The Greenback

One of the reasons I held on to a little of the Euro/US short was because I feel that the pair is extremely overbought. Also, according to the 'crowd', the Dollar is again history, not worth the paper that it is printed on, etc, etc. So this is a contrarian trade.

Also this from FOREX.com:

The USD decline has brought it to levels that are likely to elicit official concerns over USD weakness/EUR strength/JPY strength. Japan's Vice Fin. Min. Sugimoto sounded the alarm over JPY strength earlier this past week, and on Friday Eurozone finance chief Juncker said that further EUR strength could hamper the Eurozone recovery, which he also said was a long way off. We would expect additional verbal intervention in the weeks ahead, with US Tsy. Sec. Geithner likely to re-introduce the strong dollar mantra, after his attempt at re-formulating it fell rather flat this past week. Also, we will be closely watching the results of next week's US Treasury debt auctions (see below) and if healthy demand surfaces yet again, we would look for the USD to stabilize and potentially recover. If, however, demand is weak, look out below on the USD.

Trade updates

Even though staying in the US/Yen trades would have ultimately been successful. I didn't stay with them because of horrible Memorial Weekend volume (so I took a small loss.)

BUT there was plenty of volume in the EUR/USD, so I made some profitable trades there AND I am holding a small position through the weekend because the Dollar has been so beat up this week. I am ending the week with my account at another all-time high. I will do the breakdown later.

Also, I am close to breakeven on my Gold but, just as it didn't matter when my Gold was down $10,000, it won't matter when I am up $10,000, as I am holding Gold as protection.

Another Excellent Tool...Fibonacci

Here is a picture of the present trade. The reason why I only did a half position at first was in case we showed a little more weakness. We did...then I added more...and now take a look at the chart...and see how traders use Fibonacci. It is amazing how this happens much more then it doesn't.

Obviously Fibonacci works better when you use longer term charts...this is a 15M chart...but it has been a huge part of my trading success (clicking on the chart gives you a clearer view):

New trade

I went long a half position of the US/Yen because I am expecting a retracement back up. This is a short termer because the trend for this pair is still down. Stochastics are very oversold and given the strength in equities, this thing should be higher anyway. We do have some sort of decoupling going on, because money usually flows out of the Yen when markets go up. (Clicking on the chart gives you a clearer view):

---------------------

Is it just me, or does anyone else find it ironic that a ratings agency (such as S+P) can affect a whole country's currency negatively (downgrade rumour), as they have with the Greenback, when the same agencies gave AAA ratings to mortgage-backed securities before the you know what hit the fan?!

GOLD

All those who have been following this blog probably know this account is at an all time high. (Combined accounts are roughly up 80% since Jan.)

A good part of that is Market Club and Adam Hewison. Gold is rocking, and we were told it was going to by Adam a few weeks ago. Remember?

Guys...try it free for 30 days...I did. It really helps your trading. See what I mean by clicking here.

Gold

Sold 1/3 of my Gold for a $1300 profit. Dollar looks like it is oversold and the markets ending the trading day like it did is not exactly bullish.

Here is the new account update which is at an all time high. Since this particular purchase was made on April 1...it is much further up the statement page.

Account Update...Wednesday

Because of the VIX, I bought (and sold) two small positions of EUR/USD. Account is at an all-time high.

This is a short term account, otherwise I would have held these in my intermediate account. Since this market still scares me, I am not ready to go against the Dollar longer term.

VIX addendum

Kathy Lien just reminded me that the last time the VIX, otherwise known as the 'fear index', was below 30 was before Lehman Brothers filed for bankruptcy. (Now, think about everything that has happened since then.)

the VIX

One of the reasons why I made no trades today was because I was in NY City and Queens on business. Had I been in front of my computer, I would have seen that the VIX closed at 28.80. That's not good for the Dollar...and great for equities, as I described before.

Oddly enough, Forex had big moves today, but they were early, and before the U.S. stock markets opened (and obviously, before the VIX closed down 1.44 and below 30.) Looks like 20 on the VIX could be next support (unless we quickly move back above 30 again.) That bodes well for equities.




The biggest intraday move was the EUR/USD...waiting on Nikkei open...

Since the EUR/USD has been the biggest mover up...I may wait for a retracement before deciding whether to go long on it. I'll need to confirm with other indicators too.

More on this...

I wrote about the negative divergence in equities the other day. So I asked the aforementioned Mr. Steiman about it because he is less cautious then I thought he would be...in response to the above post, he wrote me back the following (in effect he's saying we should wait a little more):

"Normally, whenever a stock or an index breaks out or down, they will usually come back to that levl (sic) in the short term to test it to see if the move was for real. If we test a breakdown back to the trend line and then it rolls over, you know you have a true break down."

Funny thing is...this is basic tech analysis, BUT I still need to be reminded of it all the time. So let's see what happens. We never really broke down out of the trend from the above post BUT we did break down from the post I did about the converging trendlines (slightly, and then we went back into the trendline.)

