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Video: Flash Crash on the Way for Asia, German, UK and US Markets?

   

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Watch the video now: 

 

 

This is Malte Kaub on behalf of Valutrades, today from New York, not London or Frankfurt. I give you my take on what we've seen recently in the capital markets and a bit of a view on what to expect from here.

So, finally we got it. We got that pullback that everybody was anticipating and waiting for. That happened across the globe. We had that in Asia, in Germany, in the U.K., and then finally also in the U.S. Some even spoke of some sort of flash crash where we've seen markets in after-trading hours literally collapse. For example, the DAX went all the way back to the 1200-level.

And interestingly, that was another opportunity to buy at the end of the day because some significant technical levels were threatened. A lot of 200 day moving averages were, kind of, penetrated. But the big buyers came back into the market and bought them up again. So just to look at the DAX, for example, we've seen it bounce back from the 1200-level to 12,600-level very quickly.

So, what has happened here? So, first of all, the main reason for the movement in the markets is to be explained by having a look at the fixed income market. We've seen treasury interest rates for the U.S. treasuries going up. That requires a lot of large funds and pension funds to rebalance their portfolios. That also, then, makes the markets already a little bit more jittery, and a lot of players, being late to the market, being forced out of their positions. And finally, due to this increased volatility, a lot of funds, then, need to apply brakes. In other words, they need to add some derivatives to their portfolio.

As a side note, if you have a look at the stock price, for example, of a Deutsche Börse, that has gone up significantly because everybody knows that it's good for their business. So, it has been quite a shakeout, but what I just described should hopefully also help you understand that from here on we will see a lot of volatility which, for our day and swing trading positions is, of course, a great opportunity.

And how do you react to that? Reduce your position size, anticipate more movement than we've seen for the last couple of months, and then you can have an opportunity to benefit from these market movements. I wish you good luck in your trading and hope to talk to you soon again. Bye bye.

Disclaimer:

The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice. If such information is acted upon by you then this should be solely at your discretion and Valutrades will not be held accountable in any way.

This post was written by Malte Kaub

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