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Notice how, on the run up to major news announcements, market commentators, almost collectively, form a consensus view and then extrapolate that view to what is usually a cataclysmic end result.

Prior to the Sunday elections in Austria and Italy, one could have been forgiven for thinking the Euro was about to collapse once again and the long awaited parity with the US$ was just around the corner. But wait, what the Euro did was breathe an enormous sigh of relief as it gapped lower and immediately reversed for it's best one day rally in months.

Those commentators were still worrying about Italian and German banks failing and bringing down the Euro. The reality is that, despite tumbling on Monday, Italian bank shares have since recovered, up almost 10% so far, as some form of bail out is now expected. And what of Deutsche Bank's share price that spiralled down during 2016 until Trump was elected, resulting in a 40%+ rally so far. As an aside, it seems Trump has almost $400million in mortgage finance from DB!

 

From the blog

The NASDAQ takes a 500 point tumble...

 

The NASDAQ takes a 500 point tumble...

Markets thrive on uncertainty and that's exactly why these false break-outs work so well. The majority expect the new high to be just the start of the next trend wave. The warning signs were there, a combination of divergence, volume, wave count and Fibonacci

We just needed price action confirmation and this started with the bearish engulfing candle at the high. The next few days neatly set up the sell level as the Colour Charts confirmed. Then, tumble, it did.....

Where we are now is in the happy position of sitting on a very healthy profit. However, there are now warning signs of a possible rally that could evaporate those profits.

The prudent trader will be converting most of those paper profits into real ones, leaving just a small part of the trade on for the gamble of an even bigger move.

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