S&P Breaks 700; FTSE Dips Below 3500

The slide in equities continued with the S&P 500 (^GSPC) dropping below 700. FTSE (^FTSE) stuck a toe through 3500, but still profit-taking in gold continued.

My best trade of the day was a ‘carried forward’ from yesterday. In yesterday’s blog (Dow Sinks Below 7000)I mentioned that I’d opened a new short bet on gold at $933. At the time it looked a bit risky, perhaps even foolhardy, but with the gold price currently at $915 it’s looking good. I’ve brought my stop down to guarantee a profit at $932, but want to leave room for the trade to breath.

The price is getting to the level where I’m likely to jump out a bit too early. I reckon there should be good support around the $900 area; it’s just refining how far the ‘area’ extends to. I’ve been brought up to always leave a bit for the next man, so will probably take profits between $900-910, but the price could carry on down towards $880. That could be where I look to go long.

The markets (or my trading) work in cycles. For a while the forex market put bread on the table; at the moment I’ve struggled in forex, but made money in gold. Yesterday I struggled with the concept of Sterling falling further. This was based on nothing more than previous support in GBP/USD at the $1.41 level. So this morning I approached the market with a more objective approach and sold Sterling early on at $1.4083. I part-closed at $1.4071, but was caught flat-footed by a rebound in a flat market and ended up being stopped out at $1.4110 for an overall loss.

My second forex trade was poorly timed and, to be honest, I was lucky to get out with a profit. I bought GBP/JPY in £1 at Y138.09, a level that had produce profits over the past few days. But today’s purchase was the fanfare for a full retreat. The price dropped back to Y136.60, just as I was due to take Mrs FT out to lunch. I felt confident enough to leave that bet on and put on a limit order to buy another £1 at Y136.20.

I returned from lunch to news that my order hadn’t been filled, but the price was back up to Y138.49. Whistling ‘The Great Escape’ I decided not to push my luck any further and close out for a 40-pip profit. With equities still heading south there was a risk that Sterling took another pounding so I was happier keeping hold of my trading capital.

Uh Oh! The sirens are tempting me closer to the rocks. Twice now I’ve left limit orders to buy FTSE when I’ve been out (last night at 3560, today at 3510) and twice I’ve cancelled them on my return. It’s almost as if I know it’s stupid, but I don’t mind if it happens when I’m out!!!

I reckon somewhere round here there’ll be a successful long trade in equities; what I don’t know is how much pain and patience will be involved before the profit. I’m definitely not calling the turn, just the likelihood of a bounce in an overstretched market. At the moment the S&P 500 has just dropped below 700 and my earlier limit to buy FTSE at 3510 would have been hit. Next limit order 3460?

Update:
Squeak, squeak, I’ve just closed out my gold short at $906.6; that’ll do me.

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