Always Be Improving

Think about what good traders we would all be if we could read and analyze the below news item in 10 seconds or less!

That's going to be my next goal. Forex is very different to stocks and, although I understand the following, it took me way too long. To a professional trader...it's like riding a bike, and that's how the quick profits are made. I'll get there...

(From MarketNews.com, and well worth the $177 per month)
17:30 04/23 EURO SUMMARY:
Opened at $1.3082 after $1.2981/1.3082 overnight range.-- Euro had nudged to fresh highs early in the US session with eventual prints at $1.3086 before reported supply ahead of $1.3100 capped and reversed, later chatter tying Asian sovereign to some of that interest. Euro retreated steadily as longs set in anticipation of a stop run above $1.3100 were disappointed, euro backing off to $1.3005 ahead of option expiry where an expiring $1.3000 strike held attractive influence. With flows remaining muted, euro lifted quickly to $1.3030 with slower gains seen to $1.3060 before setback to $1.3030 again after the London fixing. Late morning into afternoon saw euro lift slowly to $1.3080 area approximating earlier highs, though with unimpressive momentum, and later trade saw the pair nudge to highs at $1.3103 as light stops were flushed around $1.3100, the pair deflating modestly to $1.3090 before resuming its lift for trade to $1.3120 in late action.

Out of trade

Probably could have gotten more ($114 profit)...but I will wait. After all, this is a short term account...take my profits and slowly bring the account up in value. Slowly, but surely...the results speak for themselves.

New Trade

I just shorted a small (1 lot) position of the Euro/US pair (very overbought), using my favorite trading method...simple historical support and resistance points. I guess this could come under the guise of Fibonacci, as I think support and resistance points are developed from Fibonacci. We are at a R1 resistance and I will average it if we go to R2 (1.3322)

You can only do this when you are sure of the trend! (Clicking on the chart gives you a clearer view):

Hope you are not getting (too) comfortable

Equities look nice and strong, right? I just don't see it yet. Weeks ago, in this blog, I asked anybody to show me any market in history which had not tested a low that it had previously made.

Now, I'm a Forex trader, so direction of the equity markets is not important to me financially, but understanding direction is important because of the direct implications it has with the FX market. However, if you are an equity trader, you do want to see a retest of these lows. Here is a good summation:

From Mizuho's Steve Ricchiuto - "Now that the'Green Shoots' data has come into question, the broad equity marketindex is more likely to retest the bottom end of its perceived tradingrange than to push through the 875 double top recorded in January andFebruary. A reversal to the 750 area will help the market unwind anumber of the indices over-bought technicals. The fact that the 875level stalled the March-April advance as well increases the likelihoodthat the S&P will have to go back and retest the March 9th low of 676before a sustained uptrend can develop."

Shut up or you are a goner!

Interesting tidbit of what happened privately between the Treasury and BofA, back when the ---- hit the fan, as the financial world came to a standstill for a few days. Here is Ken Lewis's testimony, where he basically says he was warned to keep his mouth shut...or else!

Housekeeping

Gold is showing significant strength (just broke 900).

My puts are much lower then where I bought them, obviously...and that is just fine and dandy. They were bought as protection, and don't expire until June. There is no way of knowing what Gold will do in the meantime. Meanwhile $20,000 worth of Gold is a lot more valuable then a $2,000 Gold put loss.

News out of Europe not as bad as expected...but I am not convinced. Nor, it seems, are the traders, as the Euro/US pair hasn't really gone anywhere (yet.) Still hold in longer term account.

Euro update

Holding EUR/USD in my intermediate account. I have a hunch that the numbers due out at 04:00 e.s.t. tomorrow morning will not be good. I took a small loss in my short term, in case the pair decided to test higher resistance. No sense holding it in the short term account...

...but, as of now, we seem to be finding a lot of offers @ the 1.302 level.

In my intermediate account, I am going to tighten the stop loss here. If the numbers are worse then expected, I probably won't have to worry about a whipsaw. If they are better (which I doubt they will be,) the Euro will head north.

Interesting Dollar tidbit

From MarketNews:

23:09 04/21 UK PRESS: UK PM Gordon Brown and Chancellor Alistair Darling are growing increasingly concerned over America's failure to clean up the "toxic" debts of many of its major banks despite repeated attempts to do so, the Telegraph reports.

