Wednesday, August 21, 2013

The First Move Is (Almost) Always Wrong

The market can make very volatile swings on days like today. Meaning; days that an important report will be published, fundamental data is released and so on. Days like the first Friday of the month (NFP) or days that FOMC-minutes are published. The latter happened today.

Often the first move on this news, is the wrong one. And so it happened that once FOMC-minutes were released at 2PM, indices started going down fast, most of them making new lows. Losses were between 0.6% and 1% at that point. But soon the swing in the 'right' direction followed. And an hour later, indices were all back to breakeven or even slightly green!

Lesson for these volatile days: if you're a nervous Nancy, just stay on the sidelines or trade a much smaller amount than you normally would. If you have balls of steel, fade a first extreme move.

Although the market bounced well after FOMC, almost all of the gains were given back in the last hour of the session. Briefly summarizing the last two hours of the session: down big, up big, down big...

5m-chart SPY:

Daily charts DIA, SPY, QQQ and IWM:

Euro, oil, metals
The euro consolidated and is trading under 1.34 again. Oil pulled further back to 104.
Metals were all losing. Gold and silver mildly down, but copper lost 0.7%.

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