The last few days of 2014 and the first few weeks of 2015
have shown a much larger volatility than what we saw in 2014. Higher volatility equals wider ranges, faster moves, larger moves and then some. That affects day traders who need to adjust their style and adapt to changing market conditions
From the longer time frame perspectives (days/ weeks) I am looking at a market that has been making new highs for the past six years with very few and minor corrections. Much has been written about quantitative easing.
My opinion is that QE was overdone. The long term affects will be seen over the next few years and may not be pretty, but this is just one man's opinion. As far as trading, the increased volatility pushed me to look at higher time frames. This time, the weekly chart and specifically the mini NASDAQ 100, which seems to be the leader amongst stock indices.
The lows we witnessed yesterday around the 4082 level are a major support on many time frames.
With the earning season starting, if this market can stay above this level we may see a push towards new highs. On the flip side, if we visit this level again and break it, I will vote for a much larger correction towards the 3960 area.
I think the next few days will be quite important as far as price action and clues for the next few days and weeks.
As I mentioned earlier, changing market conditions and volatility call for adapting your strategy and taking these conditions into consideration.
One thing is for sure, if the first few days of 2015 are any indication for the year to come, it is going to be a wild ride.....
NASDAQ 100 Weekly Chart:
This move can be played either way depending on price action
. One can use straight futures, spreads between the indices as well as options.
Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services
Disclaimer - Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. Past performance is not indicative of future results. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.