Trading plan 12/06/2017

Trading plan 12/06/2017:

At the beginning of the week, the US Dollar is weak, it only gains against NZD. GBP/USD is rising to 1.2765, EUR/USD is holding above 1.12 and USD/JPY is oscillating around 110.25. Precious metals and grain are getting cheaper, crude oil is gaining slightly. On the Asian stock markets, weak sentiment is dominating after the direction set by Friday's depreciation of the of the US technology market blue chips.

On Monday 12th of June, the event calendar is not busy at all and just few important data are scheduled for release. Market participants are preparing for the main event of the week, which is Federal Reserve's interest rate decision and statement on Wednesday, 14th of June.

Market snapshot: SP500 made a short-term top? Will other indices follow it?

Last Friday, the US tech sector suffered a relative huge sell-off from the record levels. The technology benchmark index Nasdaq Composite slid 1.8% on Friday, and the S&P 500 technology index plunged 2.7%. The stocks from the FAANG group (Facebook, Amazon, Apple, Netflix, and Google) slid more than 3%, a sell-off that has not been seen for some long time. All these stocks have hit new highs recently, so now this is just a simple profit-taking and possible capital rotation to other stocks. Nevertheless, it is still worth to mention, there is a possibility of a capital inflow to the commodity markets like gold and crude oil, so this move might be more significant than expected as there is no fundamental reason to short the US tech stocks. The move up in this sector might be considered as overextended, so natural market participants' reaction will be some profit taking at the attractive levels, but if the recent upside breakout in the gold market will sustain, then the possible mid-term high in the US stock market might be in place.

The sharp drop in US tech companies last Friday can be seen even in today's Asian markets, where this sector is also poorly performing. The market is dominated by sellers, and their dominance is particularly evident in the Hong Kong market, where Hang Seng is down 1.2% at the time of writing. The Nikkei 225 and Shanghai Composite lost 0.5%. After a week dominated by lower levels, yields on US 10Y bonds rallied more than 2.20%.

Let's now take a look at the US stock market technical picture on the daily time frame for any early clues of a trend reversal. Almost all of the stocks and indices have a suspicious candlestick reversal pattern. All traders need now is to wait for the pattern confirmation.