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Second Recession is coming?

This May 2010 was recorded as the second worst May in the history of the stock market (The first is May 1940). The Dow was dropped almost 8% (7.9% exactly). Trader error and downgrade of Spain’s debt rating were the two most shocking thing happened this month. Escalating tensions on the Korean Peninsula triggered a flight from riskier assets.

One of big concern all investor see is the impact of a second slowdown in the global economy. Mark Matthews, equity strategist with Macquarie Capital Securities, tells that European banks will incur large losses on the loans they have extended to peripheral economies in Europe.

Based on the chart above, we can see that a major threat of second recession seems real. I don’t know how big the european debt problem will impact to the global economy.

Honestly, right now i have some put position on stock. The stock movements seems will be more volatile this week. Because i learned new technique (calendar spread) on option,  I reconsider to start scanning some candidate for calendar spread position.

On Currency market, euro slipped again today, showing its continued vulnerability to a broader sell-off on fears that the region’s sovereign debt problems could spread to the banking system. From the chart, we can see that EUR/USD already broken the previous low.

The above chart is H1 Chart, as you can see the support already broken. And the question is how low can EUR/USD go?

Let’s check the Monthly Chart of EUR/USD.

The support line already broken last week, the next potential target can be on 123.6% fibonachi level (the same level as previous low hold @1.6190). I trade full only sell position on EUR/USD today. I got some losses because i place the stop loss to close from the open price, but the total result of this day still good.

Just wish you all good luck in this new month. Happy Trading for all

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  1. Glendora Wyrostek
    June 6th, 2010 at 06:54 | #1

    great site and your writing style is amazing. just found your site on yahoo. I¡¯ll come back later for sure

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