Tips for traders, 3 June 2020
Conditions
Recently the US has been hit by riots which were caused by the death of George Floyd. This has made some investors fearful because of the possibility of escalation. What is actually reflected in the stock market is another story: stocks in the US seem to be unstoppable as the surge continues.
This surge in stock markets is mainly due to the fact that the Fed is flooding the market with liquidity. This liquidity doesn’t just go into the stock market but also gold, crude oil, etc. The only market that does not really receive a big chunk is the crypto market, where prices generally plunged yesterday as more investors took profit.
Stocks’ gains have caused the volatility index to drop further, bringing it close to its range before COVID-19.
With this condition, we can expect that the VIX will drop further as fear has gone down significantly while greed increases. What we can do as investors is to keep an eye on the current condition and make sure we are ready for every opportunity that is coming.
We can also take a look at the price of gold, which is consolidating in its range around $1650-1750/troy ounce. This has created frustration, but at the same time it has also created opportunities for traders. We have not seen any significant liquidity that is going to move the market currently, so if there is a shift of liquidity, price might move in a clearer direction.
Tips
Meantime, short-term trades and scalps are in favor to capitalize on short-term opportunities. Scalping techniques will probably work better in the current environment, while longer term techniques like swing trading or position trading might bear higher risk.