Good Morning Traders
Rotation...Rotation...Rotation
We have continued to see the strength of this bull market after yesterdays impressive gains in the European and US equity markets. The market was taking a breather for the last couple of days, and yesterdays strong rally highlighted the fact that this market wants to continue making higher highs. There is only one way to play the market and that is 'Buy the dips', although people are reluctant to enter the market at these levels, they are providing excellent returns for day traders in the short term. It is simply one way traffic, and it is an unusual market at the moment, all bad news is being disregarded and markets continue to move higher, I put this down to two significant reasons, and unless one or more of these change expect to see higher highs;

1. The 'Great Rotation'; As touched on in previous blogs, we are seeing significant money move from the struggling commodity markets into the equity markets. Gold has fallen below $1400 and currently trades around the $1384 handle. Silver has fallen as low as $22 and I would be reluctant to take on a position in either good. The bond market is also struggling, and it is simple all money is being moved to the equity markets as central banks continue to fuel returns.
2. Central Bank Policy; Central banks across the globe led by the FED, BOJ, BOE and BOJ continue to adopt a 'whatever it takes approach' and will continue to fuel this rally until their objectives have been met. It is quite clear to traders and investors that the returns they are seeing from their policies is not as high as expected and they are a long way from achieving their targets. So I would be firm is my belief that I do not expect to see a reduction or tapering of bond buying in the short term.

We are expecting to see some significant data from the EU this morning in the form of inflation data due out at 10am, we are looking for a headline figure of 1.2%, for FX traders this should bring significant volatility into the EUR currency markets. A figure below this expectation will bring some significant downside to the EURUSD pair and it would being the 1.2750 low into play. Elsewhere in the FX markets the BOJ continue to push the USDJPY pair higher as it tests the 102.50 handle, and we expect to see this strong trend continue as long as the BOJ keep their foot on the pedal.

In conclusion, keep the same strategy in place, it is not often that markets can be as predictable as they are at  present so use this as as opportunity to take advantage of the moves and keep stops tight. 

Happy Trading

@lowkeycapital