Here's a question I ask myself all the time: "Why is price doing that?"
Ok, so its not exactly groundbreaking/revolutionary/genius or, well, you get the idea, but I want to know whats happening next so for that I want to see why price is behaving as it is in the here and now.
The theme as of lately has been a huge focus on risk, where carry trades are seeing massive whipsaws we havent been used to in quite a few months.
It hasnt been uncommon for EUR/USD to make similar moves to SPX or USD/JPY (generally speaking), and likewise SPX falling right alongside commodities, which are generally anti-correlated.
Last night, we opened with a gap up on EUR/USD. When we see something as strong as this, what will GENERALLY happen is price continuing the move in the direction of the gap before a strong move down, filling it and thensome. It happened today and happens across all markets, pretty often, for a number of reasons.
The main and most obvious reason for the continuation of price after an opening gap like that is pure hysteria in buying and seeing price rocket in the early Asia session. But with crude dropping, and all other signs in the market showing normalcy on most accords, that hysteria is likely to get capped at some point and the market catches up to the, for lack of a better word, pure garbage that ran price up so far and so fast.
If you want an example in another market, take SPX last week, the day after Freddie and Fannie were taken over by the government. SPX opened up high, along with the currencies, and fell dramatically the next day. The mere fact of the matter is that the news of this takeover, though good for buyers for a day, is a bad event and shows heavy weakness in the market. So after the short term speculators are done buying, get your shorts on and ride the (what is usually a massive) wave. Same thing here today. The opening gap was shut down as London got their shorts on and started selling into the wave starting at the bucket pattern we talk about pretty often in this thread. Just something to note.
Ok, so its not exactly groundbreaking/revolutionary/genius or, well, you get the idea, but I want to know whats happening next so for that I want to see why price is behaving as it is in the here and now.
The theme as of lately has been a huge focus on risk, where carry trades are seeing massive whipsaws we havent been used to in quite a few months.
It hasnt been uncommon for EUR/USD to make similar moves to SPX or USD/JPY (generally speaking), and likewise SPX falling right alongside commodities, which are generally anti-correlated.
Last night, we opened with a gap up on EUR/USD. When we see something as strong as this, what will GENERALLY happen is price continuing the move in the direction of the gap before a strong move down, filling it and thensome. It happened today and happens across all markets, pretty often, for a number of reasons.
The main and most obvious reason for the continuation of price after an opening gap like that is pure hysteria in buying and seeing price rocket in the early Asia session. But with crude dropping, and all other signs in the market showing normalcy on most accords, that hysteria is likely to get capped at some point and the market catches up to the, for lack of a better word, pure garbage that ran price up so far and so fast.
If you want an example in another market, take SPX last week, the day after Freddie and Fannie were taken over by the government. SPX opened up high, along with the currencies, and fell dramatically the next day. The mere fact of the matter is that the news of this takeover, though good for buyers for a day, is a bad event and shows heavy weakness in the market. So after the short term speculators are done buying, get your shorts on and ride the (what is usually a massive) wave. Same thing here today. The opening gap was shut down as London got their shorts on and started selling into the wave starting at the bucket pattern we talk about pretty often in this thread. Just something to note.
Attached Image (click to enlarge)
