Did danger pass for Deutsche Bank? Buy the rally? I share some tips to separate market fact from fiction/noise as well as possible actions you can take.
Is the danger over for Deutsche Bank?
So the market was in a panic buy mode to go into every risk-asset because Deutsche Bank suddenly posed no risk anymore based on some rumour by some undisclosed special source. To top the cap with a tall feather, market dumped gold and silver. Totally bizzare.
Is everything bullish now? Should I jump in and go long? My personal answer is No. Look at the weekly chart of DBK below. This is a long unfolding drama that is not going away because of ONE rumour-driven bullish day.
How to separate the fiction
Inspect the weekly charts of riskiest, most bubble-licious indices like DAX30, DJ30, EUSTXX50 and N225. All they managed to do is to stay unchanged for the week.
Look at forex pairs like AUDUSD and NZDUSD that shoots up whenever it’s risk-on. Anything changed?
If we focus on lower time frames only, it is easy for our trading psychology to be ‘captured’ by short term momentum – in other words, very big white candles make us feel bullish, very big black candles bearish and if we were short because of DBK, then lower time frame candles on Friday would certainly make us very worried. Take a step back to the higher time frame, ask these questions “where are the resistance levels?” “Any key levels broken?” “Any new highs?”
My answer is nothing changed. Market’s are now jittery now. No doubt in the next few days we will see policy makers do whatever they can to encourage a bull
shit-ish view. Based on past action, look forward to all kinds of scheduled and unscheduled appearance of every central banker in the world come out to vouch that Deutsche Bank poses no risk. Look forward to DBK CEO making multiple interviews in a day. Look out for bullish rumours to be floated when markets are near to the point of capitulation. Look out for bans on short selling. Look out for Plunge Protection Team, National Team whatever to buy and rally. It’s the standard playbook used in every market.
Potential actions you can take
This is the best action you can do:
- Do not participate. This is for those of you who are risk-averse.
- Participate only with trading capital you can afford to lose taking into consideration the possibility of huge slippages.
- Look at big picture, big trend, rise above the noise and do not be misled by short term momentum.
Stay safe, have fun, huat ah. For new traders who have not gone through any of these Asia Financial Crisis, 9-11, Subprime, last year’s SNB-CHF fiasco, Black Monday, Brexit … this is going to be the best eye opener and trading lesson money can’t buy.
Never fall for this.
Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.
“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.