Dow Sinks Below 7000; FTSE Hits 6-Year Low

Wow! Happy Mondays. FTSE (^FTSE) hit a new low, yes a few points lower than panicky October. And investors preferred the safe haven of the Dollar to gold, as Sterling and the Euro took a bashing.

You know when you turn up in a near-empty car park? You’re so spoilt for choice that it’s probably the worst bit of parking you’ll do. I was like that this morning. There were plenty of trades on offer, but I didn’t fancy selling an equity market that had gapped down. The same with the weakened Pound (in recent days a buy bet below $1.42 has worked out better than a sell bet) and Euro. I was still interested in going long GBP/JPY, but there was no set-up there today.

So I didn’t short either FTSE or Sterling; actually I was nearly tempted into a cheeky long bet on FTSE at 3660, but I was going to be off the desk for a while and it didn’t seem worth the risk.

I did go short of gold at $954.6, which would have been a cracking trade if I hadn’t been stopped out in my absence. With the price down at $948, I trailed my stop down to $953, just in case anything untoward happened while I was away from the desk. Nothing much happened-other than a rogue price triggered my stop!

I missed the leg down to $934, but opted to open a new short down at $933. Why down there? Well, I admit it’s riskier, but firstly, I wasn’t impressed with the rally in gold first thing with equities piling off. My original short was based on, “Is that the best you’ve got?”. Secondly, the price didn’t much care about holding the 21-day moving average-now at around $941. Today it’s looked like the “must-have” safe haven is the US Dollar and not gold.

Hey, what about equities? Worth a buy yet? I must admit I’m almost tempted, but I’d rather do it in the midst of a capitulation sell-off, which I still don’t think we’ve had. The Dow’s (^DJI) currently below 6900 and FTSE is below the lows of October; it just doesn’t feel as panicky this time around.

One reason that I’ve not rushed in to buy is that chartists take a break of previous lows as a fairly serious offence, punishable by a further push to the downside. The S&P 500 is in real danger of breaking 700 and that could see FTSE down in the 3500s.

There’s lots for jumpy traders to focus on again this week. Undoubtedly interest rate decisions in Europe and the UK, along with payrolls data in the US, share top billing. But there’s a whole Kleenex box of sentiment indicators as well as more on the housing sector; check out the Weekly Wrap for details.

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