Should We Run For The Hills?

NEW TRADE - Has been really nice to see follow through in both GBPNZD and EURCHF as per my commentary this week. Things have kept on with the volatility and I have now gone ahead and established a long USDJPY position at 120.80. Everyone was excited about getting the chance to buy into a dip, and now that it has finally arrived, it feels like no one wants to touch USDJPY. But this is the nature of trading as a contrarian. Trades are never popular when I establish them. While this could be a longer-term trade, I am not treating it as one. The violent drop on Wednesday opened a compelling opportunity to fade the weakness and look for what should be a nice corrective bounce. Should this trade gain some momentum, I will consider the possibilities. But I won't be looking to hold on for any extended period if we don't get a bounce of some kind.

SHAKEUP - The rain has been coming down hard on the market this week, with the threat of Grexit, collapsing China equities, diving commodities and shutdowns on the NYSE all playing into the chaos that is markets right now. We have seen a major reduction in risk appetite and there is a sense everything could still get a lot uglier. I am not sure how it will all play out, but my sense is, things will start to normalize as they always have a way of doing and the market will buy back into risk. But I always say how funny it is that when something looks exhausted technically, there is always some form of fundamental catalyst that comes along to confirm the exhaustion. When a market is stretched, traders are jittery and will look for any excuse to book profits. And so, this is what has been going on these past several days. Just a bit of a long overdue, healthy shakeup.

It's lonely being a contrarian but I'm ok with that. It never stays like that for too long. Via @joelkruger

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