A Most Unusual Day


WHAT A MESS - Who can really make any good sense of the price action in currency markets on Monday? The Monday open was as expected, with the major markets gapping lower in response to the weekend news. The big standouts were EURUSD, EURJPY, EURCHF, and USDJPY. But almost as quickly as the markets gapped lower, bids were quick to emerge, with the gaps all but sealed up by the North American session. As a technician, I can fully appreciate the need for markets to fill gaps. This is common practice in technical analysis. At the same time, it was rather surprising to see how quickly these gaps were filled. Fundamentally, there was some renewed optimism that a deal could get done. But at the same time, with Greek banks and markets closed due to the severity and fragility of the situation and with some intense risk ahead, to see such a recovery was somewhat baffling in my view. As someone who analyzes price action on a day to day basis, I would have to say that Monday's price action was as surprising as the Tsipras announcement for a referendum. But looking back, I suppose subconsciously I had some idea of what would come.

A GUT FEEL - After all, I was short the SPX500 from 2120 and immediately booked profit on my short position early Monday at 2065. This was a huge trade for my book and I wasn't prepared to give up those profits to another bounce, as we have seen so many times. I have made good money shorting the SPX500 over the past several weeks, and each time I have sold into rallies and booked profit into modest dips. So to get the sharp sell-off that we saw at the open was a wonderful gift. The fact that stocks actually stayed offered into the close is besides the point. The point is, I suppose I had some sense the market may do some funny things on Monday and I didn't want to get caught up in the mess. I had also warned in the Monday piece to be careful and this resonated with me during the day. I don't have a great feel for direction at the moment, but after hitting such a big trade (with lots of luck) on Monday via the SPX500 short (+5%), I'm happy to sit back and wait for the next one. Monday's profit takes the unleveraged portfolio over 30% for the year (12 months ends in July). Not too bad.

Anything can happen in markets and we always need to be prepared. Via @joelkruger

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