...and now, a couple of negative points for the Greenback.

Reason One:

On March 16 and March 19, I wrote about this 'flag' pattern that the US Dollar/Canadian Dollar was trading inside of. Now, I felt that if it were to continue in the channel, it would explode sometime in April. Well, it broke in favor of the Canadian Dollar:



This pattern goes back to January, so I think it is a significant break (even though I am voting for a stronger dollar.) We should also note that the pair could easily trade north right up to the trendline but then come back down. I spoke to a mutual fund manager today, and he thinks that the S+P comes down a little more, and then resumes its upswing...that would correspond to the same sort of thing I just mentioned.

Reason Two:

Pretty succinct quote here from this analyst even though he doesn't give his reasons here:

David Solin of Foreign Exchange Analytics in Essex, Conn., agreed that Friday's rebound was likely the result of profit-taking before the weekend, and said he expects the dollar to continue its fall next week.

"I wouldn't read too much into today's changes," Solin said. "This is probably not anything more than a little consolidating after the huge sell-off we've seen."

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One of the most important indicators I use; try the trade triangles for free. They are one of the big reasons that I am doing so amazingly well.

See an update of my account here.

A few more points for the Greenback

Here are three more reasons why I like the Dollar here (I am really trying to find an opposite point of view, but I can't yet...still searching):

Reason One:

In my last post I mentioned that Matt Nesto (CNBC) pointed out that the Sterling/Greenback is trading higher today then it was the day it plummeted on news that the UK gov announced it was going to buy $75 Billion Pounds of their own paper. Well, check out this quote from Marc Chandler today:

"The dollar's decline clearly accelerated when the Federal Reserve announced that it would buy another $750 billion of mortgage-backed securities, another $100 billion of agency bonds and, for the first time, $300 billion of Treasuries. Other countries that have announced quantitative easing programs, such as the U.K., Japan and Switzerland, have seen their currencies weaken as interest rates fall.

Yet in the larger picture, many seem to be exaggerating the negative dollar implications of Fed's decision. First, while inflation expectations of monetizing the U.S. debt are a legitimate concern, dis-inflationary if not deflationary forces seem stronger than inflation, not only for this year but next year as well. Second, using the five-year/five-year forward rate, which both the Fed and ECB have cited, shows that even after the adjustment following the FOMC meeting, expected" European inflation is higher than expected U.S. inflation."

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Reason Two

In this first chart we have the EUR/US pair coming right up to (a decently long) trendline. No big deal...anything can happen, right? I can't see much fundamentally that would signal a significant breakout of this trendline, but anything can happen (clicking on the charts give you a clearer view):

But look at the next chart...the above chart's trendline starts at the second top of the double top (below.) BUT the second chart's trendline starts at the first top of the double top...and look what happened on the 22 or 23 September of last year...it seems to have bounced again. It could be a reach, but I don't think so:

Lastly, I read Brian Dolan, the fundamental analyst from time to time (excellent explanation here (PDF)...and he suggests that the Euro could be in trouble. Remember...Europe hasn't announced any quantitative easing yet...whereas Switzerland, the UK and the U.S. have.

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Reason Three
(boy, I'll look silly if this pair goes north!)

Here is a chart from my trend-determining software which shows the spot price of the Dollar. As you can see, the currency held the gap created right before Christmas and finished higher:

Not so fast Greenback haters!

As traders we are taught to be pliable and quick on our feet. I went in to the end of the week thinking that Gold would still move higher (after a minor correction...)

BUT...judging by what I am seeing and reading this weekend with regards to the Greenback, and some of the charts of some of the other US pairs, we could be in for a little more then just a correction in Gold, unless Gold and the Dollar rise at the same time, which doesn't happen all that much.

So, in order to keep this readable and organized, I'm going to break this up into a few entries and give pros and cons to the argument.

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First Argument FOR:

I think it was Matt Nesto on CNBC the other day...(I looked at the chart, he was right..)