Now we wait...

Maybe I should just accept it...

As far I am concerned, there are only 2 or 3 people I listen to when it comes to stocks. I don't have the time to put into equity research...and Jim Cramer is NOT the answer folks!

One of the guys I have followed for a long time is Jack Steiman (www.swingtradeonline.com) because he understands technical analysis (equities) like few people alive. Now the market basically did nothing today...that's good for the bulls. Here is part of a piece that Jack wrote about yesterday's action that could bode well for stocks:

"The breakdown on the Vix is a close below 30 and we are getting very close to that. Should that 30 level break, we could see a very sharp move higher in equities. We hit 30.00 during the day with the close at 30.22. The bears need to watch that level closely for if it goes they will be forced to start covering quickly. With the S&P 500 heading back towards the recent high near 930, this could be setting up for a breakout in the market and a breakdown in the VIX. Very interesting times."

Now, I don't always agree with him...but much more often then not...he is right. And when you talk about the VIX...he is completely right (redundant?)

The VIX measures fear in investors...and you know how much I love trendlines. So that is something we want to watch if we are going to go against the Dollar.

Stay tuned.

Account Update

I got out of my AUD/USD trade with no gain/loss. No current positions because I am very afraid of equities, and the only trading I will do will be short term.

My main Forex account, which contains my inflation-protecting gold, is up about 66% since the beginning of January.

My intermediate Forex account, which is up 16% since January (Zip file.)

My options and equity account, which are titled in my children's names, so I can only recreate the trades. Here are the account particulars:
--My Sprint trade (which I closed at around 13%)
--My Zion Bank trade. (26%)
--The Puts I bought (and sold) to protect my gold, the first time around. ($11,000 profit)

I also own:
1. S+P puts which are down because of yesterday's market up day.
2. Gold puts on my long term gold position.

Gold and Equities

LATEST SEC FILINGS SHOW MORE HEDGE FUNDS DIVING INTO GOLD

A while ago, I re-purchased puts on Gold. Even after this correction we've had in the yelow metal, they are only worth 1o cents today, and, as I've explained before...that's just fine and dandy! (Puts expire May 26)

The upside of my Gold position outweighs the loss in expiring Gold puts by at least 8 to 1. Many of this blog's entries cover this subject.

Since I have already done well in the Gold puts that I sold (about $11,000 in profit,) this is a strategy I will continue to employ. There are so many conflicting and confusing signals (like the headline on the top) for and against inflation that I feel like I am watching a long rally at Wimbledon!

--------------------

Speaking of puts...I gotta laugh that I bought S+P puts the night before the Dow went up over 200 points! You'll see, bulls...you'll see!

Updated Statement for short trade account

Account doing excellently, even though I am holding the AUD/US, as it has not even come close to my stop loss, and it is showing strength (Dow up 133.)

The Commitment of Traders report

The Commitment of Traders report is an excellent source for traders to use when determining trend. Basically, it is a contrarian indicator. I quote Kathy Lien below:

According to the latest Commitment of Traders report of non-commercial or speculative positioning, traders have reduced their long dollar exposure significantly. In fact, net long positions in the dollar are the lowest since 2008. Traders have also increased their net long positions in euros by 142 percent in the last week, which is why he EUR/USD is having such a difficult time rallying. The British pound on the other hand saw an increase in net short positions. This suggests that the GBP/USD has plenty of room to rise.

-------------------------------

Equities up...however, I am still sure about my put purchase last night. Stubborn.

Spending money to make money

Just like I bought and sold (and rebought) puts to protect my Gold, I just bought a 15 contract put position on the S+P. I really do believe that equities are coming down. The idea is to protect my Ozzie position if it continues down, and if it rises here, I will make less on the upside because of the cost of the puts (which is limited.)

Just purchased 15 S+P June 850 puts @ 21.00 (plus comm.)= $3150. Expensive...but time to put (no pun intended) my money where my mouth is.

See put description here, and see the entire chain here.

I made plenty of profits on non-Forex trades which will pay for these puts. (I also own puts on Gold which expire in June.)

--My Sprint trade (which I closed a while ago)
--My Zion Bank trade.
--The Puts I bought (and sold) to protect my gold.

May be buying Equity puts

I am getting ready to buy OEX or S+P puts. Just like buying puts to protect my Gold position, this will be a way to add extra income to the account while the AUD/USD pair in my account stays in the negative.

Next post...will be the details.

Rubber Band...breaking?

I've been saying it for a couple of weeks now...this market has to have some sort of a significant pullback. I showed you the double trendlines the other day...and now this from Action Forex:

The last time we had a negative divergence like this, I wrote about it in a post about the Dollar, and it got crushed. In the above, you see during this whole rise, the divergence in volume (which is basically what a MACD is.) We are still in the channel, but I thought it had broken on the 4 hour, as I showed the other day.

Oddly enough, in the next post, Kathy Lien makes a great case for a bearish Dollar, which is good for equities...

Strange days indeed.