Pay Attention To The Chart, Not The Chatter

Over the next couple of weeks, there will be some big announcements!

• Yellen Speaks On Economic Outlook
• Draghi To Speak
• ECB Rumors Drop In Interest Rates
• US Fed To Possibly Raise Interest Rates Mid-December
• Nonfarm Payroll Released Friday
• Canadian Unemployment Figures To Be Announced

It almost seems as if the markets have awakened, causing some much needed volatility. With all of the news releases and the press conferences, you have to pay attention to the chart, not the chatter. Embrace the volatility but do not be opinionated in the process.

Drop all biases/opinions
You have to be able to drop all biases and opinions and trade what you see, not what you think. Let’s suppose you are trading based on what the Fed may say or what ECB (European Central Bank) President Mario Draghi might say and you trade in a certain direction but it goes against you. If you stick with your opinion, “knowing” you are right, “believing” the market will come back, and it does not come back before you have to exit the trade, then you are stuck with a potential big loss. Biases can skew your trading causing you to lose. The only thing gained is a very expensive lesson, which can be a hard pill to swallow.

What is happening impacts your account
As soon as you can learn to drop your own biases and opinions, follow the chart and take advantage of volatility in all directions, you will see profits go up and losses go down. Be nimble and go with the flow. If you are in a trending trade and it reverses, exit immediately. Don’t try to be “right.” If the reversal is confirmed, jump back and go with the next trade. You should not worry about the direction the market should be going. What should happen does not impact your account. What is happening impacts your account, which is another reason to pay attention to the chart, not the chatter.

Market events
Janet Yellen spoke on December 2, 2015, testifying before congress. She spoke on the economic outlook and monetary policy. She was expected to reinforce the possibility of a decision to increase the Central Bank’s benchmark Fed Fund Rates when the Fed announcements come out on December 15 and 16. On December 1, the day before Yellen spoke, markets had a tremendous rise, but after her address, it was as if everyone was slightly disappointed. The market experienced a very smooth downtrend.

Some Implied Volatility can be expected in the Indices on Thursday, December 3, possibly as much as a 200-300 point move. With all the volatility, don’t try to be right. Just try to be profitable.
The US Nonfarm Payroll numbers come out Friday, which interest rates are heavily weighted on this report. To add more volatility, Canada will also release their unemployment numbers at the same time.

On December 3, the ECB will release its Interest Rate Decision and it is rumored to be lowering interest rates. This will cause an explosive move to the downside for euro. The ECB is almost maxed out on buying notes. Right now, the ECB can buy 30% of every note that is out there. They own almost 30% of every note that is available. This is why Europe is in negative rates. In Germany, you can buy a 5-year bond, but it will cost you two-tenths of one percent. It is like putting your money in the bank and paying them!

Add in the ECB press conference for even more market explosions on your charts!

Summary
Markets will be volatile for the next couple of days, and then slow down a little early next week, returning some more volatility later on in the week and month. With all of the various reports, you have to just follow the immediate trend and try not to take a view. If the market shows that it is going to go short (or long), go short (or long), but the minute the market changes direction, get out! Follow the chart and be ready to flip on a dime. Drop the opinion and follow what you see, not what you think. If you do, it can be a very profitable two days this week, and profitable in the days to come.

To further your trading education for free, visit www.apexinvesting.com, a service of Darrell Martin.