Looking at the day on Tuesday, there’s very little to move the markets outside of the UK Core Consumer Price Index numbers, as well as the basic CPI numbers. Because of this, we believe that the market will be focused on the FTSE and the British pound, which interestingly enough formed a hammer for the day on Monday.
Speaking of the GBP/USD pair, we believe that the hammer is simply going to be a sign that the market could bounce a little bit, offering “value” in the US dollar. Because of this, we are going to let the market bounce in order to start buying puts and take advantage of the longer-term downtrend. Although we recognize that there could be a bit of volatility to the upside over the course of the next day or two, we have no interest in going against the overall trend. That’s a great way to lose money.
Looking at the FTSE, you can see that we fell a little bit during the session on Monday, but found enough support at 7050 to turn things back around and show signs of support. This is not a big surprise, we have broken out as of Friday, and we should continue to go much higher. We have no interest in buying puts, as we do believe that the market should continue to move to higher levels given enough time.
Gold markets fell again during the session on Monday, wiping out most of the gains from Friday. Ultimately though, we believe that the precious metals arena right now is going to be a very difficult place to make money. Yes, short-term traders may be able to play the boundaries, which we presently see as $1120 on the top, and $1180 on the bottom, but as far as longer-term trades are concerned you’re going to struggle. Unless you have time to play short-term options, it’s probably best to leave precious metals alone for the moment.