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

Breakfast Blog

Good Morning,
                       Yesterday was a continuation in the Trend we have seen for the last weeki.e. Another day, another Day of Dollar Strength. We saw Higher Growth expectations from some Tier 1 Bank's capitulated in Cycle highs for USD against JPY, AUD and CHF. We also obviously saw a fresh cycle high, YTD high and All time high of 1650 in the S&P 500. Tuesday's in the Stock Market this year have been incredible, This combined with a POMO day (Day when Fed injects Liquidity) and some upbeat comments from Fund Manager David Tepper on his long equity positions caused a rally all day with 1% being put onto all American Indices and seeing the Nasdaq Break 3000 for the First time since 2000 even though Apple slipped in late trade to close under 450 at 443.
Looking at the Market in General, the Break of 100 in USDJPY has caused Japanese investors to pile their money into Dollars and American Equities, This is causing a huge flow dynamic which is weakening the Yen aggressively and adding fuel to the Equity markets. This will likely continue as long as the Yen continues to weaken. As I mentioned the Dollar has been gaining traction in the last 5 Trading sessions from some upbeat growth comments and strong Data, This has seen the Dollar gain back 300 Pips on the Euro, 300 against Sterling and nearly 400 against the Yen. Yet the Equity Markets still believe that Quantitative Easing will continue and our being pushed higher daily on low volume.
Equity Markets going higher on low volume is technically called a negative divergence and is a warning sign of a reversal, but as they say "trend is your friend" and buying any dips is the only play until their is a significant Fundamental Development that may cause the Markets to sell off. The only development this could be is a story, rumour or announcement of the Fed's intentions to Stop/reduce/taper Asset Purchases.
The EURUSD made a strong reversal at 1.32 last week and now finds itself below the 1.29 handle. How things change quick? I even saw a few analysts chatting about parity again this morning. Poor ZEW data from Germany yesterday has probably made the Market think about Additional cuts or Stimulus for the Single Currency combined with the Dollar Strength story it has been a steep decline for the Euro throughout the past few trading sessions.
Today we saw Poor Geman GDP data which pushed the Euro out of its 1.29-1.32 range and a daily close below here would give case for further declines towards the Yearly Low of 1.2745 and potentially further on a breach of that level.
Base Metals and Commodities in general continue to have a dismissal year with slowing Chinese Growth, slowing demand and Dollar Strength combined with a rotational issue into Equities it has seen Metals especially suffer huge losses. Gold Broke down out of its 1440-1480 range on Friday and trades at 1410 spot in Current trade, still looking heavy. One of the Main reasons I believe base metals have been hammered so hard this year is because of the Drop in inflation, Let me explain what I mean by this.
Ever since Central Banks started their Easing programs and flooded World Markets with liquidity and easy credit their was an expectation that Inflation would take off and be above 2% in all major Economic zone's. This has not been the Case at all, Inflation has declined in the States and in the Eurozone. Investors bidded up the Prices of Commodities in times of inflation as a place to protect the value of their money. This is especially true with Gold. Gold is traded as a currency and a direct hedge against Inflation. Since Inflation has not happened even though their is Trillions of printed money in the system The relative value of Gold must drop because it has no Intrinsic Value like Stocks that provide value and revenue streams for the investors. As long as the Inflation rate remains subdued, Gold will suffer further declines.
Good look in the Markets
Lowkey

SP500 4 HR

You can see a clearly defined uptrend on this 4 hour S&P 500 chart. The price action has become wedged in a rising channel between 1620 and 1636. A rising wedge or channel is generally a bearish technical warning combined with a bearish engulfing candle that is forming over this timeframe the market looks to be turning lower. A reverse and a break to the downside of the 1620 area could expose the 1612 level which is the 23.6% Fibonacci retracement of the rally from 1537-1636. An additional break of this would then target the psychological 1600 level then 1597 which is a previous high and the 38.2% Fibo of the rally up. 

1597 is definitely a level a lot of Bulls will be looking to take a speculative long trade at.

Good Morning Traders.
Global equity markets seem to be hanging on the edge of a cliff as we speak. In the last few trading days the aggressive nature of the prevailing up trend has lost its explosive power but it continues to remain range bound at these high levels. We are seeking new highs being made in the US equity markets but there has been a lack of persistent follow through which will give both bulls and bears something to speak about.
The markets as a whole seem to be confined to these tight ranges and the lack of important economic headlines should keep us in these ranges unless we hear something unexpected.

The interesting story over the last few days that caught the attention of the market was the Wall St journal article which highlighted the FED's map to taper their monetary easing policy (QE) toward the end of 2013. This headlined caused a minor pull back in the equity markets only to be quickly bought up again. As we mentioned in a blog last week, the European session continues to lack volume and they have been selling the market and we have seen the american market participants come into the market and give strong support.

Levels for me today are as follows: EURUSD 1.3040 / 1.2940, S&P 1620 / 1636, DowJ 15070 / 15,110

In conclusion we have a bit of economic data from the Eurozone this morning in the form of German ZEW and Eurozone Economic Sentiment Indicator which should give direction to the market. We expect to see a German reading below expectation due to the recent leg lower in the DAX but want for the headline don't speculate. I would be sticking to the philosophy of buying any dips unless we see something drastic in the market.

