lead to increased volatility.

Of particular interest to us would be stock trading as higher volume, because the big money who is late and anxious to sell might use them as a way to hedge and to minimize traces of stock selling.


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