The market is very aware of the likelihood of a domino effect occurring in the Eurozone .
The absence of certainty and confidence is bearish for general market sentiment, When reacting to news Often the market will move in a contrarian direction until such time as the herd begins to dismiss the validity of the original data and begins to reverse both their opinion and trades. Only once these “weaker” participants are out of their initial positions does the market subsequently resume its correct, fundamentally-driven direction. As a result, such price movements on the back of fundamental news are fading opportunities and that,s exactly what we got on the open on last nights Sunday confirmation EU bailout of Ireland .
It is important when the market is trading in a nervous state to be patient. Currently, markets have a tendency to drive up and stop out weak shorts only to then drive down and squeeze out weak longs. Only after this do the markets make a more concerted move to new price areas.
open – rejection – reversal = At the moment, the original price movement is often followed by a larger move in the opposite direction within any one trading day .