Well the European Central Bank (ECB) rescue team headed by Mario Draghi, came to the rescue this week with a huge stimulus package that exceeded estimates.  The Euro is under severe pressure and the U.S. Dollar is soaring. The U.S. Dollar Index closed at the highest level since September 19, 2003. What’s the market saying?

ECB Anticipation

The U.S. stock market was up for four days in a row culminating in the huge 260 point rally on Thursday after the ECB made their announcement. It then dropped 141 points yesterday.  So it seems that in anticipation of the ECB move, the market felt that it was a good thing. The market seems to be saying that saving Europe from deflation and contraction offsets the currency impact. We’ll see if that is still the view several months from now.

First Up Week

It is also interesting to note that the DJIA was up 161 points for the week and the SPX was up 32 points. This was the first up week for the market since December 26.  On Thursday I said I thought the market may have caught the northbound train and indeed I am leaning that way. But this market is a crazy beast…so be alert, it can all change in a New York second.

Trading Psychology

Rule 9: Don’t arrive over-eager to play.   Many players arrive at a poker game a little too eager to play. You can see it in their body language. They are rubbing their hands together, leaning forward in anticipation. They’ve “come to play,” and they will tell you so.

“Back away” from the game, and from any feelings of over-eagerness. See how many hands you can fold. make each hand “prove” that it is good enough to play. Such an approach will keep you out of trouble. Will doing this make you miss a good hand when it comes along? Or cause you to overlook it? It’s doubtful. You’ll still know when you have a good hand.  Don’t arrive at the game champing at the bit to play.  From the Tao of Poker by Larry W. Phillips.

In trading the analogy would be to wait for your setup. It’s frustrating sometimes when you wait and don’t see something but yet the market has a big move. When I was much younger I use to get very frustrated when the market had a big move but either my trade didn’t do anything or I wasn’t in. What I’ve come to appreciate is that it is a world of abundance not a world of scarcity…something always comes along.

 “Many people make the mistake of thinking that market behavior is truly predictable. Nonsense. Trading in the markets is an odds game, and the object is always keep the odds in your favor.”

- Victor Sperandeo

Video

In today’s video I look at the market indices and indicators as well as TLT, HYG, Dollar Index (DXY), GLD and USL. Stocks in focus are Valero (VLO), FireEye (FEYE) and VipShop (VIPS).

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