I went into yesterday bearish and shorted the DAX in the morning. I caught a 70-point move lower and was fully expecting the move to extend even further. Instead, I ended up getting stopped out at breakeven. So, I then shorted again in the afternoon. The price stagnated, so I closed out and went home. Overnight, the German index dropped 50 points or so. Bloody marvellous.
I do not see the correction as yet having run its course. The Euro crisis rumbles on and the indices have yet to become truly oversold on their daily charts, which is what I’d expect if the selling was at an end. My strategy is therefore still to short the end of rallies. The best opportunities continue to lie in the FTSE and DAX, as far as I see it.
Click here for analysis of some leading equity indices.
Brent crude is around its 55-week exponential moving average ($112.37), the line which it reached and went a bit through in each of the last two years’ summer corrections. Also, the weekly momentum reading has reached similar levels to where it bottomed out at the end of those two sell-offs. I think it quite possible a bloodbath can be avoided here in 2012, although several months of corrective activity is an obvious risk. In the very near term, I reckon the black stuff can rally, although most likely as a precursor to further downside to $108.81.
Click here for analysis of some leading commodities.
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Dominic Picarda is a Chartered Market Technician and has co-ordinated the IC's trading coverage since 2006. He is a regular speaker at trading and investment events and also holds the Chartered Financial Analyst qualification.