Trading insights: Season of change seen in current price action

Market Talk:

Which way is the wind blowing?

Indeed at the moment it’s not “easy” trading conditions, increased volatility across many parts of the financial markets could be because traders and investors do not know which way the “wind” is blowing?

Recent volatility indices last 5 days:

• US100 VXX +8.4%
• SPX500 VXX -1%
• Gold VXX +7.85%
• Crude Oil WTI VXX +4.9%
• Euro FX VXX -0.14%

*Data tradingview 22/8/23 8:55 UTC *

How to navigate choppy trading conditions?

1. Take a step back and look at the big picture themes and price trends across the business cycle and financial markets.

The above chart illustrates the relative performance of commodities, stocks and bonds index to 100 vs a 4 year moving average. The 4 year moving average is used to represent a typical 4 year business cycle.

Simple observations:

• Bonds are bearish: major moves in higher interest rates from the US Fed that began in March 2022 can be seen on the above chart which triggered the US 10 year treasury note to fall below its 4 year moving average.
• Commodities are weaker: although above the 4 year moving average but seem to be turning lower, and
• Stocks have recovered from the 2020 lows and seen to be pointing higher.

Conclusion: March 2022, the time the Fed began its aggressive rate hiking cycle, could have been the trigger event that kicked off a new 4 year business cycle?

Stay tuned tomorrow we will post part two on how to navigate choppy trading conditions when seasons change….

Trading prospective:

SPX500 Index- bullish above the $4,300s?

Technical commentary: SPX500 Index

Despite that current price $4,420 remains above its 200 day moving average, last week's downside price moves leaves the door open for a potential downside move towards the $4,300s area. However, provided price can build on Monday’s upside advance then a test of the $4,460s resistance (see chart) and even an extension towards the August highs near $4,560s can not be ruled out over the short term (5-13 days).

Do you have an opinion on where financial markets are heading? Express your opinion and trade with CFDs.