Equity Rally Falters

Equities lost ground as the Dow (^DJI) dropped below 8000 and the FTSE (^FTSE) failed to hold 4000. Gold collapsed through key support levels to hit $865.

The shortened week, light on economic data, is lightly to be governed by technical factors; a mixture of how the charts look and how traders want to be positioned over the Easter break.

My week began with an anguished scream (actually there were a few of those during Bath’s dismal performance on Saturday). In Friday’s blog (Gold Falls Below $900) I highlighted gold’s break below the $900 level and said that it was madness to place a bet over the weekend, but that on Monday I’d be shorting it to test the 100-day moving average at $875.

Blow me, I was beaten to it; running the bet over the weekend would have been very profitable indeed. Gold had reached my first target and was oversold on the intra-day charts so I opted to go long. I was taking a calculated risk, but that’s what this business is all about. I didn’t jump in immediately, but joined in after the price had held support for a few hours. I paid $881 for a £1 bet with a tight stop at $873-if support broke I didn’t want to hang around.

The market looked to be quietly holding in until a wave of selling early on in the US session. I was kicked out for a £90 loss as the price dropped into the mid $860s. I’ll wait for a confirming close below the key moving averages, but look to return to trading the short side again now.

I had more success trading FTSE today.

30-minute chart

Early UK trade suggested a further push to the upside, but this was short-lived and mid-morning I got a signal to go short. I sold £2 at 4066 and watched the index drop below 4000. If I’d been more awake I’d have closed out in the region of 3970; that was where the price overshot the lower Bollinger band by around 20 points. Unfortunately I was looking at something else and closed out at 4006 when it looked as though a short-term bottom was forming. Still, I bagged £120, which paid for my gold trade with a few quid for the shopping.

I’ve just closed out a cheeky little short bet on GBPUSD; I was late in on this one, but once $1.48 had been penetrated I used a pullback to sell £1 at $1.48, buying it back at $1.4745 for a £55 profit.

Although the week’s light on data there’re still a few important numbers, including Alcoa kicking off the next round of US earnings; check out the Weekly Wrap for details.

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