European Central Banks (BoE & ECB) Take Different Paths
Global capital markets focused on issues related to Europe for the balance of the week, as better than expected economic data out of the US during the weak help lift riskier assets. Markets seem to price in in-line employment data after absorbing important monetary policy changes from the Bank of England. The disappointment over no-change [...]
Dow Theory Confirms Technical Analysis Trend
Dow Theory is a unorthodox theory on stock price movements that includes both technical analysis as well as sector rotation. The theory was created out of 255 Wall Street Journal editorials written by Charles H. Dow (1851–1902), the founder and first editor of the Wall Street Journal and co-founder of Dow Jones and Company. The [...]
Europe Remain Spotlight for Currency Markets
The past week, which ended a horrendous quarter for equity markets, continued to remain volatile. Investors witness the S&P 500 index decline by nearly 13% over the past three months. The dollar continued to remain the currency of choice, and treasuries in the US remained robust. The votes cast this week to back the expansion [...]
Volume is the Key Indicator Confirming a Trend
Trends are confirmed by volume Dow theory states that volume confirms price trends. Volume should increase in the direction of the primary trend. In a primary bull market, volume should be heavier on advances than during corrections. When prices move on low volume, there could be many different explanations why. An overly aggressive seller could [...]
The Dollar is King, Despite the Feds Twist
The past week was not kind to riskier assets, as equity markets globally, along with oil, gold, silver and copper where hammered, having one of the worst weeks since the financial crisis. Silver prices declined more than 10% over the week, as investors continued to eye headlines from Europe and analyze the monetary easing dubbed [...]
Bulls Making Money, Bears Make Money, but Pigs get Slaughtered
The saying about bulls bears and pigs, should be a consistent reminder to traders, as there is always a point when a trader needs to take a position off to ensure a profitable trade. Taking profit is just as important as determining how much should be risked relative to a move in the capital markets. [...]
A Stop Loss Can be Essential to Robust Risk Management
Creating a stop loss A solid trading strategy should always start with determining how much capital you are willing to risk on any given trade. To determine how much of a market swing you are they willing to accept against the direction of their position, the trader needs to decide where they should exit a [...]
When Managing Risk, the Worst Case Scenario is Your Largest Drawdown
A drawdown is measured from the time a retrenchment begins to when a new high is reached. This method is used because a valley can’t be measured until a new high occurs. Once the new high is reached, the percentage change from the old high to the smallest trough is recorded. Drawdown’s help determine an [...]
Central Bank Funding Program Boosts Riskier Assets
The Risk on trade came back during the week as European stocks lead global equity markets higher. The coordinated action Thursday by 5 central banks helped the weeklong rally continue. The ECB, FOMC, BOE, SNB and BOJ announced this new action aimed at avoiding any new liquidity crisis. The action addresses the shortage of dollar [...]
Trend lines Summarize Market Sentiment in a Picture Format
Trend lines Summarize Market Sentiment in a Picture Format Trend line represent the slope of the highs and lows of a financial instrument whether they are objective or subjective. The line generally is downward sloping for resistance and upward sloping for support. Lines can be created out of any specific high or low point as [...]
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