It was a nothing day in both the DAX and FTSE yesterday, with both indices ending the day at similar levels to where they had begun it. My near-term focus remains on further weakness, albeit not major weakness. In this environment, the best strategy is to shorten one’s trading timeframe, which in my case means looking for moves lasting a session or so. For this purpose, I switch down from the fourhourly charts to the hourly charts in order to finesse my entries.
I am on the lookout for further shorts in the FTSE and DAX today, as well as in EURGBP.
Click here for analysis of some leading equity indices.
The relative robustness in gold and silver against the backdrop of a weakening Euro may not endure for long. If the single currency continues its recent downtrend, I fear that the precious metals will be dragged down too. After all, their current uptrends have been decidedly choppy, which is not a characteristic of genuine moves. I am giving them the benefit of the doubt for now, but have more conviction in shorting the likes of copper and EURUSD.
Click here for analysis of some commodities and EURUSD.
WALL STREET OUTLOOK
Compared to the European indices, Wall Street is much nearer to oversold right now on its daily charts. Oversoldness is never a reason in itself to buy, of course. In a genuine downtrend, it is quite normal for markets to get oversold and stay oversold for extended periods. However, I do not believe this to be a genuine downtrend, but a correction within a bull market. I am allowing for a bit more selling for now, and as such for the markets to become even more oversold, with RSI readings of below 30%. Positive divergence – i.e. a new low in the markets unaccompanied by fresh lows in the RSI – and then a bounce would likely be a good buying opportunity.
Click here for analysis of some leading US indices.
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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.
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