Basically, he pointed out that that the Sterling/Greenback is trading higher now then it was when the UK gov announced that they were going to buy their own paper. If we remember, the Sterling had a precipitous drop around the 7th or 8th. Now, we all know that past performance does not indicate future results (so please research your broker carefully!) but the Greenback made a similar move down when we announced the same.

Important fundamental addition

I tried to highlight Allan Bollard's (Governor of the Reserve Bank of New Zealand) statement last week, but the PDF wouldn't let me highlight it...so I uploaded it. It is really, really short anyway and it succinctly describes New Zealand's outlook. For my money, I haven't read too many official outlooks as positive as this one recently.

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I posted this quite a few days ago, but it was worth showing again: It is an excellent parody on the disgust we have with our government. With our Congress acting like a bunch of buffoons the last two days and our (too big to fail?) banks fighting for their lives...Very funny! (Warning, bad language.)

Probably the only country that will not do any quantitative easing

...and that country is...New Zealand. And today I was alerted to a trade for next week between the aforementioned NZ Dollar and the Swiss Franc that I think will do quite well.

Fundamentally, the big drop that occurred with the Swiss Franc recently was because their government came out and surprised the markets, similarly to the way we did the other day, when they announced they would start to buy foreign currencies to stem the Franc’s appreciation. Switzerland is an export driven economy and this is a form of quantitative easing, opposite but similar to what the Brits will be doing and...what New Zealand hopes it won't need to (the idea being that that would be good for NZ's currency.) Now let's look at a daily chart of the pair with a new trade triangle issued just today (clicking on the charts give you a clearer view):



I purposely drew the trendline above all the closing bars of the bottom half of the chart AND above the close of the big red bar on January 12. Now look at where the last bar closed. It is above my line which I think is very bullish.

But then I went to check the longer term weekly chart and lo and behold, look what I found:



See the weekly up trade triangle that was issued last week? This is the text book trade for use of these indicators and normally it's not this smooth. Trade triangles are great, but they can be schizophrenic. Not the case here. Even if this were a false breakout, the chart still suggests some more upside first.

Why Trade Triangles are so great

Ino.com has a great product that creates 'trade triangles' which really are a huge asset to me. They are one of 7 indicators (all equally important) that I use before I make a Forex trade...but they are first on the list, because they determine the trend.

Then, I move on to my other indicators. However, I don't make a move before getting the 'trade triangle' blessing. As I was finishing up my first post (new trade) for this weekend, I realized that it never would have been possible, had I not opened up one of M Club's many (but useful) alert emails I get on a daily basis.

This one will be the most profitable pip-wise then the others I come up with, but I am pretty sure that we are going to do very well with others this coming week.

The next move for gold

Here's a (short) new video on how I decide where to get back in to gold.

Taking gold profits here...

I'll let the pros on CNBC discuss our wonderful (doctorates of finance) politicians. I think that equities are selling off because of the recent run we have had, not because of them...though I wish they would just concentrate on not getting their hands caught in the till as opposed to passing "laws."

Anyway, I still hold some gold and will re-buy later...but I took profits along with a couple of losses. All in all, a good week so far.

There Will Be Blood! (Oops, I mean oil.)

The video that Adam did in my last post prompted me to take a look at the oil chart again. This is the one area that I have a hard time trading because a part of my income is directly affected by the chart's workings, whether I like it or not. Nobody has to buy call options...nobody has to buy stocks or mutual funds...so their pricing action doesn't need to affect us. But trading oil coldly would be like making a wager against the team you have rooted for for decades. BUT...

Oil is a commodity and can be used as an indicator of the economy for other commodities to trade e.g. copper, gold, steel etc. Oil, just like gold, is an inflationary indicator as well. The dot chart below is perfect, if for nothing else, in that it suggests that the downtrend in oil is over:

So for instance, what I could do here is sell longer term puts on oil and maybe pick a strike that's $10-$15 away. However, the main gist of this is to suggest that gold (which I am long a lot of), in the intermediate term, and probably short term, is going higher. By the way; did you notice the difference in volume from oil's downtrend to what oil has done in the last few weeks?

