5 May 2008 - 11:29Market Commentary 5/5/08

Today’s strong non manufacturing ISM took the market by surprise but the dollar could not hold onto the gains it made on this market shocker. This gives some good insight into the mentality of the market and the dollar bid tone at the moment in it. The market tends to move in weekly not daily waves since there really is only one close to the market, Friday at 5 pm. So naturally that is when many people exit their positions and when the market reopens many of these same people place positions on the opposite side of the market. Certainly big money traders at banks and other places operate this way. They have to much money to receive high leverage so for them to see a 3% return on their trades they must make 3 pennies in the market. This often takes a week to do on one trade and since they have no leverage they are not panicky and getting stopped out or margin called like the rest of us. Thus the mentality of a swing trader is buy it on Monday sell it on Friday. Obviously the weak hand will be shaken out of the market and the strong will survive the daily whip saw action until Friday when they cash out. I am not saying everyone who has real money puts trades on Sunday or Monday and holds them to Friday, I am simply saying enough people do it to make it  predictable. So this week it looks like the dollar is  being sold. After the rally last week it makes perfect sense to me and certainly gold is steadily climbing which indicates this to be the case.