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Forex, Long Ideas, S&P 500

Will The Fed Stall Stock Markets?

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Will The Fed Stall Stock Markets?

The US Federal Reserve is a regional bank that is the central banking system of the United States. Operated by the Federal Open Market Committee the bank is responsible for implementing monetary policies as well as controlling the economy of the country. The US dollar is the prevailing currency of the USA, and this can be traded using the forex trader platforms offered by easy market.

Since the financial crisis that hit the country in 2008, the Federal Reserve has held on to keeping the interest rates as low as possible for more than seven years in order to help recover the economic state of the country. As much as this move is positive, some economists claim that it is setting up competitive pressure that is increasing credit risk, weighing on bank returns and pushing money lenders to compete for more for borrowers.

Monetary Policy:  The End of QE

However, the most recent time when the US central bank raised its interest rates was back in December promising to raise the rate about four more times in the years 2016. Later on, the bank reported that it would only raise the rates twice in the year. The bank explains that it is safer to proceed moderately considering the prevailing economic risk in order to verify the strength of the labor market.

Furthermore, in a statement released after a two-day meeting in March this year, the chair of the Federal Reserve put forward that the central bank had put on hold a further increase in the interest in the US. This came as the opposite of what the majority was expecting. Most people expected that an announcement regarding an increase in interest rates.

Historic Interest Rate Levels

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The Federal Reserve resolved to keep the rates between 0.5% and 0.25%. For this, it claimed that though the labor market is strengthening, it still targets reaching a 2% inflation rate which will see the US economy expanding moderately. This comes after a recent decline in energy prices globally and a low inflation rate internationally.

Most economists expected the chair Janet Yellen to hint at the two interest rates hikes that were promised earlier down from the four previous ones that were revoked. Probably, the hike has been postponed following the slowdown in China or global market uncertainties and with the next meeting of the Federal Open Market Committee scheduled on June 14-15, it is expected that there may be a hike in the rates.

 

 

Forex, Options, S&P 500

Dow Jones Investors: Technical Analysis Strategies in Daytrading

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Dow Jones Investors:  Technical Analysis Strategies in Daytrading

The price-weighted average of the most 30 prominent stocks traded on the New York Stock Exchange (NYSE) and NASDAQ is known as Dow Jones. In general, the stocks with higher market caps are considered in Dow Jones trading and this is important information when we are looking for ways to capitalize on stocks in live markets.  

Dow Jones Daily Bar Chart

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Figure: Dow Jones Technical analysis strategy

Trading the Dow Jones is pretty effective with RSI and 200-day moving average. Forex moving averages can be found using an effective forex trading platform like the software offered by easyMarkets.  Traders draw trend line and channel to find potential trade setup. Unlike another trading strategy Dow Jones is traded with breakout strategy. Traders draw proper channel and trend line in the daily bar chart and wait for confirmation signal in the RSI after the breakout.

Trading Channel Support

In the above figure sell signal was initiated with the breach of channel support. Traders take the confirmation from RSI value. Since a value of RSI was below 50, the sell signal was valid.

The second trade was initiated after successful completion of the triple bottom in the bar chart. Traders went long after the new higher High which was created just above the 200-day moving average. Before going long, make sure that the value of RSI is above 50.Remember that we will go long only if the price is above 200-day moving average and for short the price should be below the 200 days moving average.

Understanding Time Frames

When you are using technical analysis strategies like this, it is always important to consider the time frame you are using in your approach.  There are some differences in the ways that markets operate in the short-term and long-term perspectives, and these time frames tend to be most useful for certain types of trading styles.  If you tend to have a more conservative approach, then it is usually preferable to adopt a long-term trading strategy as this will allow you to avoid many of the short-term fluctuations in price that can be seen on a short-term day trading basis.  These are factors that should be considered before you make the decision to put live funds into the active markets.