Thursday, March 19, 2015

Euro Giving Back Gains

Looking at the stock, bond, currency, and commodity markets, you can see which markets have staying power and which don't.  Stocks and bonds have mostly kept their FOMC gains, but the euro and crude oil have not.  It is no coincidence that the markets in sharp downtrends could not sustain their gains from yesterday, while those in an uptrend could.

Periodically, when you get crowded positions, like the short euro trade, you get counter moves to shake out the latecomers and the non-believers.  I am neither, as I am not one to just buy something because it has a lot of bearish sentiment.  The euro is still in a well-established downtrend, and it was overvalued for so long that getting closer to fair value makes it seem like a bargain.

Yesterday's price action after the Fed announcement shows you that those that wanted to buy euros, stocks, and bonds all wanted to wait till after the announcement to do so.  Not too many were planning to sell euros, stocks, or bonds after the announcement.  The nervous ones already did ahead of the announcement, for fear of "patience" being removed.  The Fed rarely fails in their dovish glee to placate the markets.  Remember that.

I was hoping for crude oil to stay up this morning for a slam dunk short, but the market never makes it easy.  At these gap down levels, I am less excited to short crude, but if I had to take a trade, I would be on the short side for the day.  Perhaps if the euro can bounce again, a better short opportunity will present itself in the crude oil market on Friday.  Not much to do today, going nowhere fast for the past couple of weeks.