I took profits on my FTSE short after a 60-point move lower yesterday morning. This turned out to be a mistake as the index continued to cascade thereafter. I am not particularly confident that a low is in here, either. The indices have yet to reach outright oversold levels on a daily timeframe. While that point is getting closer, we’re not there yet. I am still on the lookout for shorts in the DAX and FTSE today, therefor
I have added coverage of Euro/Sterling and Sterling/US Dollar to this note. From now on, I shall be covering the US indices later on in the morning, closer to Wall Street’s opening bell. EURGBP is at more beaten up levels that we’ve seen in more a decade, in terms of its momentum reading. Although this creates potential for a snapback rally, I think there’s potential for a further near-term slide here also.
Click here for analysis of some leading European markets.
Let me be clear about this: the best short selling opportunities right now are in Europe, not on Wall Street. I have been a bull of the US indices for most of this year, and nothing has changed from a bigger picture perspective.
So, while I would contemplate small shorts for now, I regard the present downwards activity in the S&P, Dow and Nasdaq as corrective. Assuming the world does not fall apart, I imagine I will be playing them from the long side again before too long.
All three indices are approaching oversoldness on their daily charts, with RSI readings in the low 30s. Oversoldness during a bull market – and that is what I believe these markets still to be in – is an obvious buying opportunity.
Click here for analysis of the US indices.
The Euro is surely due a relief rally before long. It is getting really oversold indeed, conditions that make it ripe for a corrective bounce.
I do not envisage myself buying EUR/USD, however. Instead, I would go long of gold, which is also in line for a rally, but is also a story that I believe in. I addressed the various factors in favour of gold in a short video (3:35) recorded yesterday: http://bit.ly/Jz36SE
For playing any remaining near-term weakness in commodities, though, I like the look of copper. The red metal sold off really hard yesterday but isn’t yet anything like as beaten up as its commodity peers.
Click here for analysis of some leading commodities & EUR/USD.
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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.