The Strength is in my Trading (and Inexpensive) Software

The inventor of the software that has been one of the driving forces behind this account's success just made a new video. His prediction for the S+P is a lot more dire then mine...but you can't argue with the program's success!

I play both sides, along with the currencies, so it doesn't matter to me if the markets are going north or south...but watching this will help you determine your investing strategies. Adam has worked in the pits...so he knows his stuff.

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Increased my long position on gold.

Update on last (post) trade

As I mentioned last time...I am holding my long gold position but have now hedged it with a 6 lot short position. When you are sure of a short term trend (within a larger one) you can do this. It also squares your account equity at an accelerated rate. It will be the 38% retracement level that I will be confronted with a significant decision.(Clicking on the chart gives you a clearer view):

Gold Hedge

I took some profits on the upside and also stayed long. However, I have now hedged my position with a short position similar to the way you sell calls on stock you own. It's extremely risky, but has worked many times. The following Fibonnacci chart decided this for me:

New Gold Video

A new video of another trade I made in gold.

US/Canadian pair revisited

I wrote about this channel that the USD/CAD was in a few days ago...it looks like we are still in it. As you can see by the last bar, we tested out of the channel and then came back in. So, according to my chart, this pair is oversold. Since the Canadian Dollar is a risk currency, this likely could correlate to some profit taking in the equities over the next few days. (Clicking on the chart gives you a clearer view):

A picture says a lot...reference last post

(Clicking on the actual picture makes it much clearer):

Now what?

Now the question is: Where do you get back in? I like 942 oz in this post Doji closeup:



Two things to keep in mind. We are in nutty times and retracement of this gold move is likely (thank you Mr. Fibonnacci,) but that may occur much later. I think most people should play this as a longer term hold. If we respect the 892 support level, you should be safe. If it breaks considerably, the more agreesive of us would sell our longs and start shorting.

You guys should try this for free. It's been my lifesaver and the reason why my accounts are doing so well.

Old Japanese Saying: Respect the candlesticks.

I am taking some profits in Gold...and will lighten up considerably. Short term, I think we are overbought, despite the Greenback. See Doji on the 30 minute below:



There is nothing that says we can't get back in...but I cringe when I hear Trish Regan says everybody wants a return on their money, so people are buying gold!

LOOK OUT BELOW!

If The Greenback is going to turn around...it needs to yesterday...OR LOOK OUT! Looks like we may see a retest of $1000/oz. in gold. I have had positions off and on since the $920 area and still hold 2 Lots.

Roll those presses!

I like Larry Levin a lot. He can be a little emotional from time to time...but he is a great trader. Here's what he says about what the Fed did yesterday. Can't sum it up any better then this:

"That's right, the Federal Reserve surprised the hell out of the market today by promising to increase its balance sheet today by a whopping $1.25 TRILION. However, the most worrisome portion of this madness is their commitment to buy $300 billion in longer-term Treasuries. The Fed will buy 30-YR bonds directly from the Treasury; one government entity to another! If this sounds odd to you, it's probably because it is. What they are doing is a bit like filling your swimming pool by pumping water from the deep end to the shallow end."

Lost the battle...But Will Win the War

"Dollar dives sharply right after Fed announced to buy up to $300b of long term treasury securities over the next six months to influence interest rates."

Closed out my Sterling/US trade with a big loss. BUT also bought 3 Lots of Gold (right after we maintained 892 support.)

The Feds decision is huge...they can say all they want about how they don't see inflation...but now all the countries' official banks are devaluing their currencies (except New Zealand) and they will suffer. Gold will win.

Will we maintain support?

