The market’s calm before the storm
There is peace and quiet in financial markets: the technical indicators are overwhelmingly neutral, the majority of the currency pairs are moving sideways without any significant fluctuations; there are no extraordinary distortions on the technical graphs (well, perhaps the pound’s phenomenon stands out of the overall picture). A bit unnatural for a highly volatile October, isn’t it?
It's always the case of swings and roundabouts. You never know which way the financial winds might blow; so, you just wait for things to happen and hope that you will dodge another tempest. This strategy doesn’t always work well. We would rather suggest you to revise your budget, cut some of your losers and sell the winners, before it’s too late. All the indicators you see in the news could be misleading. Don’t trust their neutrality. Here is why.
October is usually a volatile month for stocks. Traders should be prepared for this volatility to surface again. The US stock market continues to experience outflows. Many financial doomsayers predict the bang of the stock market bubble. With extremely low interest rates people are forced to invest into stock and keep less in their saving accounts. We should blame J. Yellen and the Fed for this turn of event.
Another wave of volatility is looming ahead of the November presidential elections in the US. No matter which candidate will win, it might fuel the markets. Here we see the ground for research. If you’re a very cautious and watchful trader, we would recommend you look closely at this event, weight all pros and cons and consider buying a straddle before the elections. With a high volatility and fluctuations, you can make much money.
If not elections or stocks, wait surprises from prosperous enterprises and manufacturers. Next week the 3-quarter earnings season begins, and the expectations might surprise you, especially if you glance at the earnings in the technology sectors. If the earnings are weak, be prepared for tremendous sell-off.
In the end, we would like to once again warn you of market’s reversal. For many years, we could observe an overall bull tendency in financial markets; now we entered into the long-term consolidation zone. Nobody knows when it ends, but once it is over, there is a high probability of the steady bearish trend, because every upward movement is usually followed by the downfall. Just stay focused and pull out the slack.
 A straddle is an options strategy that allows the investor to make profit regardless of the price of the security is rising or falling. The bigger fluctuation range, the more the owner of the straddle earns. If the investor purchases a straddle, he holds a position in both a call and put with the same strike price and expiration date and pays both premiums.