Happy Trading

Breakfast Blog

Good Morning Traders,
                                    A quiet start to the week with no Tier 1 Data from Europe this morning with Traders awaiting the Retail Sales Data from the States at 13 30 this afternoon.
Thursday and Friday were two days completely dominated by Dollar Strength. We saw the USD/JPY push from below 99 to nearly 102 in just two trading sessions. Strong U.S. Data combined with a rumour that FED watcher John Hilsenrath's weekend articles had a direct interview with a member of the FOMC and a detailed plan about the FED's exit strategy proved a catalyst for Dollar Strength with a number of significant levels being breached. These included 1.30 to the downside in the EUR/USD pair, parity in the AUD/USD pair, 100 to the upside in USD/JPY and the break of the narrow trading channel in spot Gold. This was a break of the 1440-1480 range, where we broke to the downside before recovering with a low print seen at 1419 on Friday, we trade at 1431 Spot as I type.
Over the Summer Months one of the Markets main risk events will be how the Fed plans to reduce/halt/continue/increase its Asset Purchase program as the Markets have become petrified that their training wheels could potentially be removed in Q4 of this year. Even on Thursday afternoon a rumour that John Hilsenrath's weekend press contained details of a Fed exit strategy from its current program caused a 60 point drop in the Dow Jones before it rallied back after the close of U.S. trading. This clearly shows the Market is overly long and looking for any reason to short the market. Trading Equity Indices in this current climate involves no knowledge of Company Performance, technical skills or Analysis. The Market simply revolves around Central Bank policy and nothing else and this evidently won't stop until Bernanke or Yellen or whoever chairs the Printing Press starts to draw out the Liquidity in the System causing a huge Stock Market Crash and hopefully resetting  the Market in a more rational and transparent mind set.
The Move over 100 in the USD/JPY confirms that the Market believes in Kuroda and his easing Policies and bid to beat deflation once and for all. With Japanese nationals now Net buyers of Foreign Bonds compared to Domestic Bonds it saw the JGB Market being halted on Friday as the Yield grows so small as Japanese Investors are forced out of the Country with their Capital in a bid to Find a 3% or greater Yield for their Money. This is the point that the Yen may start to weaken significantly when Wealth from Japanese citizens is forced into Europe and The United States. If we see more Data supporting the outflow of Jaonese Wealth over the coming weeks and months we may see 1.20 in the Pair before the End of the Summer.
The EUR/USD pair has been constrained between the 200 DAY MA at 1.29 and 1.32 topside. The Market thinks that the Big Panda (Asian Central Bank) has a large DNT (do not touch) Option in play here and is playing the ranges with big money on both sides. The play here is to go with a daily close under or over these parameters or simply trade at extremes of this 300 Pip Range.
We will have some order levels up later once America wakes up.
Good Luck in the Markets. Lowkey

Good Morning Traders
We have seen continued support of this aggressive rally and long may it continue. The trading psychology has been simple, buy any dips as the market is being bought at every given opportunity as retail investors look to get aboard this move. Depending on your trading strategy, I would remain cautious for investors entering at these levels with a long term hold view, in my opinion these levels favour short term day trading strategies with a daily or weekly time-frame in mind. As long as these markets are being supported by accommodative central bank policy these markets can only move higher, the stock markets have become totally un correlated with the health of the global economy. The markets disregards poor economic data and it looks that the only thing that will be able to make them turn around is the speculation of reduced central bank policy.

Yesterday we had some good job numbers from the US, although small the economy is taking a small step in the right direction. The main move we saw off the back of this news was strength in the USD against some of its major currency pairs. One interesting thing to note was the fact that the USD/JPY pair broke through the psychological 100 level, a level it had been testing for the last few weeks. As it is Friday and we have had another strong week with gains across the board we would expect to see some small profit taking across the board towards the close of the US session.

As mentioned in previously blogs this strong equity performance can be attributed to the fact that other asset classes continue to produce negative gains. Money has been taken out of both Gold and Bonds as investors look to cash in on the recent move in the equity market. That is why I don't see any correction in sigh unless we see some substantial news that will force individuals to sit on the sidelines.

Happy Trading
@lowkeycapital

Good Morning Traders
We are all back in the office this morning after the extended bank holiday weekend and we have al European markets open for trading. It is amazing to reflect back on last week as we saw the SPX make new historic highs and this was re-enforced by a strong close above the 1600 level. So we ask ourselves where to next? There has been a lot of speculation that we might see a 5-10% correction across some of the equity markets, as some analysts have called for some profit taking coming into the month of May, but the 'Sell in May and go away' ideology may be a thing of the past. It was normally seen as a time when traders would leave the office in May to attend summer events and take a break from the market after locking in some nice first quarter profits but with the advances in technology traders  can access the markets through a variety of mediums (Laptop, Ipad, Iphone) so I think this may be a thing of the past and I would take it with a pinch of salt.
The current environment is dominated by low interest rates and central bank aggressive easing policies and this is being reflected in the equity markets across the globe. In sort the SPX trades over the 1615 level, the Dow trades above the 14070 level, the Dax 8130 all of these levels in extreme over bought levels signalled by the RSI indicator. But there is nothing we can do and it is not a wise move to be fighting the central banks and their whatever it takes attitude. We saw last week that the ECB reduced interest rates by .25% in an effort to stimulate the Eurozone, and it was hinted that they would be keen to reduce interest rates going forward if things don't improve. This market will remain in a strong up-trend unless we get some significant news headlines, and as of yet there is nothing in sight to cause a turn around so expect to see markets move higher. Also take note that poor headline data will not be enough to trigger this correction it will in fact be seen as a catalyst for more easing or a reduction in interest rates so we will be faced with the 'Bad news is good news' scenario for the coming months.

In terms of the FX market all of the easing measures adopted by central banks should be negative for domestic currencies, but with all economies taking this approach the effects may be slightly diluted and not as drastic as previously expected.

In conclusion these are very unusual trading times and volatility is widespread across all asset classes, we have seen some of the safe heavens such as gold and silver react in a volatile manor, which has caused a rotation into the equity markets as investors hunt for gains. If there is one bit of advice I can give you, don't fight the central banks and don't look for a top in this market regardless if you feel that the market is too high, buy the dips as we continue to move higher.

@lowKeyCapital