Trading insight: It's going to get choppy; is profit taking about to emerge?

Market Talk

Big gains so far this year for stock indices.

• US100 100 +26%
• Japan 225 +17%
• German Dax +16%

Ever heard the phrase “selling into strength”?

Traders should remember that prices do not move in straight lines. Currently, there are two “known” headline potential market risk events:

1. Mixed views emerging on whether or not central banks will need to hike interest rates further or pause.
2. Fear the US could default on debt payments as soon as June 1st.

Considering the above potential “risk events” and the fact that stock markets have had a solid run so far since the start of 2023, if any of the known risk events crystallizes or if any new risk events pop up, investors who are deep “in the money” with stock market profits could be hard pressed to “take profits” off the table.

Stock markets have a long history of falling as a result of profit-taking, and while we are not saying that there will be such an event today or in the very near future, it is not something that investors should rule out.

Bottom line: profit-taking is a normal market “event” that happens from time to time.

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Today’s economic calendar

Source: Tradingview / J. Knobel May 19 2023 6:37 UTC

Key points

• US dollar has been trending higher. US dollar index advanced +0.7% last 5 days and +1.79% last 30 days.

• Gold current price $1,965. The support at $1,975 failed to hold putting the $1,930s in sight, with $1,900 and $1,873 as further downside prospects. Resistance seen above the $2,020s.

• SPX500 Index current price $4,203. The uptrend appears to have resumed after the multi-week sideways price action. $4,240s - $4,300 could be in sight as next upside targets, while risk for longs is seen below the $4,050s.