Today’s Key Market Drivers: 22nd November 2018

“JP Morgan is the next investment bank to caution traders about 2019.”

The Euro popped higher on Wednesday following comments from Italy’s Deputy Prime Minister who said the government was open to reviewing its budget that was again being held to scrutiny by the European Union. The Italian’s are planning to increase pensions and citizen income in 2019 and the EU isn’t happy about it.

The US Dollar continued to weaken on fears of a global slowdown in 2019 with JP Morgan the next major investment bank to advise clients to expect an economic slowdown in the coming 12 months. US Durable Good data missed economists’ estimates coming in at -4.4% which was one of the biggest misses on a US data number in some time. The Dow Jones closed flat with the S&P 500 up 0.3% and giving traders in the Asian trading session no lead to follow today.

Currency markets were generally mixed and the next leg higher or lower is highly likely going to come when traders sell off stock indexes to new lows. There is no major economic news that’s going to shift currency sentiment nor is there any Central Bank reports set for release on Thursday or Friday. I continue to hold the view US stocks are going to test the lows of 2018.

In a week when stock markets are the key driver of market sentiment, I am always eager to view the price action of US stock indexes as they close. Sometimes things happen for a reason and I am up currently at 4.30am for my walk on the beach and Sunrise video. Once I get back to my trading desk, I get to watch a full hour or more of price action as the S&P 500 and Dow Jones close. What was evident today was the sellers coming back into the market in the last hour. The Dow Jones was up 200 points at one stage Wednesday and closed the day flat with a 0.00% gain with Apple being the major contributor to the late afternoon sell-off. A late afternoon sell-off Wednesday following a 600-point decline on the Dow Jones on Tuesday is a reminder of how weak the buyers are right now. There is genuine talk amongst leading hedge funds and investment banks of a looming recession in the USA in 2020 brought on by the Fed’s rate hikes, trade tariffs with China and the short-term impact Trump’s tax cuts will have on the economy. Whilst I would not want to see a recession in the USA if they did have one it would make Trump’s re-election chances in 2020 extremely difficult and that is something I would welcome with open arms.

It is important to understand that the currency market is highly correlated and yesterday I posted on the Train with Andrew Facebook page a small excerpt from the Trading Mastery Workbook on Risk Management and having multiple trades in the market. If you missed reading it here it is.

“6. If you elect to have more than one trade in the market the probability is that you will adjust or exit one of those trades to try and make your current overall position more profitable or limit potential risk. I will bet on one trader executing one trade at a time beating any trader executing multiple trades at once. The trader taking one trade at a time has a lower probability of a major drawdown and a higher probability of winning big by managing their trades appropriately. Execute one trade at a time and the probability increases substantially that you will remain clear, calm and focused. Trading is a probability-based game and you may be able to prove to me via backtesting that entering multiple trades using a system will make a lot more money. My answer to that is you will never be able to trade a system with real money the same way you can backtest a potential system. I have seen so many traders spend countless hours backtesting trading systems, getting so excited that they’ve finally found the holy grail of trading systems only to find they can’t trade the new system with real money, real emotion and real anxiety. Their system requires them to take multiple trades at once and manage risk over multiple trades. Traders when backtesting never give consideration nor can they accurately consider how they will mentally handle multiple trades.

Any trade updates throughout the day will be sent via Trade Time. You can also follow my daily updates on Facebook, Twitter, Instagram by searching for TrainwithAndrew. Make sure you subscribe to the Andrew Barnett YouTube channel after watching today’s Sunrise video below.

Click on the below image to play today’s Sunrise video.

 

About the Author: Andrew Barnett

Andrew is a professional trader and successful investor who has a strong focus on education. He is a regular Sky News Money Channel Guest and one of Australia’s most awarded and respected financial experts and is regularly contacted by the Australian Media for the latest on what is happening with the Australian Dollar. Director at LTG GoldRock, Andrew Barnett, guides thousands of traders around the world in the live market on a daily basis, advising them on buy and sell directions, as well as trading his own personal account. Andrew, a regular keynote speaker at trading and wealth-creation events throughout the Asia Pacific region, is an authorized representative registered with the Australian Securities and Investment Commission (ASIC).

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