FX Rates and the US Yields to Drive the Market Action This Week
With the FOMC in the rear view mirror (for now) and the June low briefly tested, there does not seem to be any major event or technical risks to the markets as of now. The main market drivers this week are likely going to be the unprecedented action unfolding in the FX world. With the British Pound breaking down to record lows overnight, and with the Euro firmly below parity, the King Dollar is currently red hot, pushing up the yields even higher, which in turn will put pressure on the US equities. There may not be any respite from this spiral until the red hot dollar starts to cool off, which in turn will depend on the geopolitical environment being muddied by Putin’s Ukraine war.
This is a macro-driven market environment – do not let your valuations based analysis drive your trading decisions. At the same time, bears should be cautious of a potential spike up as the negative sentiment appears to be peaking. When everybody and their grandma is bearish, time to cover your shorts and wait for the next opportunity.
Positional Trading Models: Our positional models have negated their bearish bias on the NFP Friday, 09/02/22, and are now sporting a neutral bias. No positional trading plans for today, and until published otherwise.
Intraday/Aggressive Models: Our aggressive, intraday models indicate the trading plans below for today.
Trading Plans for MON 09/26:
Aggressive Intraday Models: For today, our aggressive intraday models indicate going long on a break above 3702, 3678, or 3655 with an 8-point trailing stop, and going short on a break below 3694 or 3672 with a 9-point trailing stop.
Models indicate long exits on a break below 3710, and short exits on a break above 3660. Models also indicate a break-even hard stop once a trade gets into a 4-point profit level. Models indicate taking these signals right after the FOMC decision release, from 11:01 am ET or later.
By definition the intraday models do not hold any positions overnight – the models exit any open position at the close of the last bar (3:59pm bar or 4:00pm bar, depending on your platform’s bar timing convention).
To avoid getting whipsawed, use at least a 5-minute closing or a higher time frame (a 1-minute if you know what you are doing) – depending on your risk tolerance and trading style – to determine the signals.
IMPORTANT RISK DISCLOSURES AND NOTICES – READ CAREFULLY:
(i) This article contains personal opinions of the author and is NOT representative of any organization(s) he may be affiliated with. This article is solely intended for informational and educational purposes only. It is NOT any specific advice or recommendation or solicitation to purchase or sell or cause any transaction in any specific investment instruments at any specific price levels, but it is a generic analysis of the instruments mentioned.
(ii) Do NOT make your financial investment or trading decisions based on this article; anyone doing so shall do so solely at their own risk. The author will NOT be responsible for any losses or loss of potential gains arising from any investments/trades made based on the opinions, forecasts or other information contained in this article.
(iii) Risk Warning: Investing, trading in S&P 500 Index – spot, futures, or options or in any other synthetic form – or its component stocks carries inherent risk of loss. Trading in leveraged instruments such as futures carries much higher risk of significant losses and you may lose more than you invested in them. Carefully consider your individual financial situation and investment objectives before investing in any financial instruments. If you are not a professional trader, consult a professional investment advisor before making your investment decisions.
(iv) Past performance: This article may contain references to past performance of hypothetical trades or past forecasts, which should NOT be taken as any representation or promise or guarantee of potential future profits. Past performance is not indicative of future performance.
(v) The author makes no representations whatsoever and assumes no responsibility as to the suitability, accuracy, completeness or validity of the information or the forecasts provided.
(vi) All opinions expressed herein are subject to change at any time, without any notice to anyone.
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