I have always thought that the 4 hour chart is great for determining trend. As of now, we are still in the same bar that broke the 892 support. If the bar closes at this price...we have, for now, held support and could retest $1000. Where the next bar closes is, obviously, just as important:

New Sterling/Dollar Trade

Before I discuss the trade, gold is now trading below major support (892.) We are printing money at a ridiculous rate, but maybe the market does not see that as inflationary, for some reason. Is it a head fake? I don't know yet, but probably not. If this is real, we could be looking at 804.

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Spot Chart of the Sterling:

and now a spot chart of the Dollar:

The Dollar has hit the bottom Bollinger Band...and today we were issued a new DOWN triangle for the Sterling spot. The pair broke big support at 1.3912. Thus, I shorted 1 lot at 1.3971.

Big Disconnect

Interesting disconnect going on here: Gold is down big (to main support), the Greenback AND equities are all down as of 11 a.m...You don't see that too often. Ironically...bank stocks are all up!

Other then my Sprint position, I am out of the market until I review what countries are scheduled to announce over the next week and see the charts.

Gold down

Looks like gold may be coming down to the 892 area. I am still bullish on gold...thus the reason I got out of my short $15 ago!

$100,000 account is up 50% since Jan 2. No take on currencies yet...except the Sterling has broken big support.

Excellent parody on the disgust we are having as a nation with our banks and government in general...Very funny! (warning, bad language)

Candlestick Signal

If you are wondering what the equities will do tomorrow, the last bar on today's daily chart of the S+P is not the most bullish indicator in the world.



I think I will look for the weakest currency against the Greenback to short tomorrow...unless I do a yen, ozzie or nzd trade...which would be tonight.

Looks like the US/CAD pair is getting tight...

We may be close to a big decision point for the US/Canadian Dollar. I am guessing about three weeks. Our 2 trend lines meet at 1.2916 in this daily chart (clicking on both charts gives you a clearer view):

Here's the weekly, which is much longer term, but it too looks toppy:

The Canadian Dollar is one of the risk appetite currencies. If the dollar does decline against it in the next couple of weeks, it could signify that equities will continue it's rise here...even though I think it is just a bear mkt. rally. I doubt highly that we are not going to retest the lows we made a couple of weeks ago.

On the news front, it is quite likely that the mark-to-market rule will be changed. If this happens, banks and insurance companies will be allowed to determine the value of its toxic assets (which have no market now) based on how they feel the assets will perform in the future. This could be quite bullish for equities, even though we will have less transparency and more unknowns...which is what got this economy in trouble in the first place.

Gold and the dollar

I have traded the Euro/USD a few times today with some decent profit. Unnecessary loss in gold. I said that I thought it would start the week taking profits. But, I decided that being short gold, even if only for a trade, was silly, given the strength in equities and weakness in the dollar.

Still Rolling along

Took a lot of profit on my EURO/Yen positions (and rebuilt the equity in my account.) Still long a small piece of EURO/Yen in case, because I expect the weekly breakout we talked about the other day.

I will say it until I am blue in the face, try the trade triangles for free. They are one of the big reasons that I am doing so well.

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Gold will be ok...but it looks I was right about this profit-taking.

The Subjective Opposite Point of View

A good (subjective) opposite point of view. This was written in oilngold.com:

SNB's action (quantative easing and intervening in the currency) is positive for gold as Swiss franc was treated as safe haven. With the franc's depreciation, one more shelter disappears and it raises the appeal for gold. Moreover, SNB's aggressive stance increases speculation that other central banks, especially those with virtually zero interest rates -US, Japan and the UK, will engage more in quantitative easing measures.

The dollar's retreat was also positive for gold. Last week, the dollar index slid 3 out of 5 days to close at 87.25. Against the euro, the greenback lost 2% to settle at 1.2927. We expect the gold will strengthen further next week as the FED will likely announce more easing policies in the FOMC meeting next Tuesday. Dollar's weakness was also brought about by increase in inflation expectation (as shown by the chart '10-year TIPS breakeven rate' below) and China's worries on the safety of US T-bonds.