Cleopiptra

With all the questions surrounding the risk appetite and risk aversion seen with this week’s volatility, it looks like indecision will have the final say as the week closes out. The U.S. Dollar has re-entered the range as the index has slid lower back below 79.00. This further confirms the likelihood for distribution on the daily time frame.

If yesterday’s Dow Jones pullback could have been used as an indication to the risk aversion seen today, then I feel traders would have much more aggressively shorted the EUR/USD and the AUD/USD earlier in the day and as Europe and the U.K. opened.

I still feel like I am waiting – like last week – for the dollar to make up its mind. The move higher on the U.S. Dollar Index has found some momentum and near-term support above the October highs, but continuation would mean an uptrend and I’m not convinced that there is enought bullishness for that…yet.

The U.S. Dollar continues to bounce within an overall range between 78.61 and 75.23 with what I see as a definite bearish bias coming from the mark down phase which has yet to transition or be broken.

On the chart I use here at Chartology, you ‘ll notice that I have a particular set of moving averages and color-coded candles that help me identify the trend, momentum, and sentiment of the market. Market trends or phases is the first step of my trading approach which means that before I enter a trade I must determine the market’s psychology which is revealed by its movement.

The week as far as I’m concerned will begin on Wednesday after the election results are in and traders can then determine what they want to do with equities and the dollar. in the meanwhile, with a RBA rate hike seemingly imminent, I also look at the aussie, the uptrend and why I still feel the daily is being bought a corrections lower.

I wanted to share this with you today because I feel this week is going to be an important adjustment for me personally as far as the trading strategy I have used for the past six weeks is going to shift away from 240-minute swing entries to a focus on the daily time frame.

I’ve always tried to communicate the entry strategy behind the trades and set ups I post here. So in the interest of that – and because I have not done this in a while – let’s break down how I consider entries, Step by Step.

This is actually a short-term intraday swing entry that is setting up what I call a “one-thing-leads-to-another”. If the pressure can continue towards the area between 1.0110 and 1.0995 this fifteen pip area will be a cushion from which buyers could rally the market since there is still a sideways range on the daily.

A trend (correction: a strong trend) may be one of the most difficult market environments to trade. I think that between strong mark up or mark down stages and possibly distribution (volatile, sideways ranges) many traders will be tempted to chase and/or enter too aggressively in expectation of follow-through.