Monday Brace for Market Violence

August 24, 2015

Monday Brace for Market Violence:
With US stock indices falling off a cliff (or going through a healthy correction, depending on who you speak to), traders have real fears that more market violence is yet to come.

European indices led the charge to the bottom with all major markets deep into the red, while the SP500 broke major weekly trend line support in the rout and closed down big on the night. Monday’s futures market open has seen a gap down and shows a real possibility that this is only the beginning of something big.

SP500 Daily:
Click on chart to see a larger view.

SP500 5 Minute:
Click on chart to see a larger view.

Are you game enough to try to catch the falling knife?

Take a look at how thin the futures markets were this morning to get a grasp on how hairy things could possibly get if the fear snowballs and the buyers start to pull. Its happened before and it can happen again.


Put simply, markets don’t like uncertainty and this move is driven by the unknown. With day traders pulling their orders and big players being forced to liquidate or square up their positions, markets get very thin very quickly.

Anyway… One of my favourite things to come out of this morning has been the discovery of the ‘Sad guys on trading floors’ Tumblr blog. You’re welcome.


On the Calendar Monday:

A completely blank calendar on a Monday isn’t something you see very often!

This just adds to the thin start to the trading week.


Chart of the Day:
So lets take a look at the charts and one of the hardest hit by this morning’s market turmoil. The Aussie dollar.

AUD/USD 4 Hourly:
Click on chart to see a larger view.

The Aussie has printed a short term bearish channel over the last few months, with the not so textbook break and consolidate in the direction of the original trend pattern that I constantly talk about playing out.

Price now sits on the previously broken trend line once again. The fact that this level coincides with swing lows just adds to the interest in the level.

AUD/USD 5 Minute:
Click on chart to see a larger view.

But just wow. How about that for a sell off to start to the week! The stock market jitters and thin trade has the Aussie back down on its multi-year lows and right now only being held up by short term channel re-test support that is weak at best.

Do you see opportunity in trading these thin, erratic markets? Mention @VantageFX on Twitter, or check out who we are here.

Dane Williams – @VantageFX

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