NEW TRADE - Whenever I get an alert with a market so overextended like the move we saw in GBPUSD on Wednesday, it is going to be very hard to convince me against taking the trade. The sharp setbacks we saw prompted me to jump in and buy the dip and I am now long at 1.5515 with a stop-loss at 1.5441. I'm not looking for any long-term play here and simply will be looking for the market to recover over the coming sessions. When you look at the daily chart, there hasn't been anything that has changed all that much, and despite the intense declines, the chart still shows a constructive market. So in my view, I might be going against a steep downside move, but I am also playing back into the more pronounced uptrend of the past several months. The trade may of course not work out, but I won't feel bad about it if it doesn't. Everything lined up for me and I can't ask for much more.
SELL RISK RALLIES - As far as the rest of the markets go, I think the best strategy is to be selling rallies in risk assets and risk correlated FX. The shakeup we have seen in stocks is very real and despite all the moves to try and keep things supported, I don't think things will stay this way. Remember, all of these central bank measures to support markets are there because thing aren't great. So to see these risk correlated markets rebound so sharply is a little crazy. If you are only trading currencies, I'd say to consider selling USJDPY if we see any rallies into the 121.00 area. If you are trading equities, I'd recommend selling the SPX500 into an overbought hourly move. I think the SPX500 will soon put in a lower top and confirm the major structural shift we are seeing in this market.