There's no light switch to new year trading
Just because we're through the holiday period doesn't mean were automatically back to normal in the first main trading day.
We've been constantly mentioning the month/quarter/year end effects in markets over the last two weeks and the very same applies in the first few sessions of a new year.
This time of year can be such a mix of trading and it takes time for old and new trends to develop.
The problem is one of patience. Often at this time of year I won't trade the week into Christmas, nor over it, or a few days after it, as it takes time for the dust to settle.
There's a lot of messing about by trades either continuing themes from late in the year, to those taking a fresh view and we can never know what any of them are doing explicitly. This is where pure price action is key. This morning I wanted to see US traders maintain the bullishness in the dollar and it looked like they we're making a go of it. But, then we couldn't break that Dec 15th high so that was the first signal. The next signals were the breaks of the intraday support. We didn't get a big dip in the run up and the support levels were made of paper on the way down. That's a big clue that the rally was on shaky ground. I highlighted the fix to watch and we saw a big move in the lead up to it.
This all might seem like hindsight analysis but if you look for the clues and signals you can help protect yourself against seeing a complete reversal in a market.
For now, we'll have to watch a few more sessions before we get a full idea of how the PA is going to develop for the longer term. Stick to your chosen levels and keep things tighter than you would normally.
