Hi, the last 48 hours has been a wild ride in the markets and I have had a lot of emails asking “What the hecks going on in the markets”?
On Sunday my co managing partner Fotis Papatheofanous did a presentation to members of our pro traders course: where he explained in detail what was going ob between the USA, Russia and oil and how the “cold war had returned.” Fotis explaiend what was likely to happen and which trading opportunities to look for- the very next day the markets went wild on the very pairs he recommended
Here is an update that he posted today in the members only forum, where he explains what is going on and how to deal with it
Hello everyone!
On Monday’s investment committee meeting, we discussed the “Cold War” that occurs now between US and Russia and we revealed what is going on behind the “scenes”.
We explained the difficult economic situation for Russia, the probability of default is very high and the implications are great for global markets.
Well, you saw what happened much later in the US session and which was the hot topic: possible default by Russia, Russia panicking and intervening in the Forex markets, emerging markets and currencies in trouble and in general we had risk aversion in play.
We are very happy that we are able to help you you focus your attention on the catalysts that matter and we are even happier because many of you know now exactly what to do and what kind of assets and currencies benefit in a risk off regime.
The Russian Central Bank has raised rates by 650bp (!!!) and the reaction in Forex markets was for the Rubble to appreciate +9% (!) against the USD. Golman Sachs said that this is a good development because it removes uncertainty from the markets and makes the strategy clear to investors.
Well, we are again now at new highs of the USD against the Rubble as Crude Oil is moving sharply lower and panick has returned! Equities are selling off and the pressure is back to the Russian side.
Beware of oil prices, they are a huge factor for the markets right now.
Now allow me to explain which political and economic events will affect the markets in the next few days, so you will know where opportunities and risks lie.
1) Greek Presidential Elections on Dec 29th
If the parliement fails to elect a president then it is highly probable that we will have general elections. The Left party is ahead in the polls by around +5% and they strongly oppose austerity measures and they are against the policies by EU. If that happens, there are even talks about a new “GRexit” and in general it would be very bad for the Eurozone and it will cause panick to investors.
2) FED Meeting on Wed Dec 17th
BEWARE!
Expectations of course are that the FED will indicate their intentions of raising short term interest rates and they will drop the phrase “considerable time”. So the expectations are pretty hawkish.
As a trader I don’t “marry” my opinion about the markets. I try to stay open minded and consider alternative scenarios. So one scenario is described above, a hawkish statement tomorrow.
But I also see other things and I am also prepared to act accordingly in case we have a different outcome.
Let me explain.
US 2 year yields are at very LOW levels and European as well as US inflation break evens are still pricing LOWER yields.
Historically the FED has provided accomodative policies when long term inflation berak -evens have fallen to current levels!
Add to the mix the Russian Crisis and Crude Oil prices, I am just thinkingbthat the FED could be more patient and dovish than expected for at least another month.
So once you have clarified what is going on fundamentally, these are the markets that I would pay attention:
For Long positions: in case oil continues the drop, I will be having a look at GBCAD, NZDCAD, GBPAUD, EURAUD.
For Short positions: key here is risk aversion, meaning a drop in equities, good candidates are: CADJPY, GBPJPY, CADCHF.
Also I will be looking to initiate positions on either EURUSD or USDCHF to trade the effects of the FED statement.
It is vital to understand what is happening fundamentally before you pull the trigger, pay attention to Crude, VIX and equities.
If you are interested in learning how to trade like a professional. Understand what is really happening to drive financial markets, then check out our Pro Traders Course. We will be relaunching in January, so let me know if you are interested and I will send you more information.
regards
Fotis Papatheofanous
What The Hecks Going On In The Markets?
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