Equities are looking vulnerable as they push along at all time highs, across the board. The Nikkei Futures (NKD M5) delivered a short entry pre-FOMC 4/29 (yesterday). There was no spark-infusion to the equity space post-FOMC, so I entered the order at 19,800. See the chart attached below. All short signals across the equity space have been getting smoked over the course of the more recent (2-3 months) uptrend. I’m watching the DAX closely, as the leading international market, and its looking toppy here. On 4/27, the DAX triggered a nice long entry signal in the program, but the risk/reward was about even on the trade at the 12,000 level as per the front month futures. I waited on it. 4/28, the DAX reversed completely inline with a fast break across the German Gov Fixed Income space across the curve (BUXL, BUND, BOBL) all got hammered. My thought process with the equities is to look for weakness in the Euro-space/German markets, and leverage that weakness in the Nikkei 225 futures on short signals, which I’ve captured yesterday. Let’s see how this unfolds. My rule of thumb with trending market conditions (this has a specific, quantifiable definition) is to only trade in the direction of the trend, using my system, unless seasonal cycles and/or extent and duration of trend (#days/months in context with historical) all converge to support a countertrend exposure. Otherwise, its more favorable to either take some profit, or add to winners in trending environments on countertrend signals. Its also important to hone your market ‘sense’ or instincts and to develop yourself to know how to read the inter-market relations to selectively risk capital in countertrend context. I’ve stated my justification for a short Nikkei position here — using weakness in the DAX as a proxy for international markets, and stocks in general at this point.
Futures Trading 