Ten Years Later


COOKING - It will take a day or two for things to start settling back into the normal flow of things and we should sit back and wait to see how it all plays out. There was a very clear bout of selling in the US equity market into the final hours of 2017 and whether or not that sets the tone for 2018 remains to be seen. I can remember we saw a similar sell off at the end of 2016, before the market recovered quickly and didn't do any looking back right into December, making fresh record highs, seemingly on a daily basis. Tax reform in the US was what helped to keep things going in 2017 and now that we have seen this voted through, I wonder what there is out there that will be able to inspire so much confidence in these overinflated asset prices. Of course, it's understandable there aren't too many out there calling for a lower market in 2018. Why would they? These calls have been crushed time and again and no one wants to step out and say anything bearish. And yet still, if we break it down, the same big problems are there. Monetary policy normalization has kicked into gear, inflation could creep in at any moment and there aren't too many other catalysts for investor get excited about. My bet is that all of the risk off that the market managed to ignore for one more year, will finally catch up in 2018, 10 years after the financial markets crisis began.

Cartoon jan 2

WILL GET UGLY - I will be happy to trade if anything come along, and will keep you posted if anything does. As we closed out 2017, currencies were bid up against the Buck and looking to maybe extend gains into 2018. I have said I like the major currencies more than the commodity bloc and emerging market currency prospects, on the view that risk off will be more beneficial to the major currencies. Right now, I only have the short USDJPY exposure as far as the majors go, but I am also holding the long AUDNZD exposure. AUDNZD has been a wonderful trade for my book over the years and I'd like to see this one get going again for us in the days ahead. My contention has been that we are in the process of carving out a longer term base and the market could be on the verge of putting in a major bullish breakout in the weeks and months ahead that targets a push through 1.2000. Moving on, we will need to keep an eye on the price of gold in the days ahead. This market has been doing a lot of chopping around, though the price action has been more constructive than not, and if we see a push through the 2016 peak at 1375, it will likely sound some alarm bells with respect to the more unsettled nature of things in 2018. So here we go! Let's make it a good one.

Volatility expected to make a return in 2018.


Charts and the Week Ahead

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