Thursday, August 3, 2017

July was a currency trend month - Likely to continue

For trend-followers in July, currencies were the big winners. Strong trends with relatively low volatility made for many winning trades. These trends as well as moves in precious metals are likely to continue in August. Currently, this is the place for greatest upside opportunities. The currency moves did see some short-term reversals around central bank and key economic announcements which may have hurt traders with tight stops, but the general direction in 2017 continues.

The major trends in other asset class sector are less defined as we begin August. Stock indices have continued to march higher even though the end of month signals in June looked for a trend decline. Valuations are extended, but this may not be relevant for shorter-term trend trading.  Markets trends slopes are shallower so trend views are mixed. Energy trends look very attractive but economic story does not seem consistent with price action. Bonds have moved higher in the second half of the months with developing trends, but have not broken out from highs in June. Further upside trends will have to be coupled with central bank delays in tightening. Grains have been choppy during this critical growing period. Some drought demand cannot be reversed with new rains, but there also is a tendency for overreaction from news. Crops surveys will start driving the market.

The folklore is that August can be a sleepy month given some many traders are on vacation, but data have proved that there are no holidays for the development or exhaustion of market trends. Nevertheless, trend opportunities seem to be more concentrated in currencies. 

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