Let's see if this impacts trading tomorrow...unsure. Nikkei is down 1/2% so far today...(00:23 e.s.t.)

Trade Update

OK...I'm out of my Sterling/USD trade with a quick $81 profit. This probably goes lower, but I get to take money off of the table (I hate using gambling references) and make a profit at the same time.

Dollar

I think the Dollar goes even higher here...just a feeling. Also, just seems like everything versus the Greenback is at a tipping point.

The Euro against the Greenback has had a big move down. So, rather then chasing (another) position here, I placed a limit order to sell more, but generously below support (1.29763).

The Ozzie against the Greenback just broke a big trendline.

Canada just lowered interest rates, which obviously lowers the demand for the currency (the Canadians happen to be a big Gold producer too.)

The Sterling also looks weak. Of course if equities go up tomorrow...

Shorted 1 lot AUD/USD (intermediate account) and 1 lot Sterling/US.

Uh oh, Gold!

Really trying to get a take on this Gold position of mine. Do we have deflation? Do we, or will we, have inflation? Remember, even Dr. Summers doesn't know. I also think traders don't know. Seems that Gold is bouncing around, looking for something to do. However, technically, the chart below could be pretty damning because trendlines and their breakdowns are powerful:

You can go back any period of time and you will find Gold and the Australian Dollar move similarly. Australia, after all, is a huge producer of Gold...it's a commodity currency...and its GDP is largely affected by it.

In the DailyFX chart above, you will see a significant break of the AUD/GREENBACK trendline, in price AND in relative strength. This is why I bought the Gold puts...risk losing a little, in case of a Gold move up OR risk holding Gold (as a defensive position) to protect your account but make no money on it until it goes higher...which it surely will do.

From FX360

Interesting quote from Boris Schlossberg concerning the numbers out of Europe this morning:

We cannot help but believe that the ZEW results are more a function of wishful thinking rather than any concrete improvement in fundamentals...A true measure of EZ economic activity will come out on Thursday night when the flash PMI readings will hit the screen. If the surveys remain mired near their multi year lows, any talk of EZ recovery will quickly evaporate. We continue to believe that for the time being any rally in the EUR/USD is simply a short covering spurt and any vision of an economic rebound in the region is just a mirage.

ZEW

Germany came out with the ZEW economic survey which was way over what was expected. Anything above 0 is optimistic...this reading was 11.8. Considering people look to Germany to show what is happening in the rest of Europe, you'd think the Euro would have taken off...it hasn't.

I got out of all my Euro trades in case we were to get a good report like this.

Gold, on the other hand, has responded. Maybe traders are looking for anything that signals inflation. However, it looks like our buddy Trichet may have to cut Euro interest rates anyway, because of how slow they seem to have acted.

In cash for now (except Gold)

If you have been following the blog since January, you know we have three accounts.

• My main Forex account, which contains my inflation-protecting gold, is up about 65 1/2% since the beginning of January.
  


• My intermediate Forex account, which is up 20% since January. (Zip file)
  


• My options and equity account, which is in my children's names, so I can only recreate the trades.
  --My Sprint trade (which I just closed)
  --My Zion Bank trade.
  -The Puts I bought (and sold) to protect my gold.

I use six different indicators in my trading...but nothing is traded without knowing what the longer term trends are...even if you trade against them i.e. short term...you still have to know what the trend is.

So, my Trade Triangle indicator has been invaluable to the success of these accounts.

Gold update

I found it interesting that we touched 61.8% retracement levels from this most recent dip in Gold (that caused me to buy more puts,) and then bounced off.

The chart below shows a candlestick that could mean this retracement is over. Not the most bearish candlestick I've ever seen...but we could be coming back down. (Clicking on the chart gives you a clearer view):

That's why I bought the puts. It makes perfect sense. Say they expire worthless in June...so what? I'm out $2k...compared to all the other profits this account is making, it's worth this kind of protection.

But we have to hold Gold. I am terrified of our legislative branches! There's no way of knowing what they are capable of doing to our economy. So it's worth holding and don't forget this account made $11,000 the last times we bought puts on Gold.

I think there's more to go

When you break support, it usually means something.

