FTSE Ends Its 11-Day Rally

FT
updated | Author's Website

Will stock markets reach a record 12 consecutive green candles? Time looks to be running out for the European markets. In forexland the Dollar index hit a 2009 low at 78.315 earlier today.

But is today’s sell-off no more than a polite one-day wonder, or will we see a half-decent retrace back to the 21-day moving average? It’s interesting that the open positions on the home page show long FTSE (^FTSE) and Dax (^GDAXI) in the 90%s.

Equities fall for the first day in 12

The US Dollar fell victim to risk seekers again, hitting a new low for 2009. But I’m starting to get nervous of the size of short Dollar positions accumulating, especially against the euro. Check out the chart below:

Dollar short positions hit $18 billion

This shows that net speculative short positions reached $18 billion last week, the highest since July 2008. Compare the current (blue) line with the red line from June 16th. That’s potentially a lot of pre-summer holiday closing off to hit the market.

Learning from summers gone by, my trading has had more emphasis on money management than looking for big gains. True, there’ve been a few big winners for those who picked the right entry; on the other hand it would be easy to get sucked into a series of small losses, particularly in forexland.

Yesterday afternoon I placed a small set bet on the USDCAD at C$1.0808. Unusual! Yep, this was a signal from the system that I’m still trying out. I still find that I’m turning down a lot of signals (some wins/some losses) but the CAD$ has been looking hot recently and this signal was on a pullback from the recent low.

I was glad I was only using a small bet size as my timing was thrown by the fall in equities. Lower equities just gave the Dollar the edge and threatened my stop loss on a few occasions. That was the beauty of using a small size; I was relaxed enough to leave the trade overnight and return this morning to find my limit order had closed out at CAD$1.0788. The price did move lower, but I’d hit my target level so job done.

At the moment I’m running a small short bet in my more traditional GBPUSD pair. This was triggered by a signal on my normal 5-minute chart to sell at $1.6527. I’m a bit twitchy about dealing in these summer markets, but there was a good stop level on offer so I traded, but in half my normal size. I placed my stop at $1.6560, a few pips clear of the recent highs.

This really was a dull trade and once again I was glad I didn’t have much riding on it. Eventually over lunch I closed out part of the bet at $1.6507, bringing my stop loss down to break even. This was less ambitious than my normal trading but, like I said earlier, I’m more focused on making some regular small gains in these markets. The price is currently at $1.6438 and my stop is down to $1.6477 to lock in 50 pips.

Those of you who read my recent piece on El Nino might have noticed the continual rise in sugar prices. In today’s FT the Indian central bank warns that the deflationary dip could be coming to an end.

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