And this is love: that we walk in obedience to his commands. As you have heard from the beginning, his command is that you walk in love. 2 John 1:6
When we spend our days looking at the market and watching the news, it’s easy to lose the trees amongst the forest. Now I don’t expect everyone who reads this to agree with the theology behind my opening quote, but even many of my atheist friends use this time of year in observance of this commandment. We travel thousands of miles to be with family and friends. Jews and Gentile gather around Christmas (or holiday) trees and share communion with one another. And that’s really the point isn’t it.
MESSAGE FROM THE MARKETS
You know what’s great about trading? The markets know this is a time of year when we should turn our attention to more important things. In fact, every year in which I’ve placed trades between Christmas and New Years, I’ve been punished for focusing on the things less important in life. I’ve lost money. The market is telling me I should be spending time with my family instead of trading.
CAUTION: ILLIQUID MARKETS AHEAD
Well, not really. But, that’s how it feels. This is the last week of 2012 that I will be placing any trades. By this Thursday afternoon, liquidity will dry up and things will become choppy and unpredictable. We will likely have some big movement, especially in the crosses. But things like stopping on a dime (or on your stop loss) and reversing course just for fun.
FOCUS ON RISK MANAGEMENT
For us market enthusiasts insistent on worshiping the market gods this time of year, I suggest decreased leverage and a firm money management plan.
KEY EURO LEVELS
Now that being said, last Monday, I suggested buying the euro on Fibonacci retracements of the prior swing move higher. In fact, I luckily called the bottom on that 50% retracement. We should not ignore the daily bull candle, or last week’s commanding engulfing candle. Nor is it prudent to buy the tops.
On a daily chart, we barely pierced the upper levels we’ve been discussing before settling into consolidation. A convincing break of this range will likely provide short term direction. I expect a move down to 1.311 before we see new highs. If 1.311 holds, this will be a buying opportunity. On the other hand, if last week’s trend fails to hold, I would look at retracements of that swing move higher as buying opportunities.
SIDEWAYS CHOP
The next two weeks will likely give us a lot of volatility to get caught up into, but historically speaking, little directional headway is likely.
[Editor’s note: What do you think? Will you be turning off the computer during quiet, holiday markets? Is this is a good time to trade? Post a comment below to share your thoughts.]
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