1.50 resistance on the GBP/USD ended up being a false breakout. Before that, we had the false breakout of the Dollar/Yen. This breakdown (EUR/USD), is not false. I just added a new short position and will look short term:

This from Marketnews:

MNI FX TECHNICALS: 20 April 2009 ---EURO-DOLLAR TECHS: Suffers Minor Test Of $1.2948 Fibonacci Level

RES 4: $1.3424 Minor res line 23 March,
RES 3: $1.3311 21-day moving average
RES 2: $1.3138 5-day moving average
RES 1: $1.3090 Low 10 Apr
CURRENT LEVEL: $1.2970
SUP 1: $1.2945/48 Hrly low, 61.8% of $1.2459 to $1.3739 advance
SUP 2: $1.2880 Projected channel support from Mar 23
SUP 3: $1.2761 76.4% retracement of $1.2459 to $1.3739 advance
SUP 4: $1.2506 Support line from 28 Oct

COMMENTARY: Euro has suffered a minor test of $1.4948 Fibonacci level -- 61.8% of $1.2459 to $1.3739 advance move. Downside risks persist as the daily studies continue to point south, and as yet still above historic levels of reversal. A projected channel support line implies weakness to $1.2880 near-term, but a longer-term support line favours $1.2506.

Hope everybody held on to their Euro shorts

Obviously a good decision to hold on to my Euro/USD shorts through the weekend...I just covered all my open Euro positions including from the intermediate account. Here is the statement. Since the breakdown under 1.3080, this account added about $4,000 in equity. FIBONACCI WORKS!

Also obviously a good decision to repurchase my Gold puts the other day.

The link below is one of the biggest reasons this account does so well. (Statement above):

Love Fibonacci!

A little while ago I was trying to figure out where to take profits in my Eur/Greeny trade. So imagine my surprise when I tuned in to FX360.com and, not only are they using the price that we chose earlier (thanks to ActionForex)...but they have a swing trade limit order to buy there! Now that would be bold of me...cover my shorts and then turn around and go long!

I probably would need to think twice because I think the Dollar is going to break resistance here and I don't like all the games the Ecb is playing.

Also, the equity markets are at big time resistance. Earnings are coming out in force this week, and you have to wonder how much bad news can be shrugged off.

After further review...

EUREKA! Action Forex went with the intra day lows and highs of the range from March 4 to March 19...which I never do.

Euro/Greenback update

With regards to the Euro/Greenback, according to Action Forex, I need to be looking at 1.2945/55 as a possible profit objective for my trades. They say it is also 61.8% retracement of the move from 1.2456 to 1.3737. Here is what I am guessing they used as their Fibonacci placement points in the chart I drew below:

Below is what I used for my Fib points...but who am I compared to Action Forex? I just wish I could ask them why they used the bar that they did for their 0%. Below is what I use, and that's why I identified 1.29765.

Yankee Nightmare

This trader is a big Yankee fan. Right now, Carl Pavano (Indians) is pitching a perfect game against us through 2 innings! I am going to need my sleep tonight, so I will hold my breath...posts could be shorter!

What is the alternative?!

David Gregory had Larry Summers on Meet the Press today. Hiring Summers was a good move by Obama. Whenever he speaks he gives me confidence, which I don't understand...because I'm the ultimate cynic. I really do believe that we are in good hands with people like him and Bernanke at the helm.

The problem is the mess that this country is in...the mess that politicians from both sides helped us get into, and ironically, it's some of those same people, who have no clue about economics, that threaten to keep us in this mess.

It is huge...and somehow we are going to have to pay for all this stimulus being pumped in to the economy. How we do it is going to affect how my position in Gold will ultimately perform, and how I trade the currency pairs.

Where the money is going to come from to pay for these actions will be interesting to see. Dr. Summers continues to maintain that anybody making $250,000 or less, will not have tax increases...The other thing we have to remember is that the TARP and TALF are not bailouts...they are loans, which should be paid back.

I have no clue (and I suspect, nor have they,) if that money, combined with other ways they have lined up to take these purchases off the Fed's balance sheet, will be enough to lower the budget deficit, but nobody has come up with any alternatives...they just complain about the president.

I do believe what the administration is saying about taxes...so let's see.