Not quite sure where equities are going just yet. I would prefer to trade a clear 100 point move, and since I'll probably get in 50 points from the bottom of the move, and exit 50 points from the top - that's a total move of 200 points that's needed. Right now the XJO is moving about in an 100 point range - not good enough for me.
Since the XJO takes direction from Wall Street, and since I don't trade overseas indices (not yet anyway), that means that the Street is undecided about where its going to go.
Have worked out a rough model of what I'm going to be looking for to see strength in the market:
- A strengthening of the Dollar Index - for me this means a weaker USDJPY, signalling the return of the carry-trade; and lower bond yields signaling moderate inflation
- That should usually be accompanied by a weakening in Gold prices, and a rebound in base metal prices.
The one market that I've been surest about this week is Crude Oil. Have several long positions, at an average of 7040 (WTI August 07). Hopefully, it gets to 7150, which is my immediate profit target. The weekly inventory report, due on Thursday, I feel will be bearish - with bigger builds in crude and gasoline, and better than expected refinery runs. Of course, I have no evidence to back this up, but I just feel its nearly time for Crude to correct to a mid-60s level. In any case, I intend to be long when the report comes out (if my target is not reached by then).
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