Markets In Rocket Mode

The broad markets appear to be in rocket mode. The EUR and GBP have gained against the USD along with most of the other benchmark currencies. Investors, going into this long holiday weekend, appear to be downplaying risks and moving head first into speculative positions. Gold continues to push forward in record territory and is ‘comfortably’ at 1507.00 USD an ounce as of this writing. The AUD is at highs with the combination of commodity markets being driven upwards and an attractive interest rate. The JPY also is gaining and moving towards the stronger parts of its range against the USD. In short the USD has become devalued on risk appetite even as signposts remain that the global economies continue to have some dangerous curves ahead. Crude Oil has increased in value the past couple of trading sessions, and while this is fine for traders who are buying the commodity and profiting from gains, if the price keeps moving northbound it will eventually throw a wrench into prospects for economic growth.

Wall Street turned in a stellar trading session on Wednesday as quarterly earnings from a handful of companies were better than anticipated. U.S. investors apparently like their international counterparts are practicing a large dose of ‘see no evil, hear no evil, speak no evil’. Market participants march merrily into the horizon having been warned about large deficits in the United States, financial risks in Europe, and the crisis in Japan. Additionally energy prices appear set to rise. Not to throw a wet blanket on the optimism being heard, but it must be asked what investors are drinking that makes them believe that the problems from the E.U. are suddenly going to reverse? The prospects for a restructuring of debt from Greece have apparently been viewed as a mere nuisance by many and again it must be asked – why?

The EUR continues to pummel the USD and the Greenback essentially finds itself at lows against many of its counterparts. Today the German Ifo Business Climate reading will be brought forth and anticipates a mark of 110.6, Retail Sales will come from the U.K. and the estimate is a minus -0.5%, and weekly Unemployment Claims will come from the States.

So what should traders do in this market when little seems to make sense? As heralded here for sometime there is a vast difference between short term perspectives and long term outlooks. Momentum is clearly playing a role in the markets particularly with Gold and Crude Oil. While the USD gets battered, physical resources continue to gain. Betting on a sudden reversal could be a dangerous business proposal short term. Risk management is crucial in these types of markets. Traders need to have clear goals and stick to their chosen parameters.

Today will be the last full volume day of international trading until Tuesday as markets begin to close for a host of holidays. Some trading will continue on Friday and Monday but markets will see extremely light volume and taking into consideration the amount of volatility that has transpired the past week, traders who are holding position going into trading after Thursday should be prepared for the possibility of manipulation.

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