Risk-Off Hits The Market, Reset In Trends
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Risk-Off Hits The Market, Reset In Trends

Authored by Ivan Delgado

Ivan Delgado is a decade-long Forex Trader. Feel free to follow Ivan on Youtube. Join thousands of traders who follow Ivan's insights to increase their profitability rate by learning the ins and outs of how to read and trade financial markets. Ivan has you covered with in-depth technical market analysis to help you turn the corner.

Let’s get started…

Scan Of The Markets

To see an expanded version, right-click and select ‘open link in new tab‘. The indices show the performance of a currency vs a G8 FX basket. A video on how to interpret these indices can be found in the Global Prime’s Research section.

The saying ‘up the stairs and down the elevator’ certainly applies to the action seen in US stock in the last session. Seemingly out of nowhere, in what looked like a slow grind lower, it evolved into a monster move that led to a slump to the tune of 5% in the Nasdaq, while the S&P 500 and the Dow Jones followed suite with similar declines.

It goes without saying that amid such panic selling in equities, the commodity-linked currencies (AUD, NZD, CAD) have suffered the most, alongside the perky Pound, unable to sustain its recently successful run. Such radical shift to selling in equities has resulted in risk-off associated currencies (USD, JPY, CHF) to be bought up. The Euro, interestingly, has also held up really well in this environment.

This move still represents a rather tiny correction relative to the multi-month rise seen in the Nasdaq or fall in the USD for this matter. The VIX index, nonetheless, had been warning us for a while now of a divergence of epic proportions against US equity indices. This chart, shared by our Discord user @tmpascoe speaks volumes.

In the US fiscal front, Bloomberg reports that Treasury secretary Mnuchin and House speaker Pelosi have agreed, on a 36-minute call on Tuesday,  “that they want to avoid a government shutdown and would seek a “clean” stopgap funding plan free of extraneous measures”, according to a source briefed on the call to CNN.

Looking at the calendar for Friday, it’s the first Friday of the month, which means is time for the US NFP release (jobs report). At the same time, Canada publishes labour figures for August. Earlier, relevant data not to be oblivious to include Australia’s Retails Sales figures for July and German factory orders (July) as potential currency movers.

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Trending Markets On My Radar

In this section, I short-list the markets that meet the criteria, or are about, in order to engage on a directional trend off higher timeframes through a 15m chart entry. To get a deeper dive into the markets included in this section, watch my daily video.

This selection is done after analyzing markets through key metrics (Fractals and SMT) in different timeframes (4h and daily). A video on the power of the SMT can be found here “How To Trade Forex Trends Like A Pro“. The video “Fractals + SMT: The Multi-timeframe Functionality” is also a Must-Watch to fully grasp this style of analysis. 

The fact that we’ve seen such an upset in risk conditions in the last 24h translates in a major reset of trends in currencies, metals and equities. Proof of that is that I was unable to find even one single instrument out of the 30 monitored where the daily and the 4h appear to be moving in the same direction based on structures and momentum.

Insights Into Market Flows

In this video analysis I dissect the information above. Ultimately, it is the traders’ call, via a set of entries thoroughly backtested, to enter and manage a position, hence the video is intended as educational in nature and not financial advice. 

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Recent Economic Indicators & Events Ahead

Source: Forexfactory

If interested in the best ‘free of charge’ News Indicator that displays data on past and future news in the Forex market via MT4, check this YouTube video I produced. The indicator allows you to save time, avoid mistakes. It’s spot on!

Important Footnotes

MARKET STRUCTURES

Markets evolve in cycles followed by a period of distribution and/or accumulation. To understand the principles applied in the assessment of market structures, refer to this video. Fractal breakouts is at the epicenter to assist us in the analysis of chart structures.

MARKET MOMENTUM 

In order to assess the market momentum of a particular asset, I’ve promoted for years the idea of using what I call the smart money tracker. The settings and the indicator can be obtained via our Discord room, where traders from all walks of life interact frequently. In this video I lay out the elements I look into to call trend directions.

PROJECTION TARGETS

The usefulness of the 100% projection resides in the symmetry and harmonic relationships of market cycles. By drawing a 100% projection, you can anticipate the area in the chart where some type of pause and potential reversals in price is likely to occur, due to 1. The side in control of the cycle takes profits 2. Counter-trend positions are added by contrarian players 3. These are price points where limit orders are set by market-makers. You can find out more by reading the tutorial on The Magical 100% Fibonacci Projection