Mar 06/15 – Take a deep breath, and fade the excitement

2015-03-06 8am EDT  |  #stocks #unemployment #US dollar

The US dollar strength of the past nine months has been relentless. Corrections have been in time where the US dollar goes sideways, as opposed to corrections in price. The dips have been extremely shallow.

Yet have a look at this chart of the US dollar index over the last year. I have highlighted all the US Unemployment releases.

If there have been any corrections, they have often occurred right after the unemployment release. At the very least, the rally seems to take a break and go sideways for a week.

Given the recent US dollar rally of the last week, we are once again setting up for this sell on the news scenario.

The unemployment number will be released this morning, and I have no clue what it will be. Instead of betting in front of the number, I prefer to wait for the release and trade the ensuing action.

After learning the hard way, I have found that the big morning move in many asset classes often reverse in the later morning hours after the unemployment release. This is often an emotional day that results in an “all baked in situation.” Whatever trade you feel like you “have to do” today is usually the wrong one. It is easier for me to fade this excitement if I come in with an open mind.

Here are the intraday charts from the last two unemployment release days for the S&P 500 future.

And the pattern was even more clear on the previous unemployment release.

It is hard, but today is not the day to chase. Even when the news seems to be lining up for a big move your way, instead of adding, it is better to a big deep breath and think about fading the excitement.

Good luck with today’s trading,

Kevin Muir

the MacroTourist