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Archive for August, 2011

Let’s range some ZARJPY

While we wait for the Europe and the Greece and the Austria and the rest of the catbag.

Although it didn’t hit my preferred buy entry on the 14.6% on 10.6400, still like my later entry around 10.80 with a stop set at around 10.820 or 10.850 or so.

Stop set, no limit (though 11.15 is the next resistance fib) and another entry placed at 10.550. This pair is much more attractive than USDJPY or USDZAR (a synth, no) that I may move more capital into that position if it gets attractive again pending macro events.

Noda wants to raise taxes? Let’s have an exodus of Japanese corporations and yen dumping? What is he trying to make Japan into?! Dejima?!

1. Largely oversold ZAR due to market collapse.

2. May be dollar-based strength so buying this against the yen, which has the chance of intervention.

3. Largely rangebound as of now with break to upside risk/reward much more likely.

4. RSI near bottom (not now, but it was when I bought it yesterday)

5. Balance out my long dollar risk-off exposure

*6. Although Africa may blow up again. Thank luck I’m in the black and have a stop at profit. Entry buy set at 10.600 (30 pips away for an ATR 15 pair)

Let’s see how this goes, and how quickly the markets may fall apart. Watch for US FOMC minutes with more Kerchlakota + Fisher + the other fed president dissent with NFPs readying on Friday for volatility, dollar strength (even if spiking).

Off to doing more Calc… and trying to let the patterns make me some money without monitoring.

To the best of good buys.

 

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Because IEOR 150 is actually quite challenging, especially because I haven’t taken any of the pre-reqs before and I aints so gud at nummers. I will try to make this as simplified as possible as I don’t have Bloomy access right now…

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Tomorrow at 1400GMT (1000EST) Uncle Ben will be giving his annual MT and LT outlook on the US and global economy. This time with all the other professors out there in Jackson hole, he will be joined by ECB president Trichet. Although the symposium wasn’t so much of a headline grabber in the half decade before, it has become synonymous with easing and expansion of the fed balance sheet – QEx.

Three things can happen tomorrow – dollar strengthen, dollar weaken, or dollar nothing. I’d trade dollar strength against the yen, while weakness against the commods AUD, NZD, CAD as they have the most to benefit. If  you have the brokerage option, I would also look at ZAR as a good short-dollar as that baby’s been oversold since last week (I would think).

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The markets have been waiting for this Friday ever since it fell off a cliff last last week. With the S&P and index+futures volume, the influx of transactions correlated have been long, driving up the index higher, unlike the last sell-off, where every spike of volume was a move much, much lower. The S&P500, fair to say, as been expecting this entire week for the fed to do something again – if not additional balance sheet expanding, at least easier credit.

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Will there be additional easing announced at this meeting? Let’s consider the facts…

–Reasons yes:

1. The equities markets, best explained with this chart of the benchmark.

Although the last fed asset purchase was done on June 29th or sometime around the last week, the realization of “easy money” didn’t really set in until last last week, catalyzed by the S&P downgrade and further negative outlook. I expected the markets to drop as the fed exited the buying market, but certainly didn’t foresee such a sharp decline in the matter of days with amazing volatility. I thought Big Banks were supposed to be smarter than that. Or maybe not, and that’s why they’re on a hiring freeze right now.

2. Unemployment, which has improved from the recent high of 11.4? 10.4? percent down to the current 9.1%. Though it can be argued the recovery is on-track as we move lower on the scale, the blip up to 9.2% last last month has cause an additional reason for concern. Breaking that number down, most of the jobs lost were on private payrolls, and even more devastatingly, in the manufacturing sector.

And weakness in the manufacturing sector, usually one of the leaders of the recovery as everyone starts to order goods again, indicates that this “soft patch” may last for longer than expected. Barry, in this case, is incredibly concerned about this data (among the many) as these lower-skilled and paid workers will be a large part of the voting demographic. And Barry wants to be re-elected. Although he can pull strings at the Treasury and have Geithner magic up some money, he’s restricted too now by the debt ceiling, and that money doesn’t go into the economy without the independent central bank.

3. Low inflation:  which is still 3.6% (annual, compared to a regular 5%) and a pitiful core 1.8% annual in July. Despite gawkers calling for the destruction of the buck and massive inflation, I don’t think there was any (the data proves it too) during the last 2 QEs, monetary easing and the whole story. The Fed’s precedence is always maintaining growth with inflation as a backburner reminder. And without inflation to get in the way of easing, the fed may go all for it.

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Why not?

1. Promise of 2013, to keep interest rates “exceptionally low” until that time. What this arm-twisting-without-actual-pain indicates that although the Fed is concerned with the slowdown, it’s not completely ready to flood the markets with wet capital once again. This promise also indicates that the bank may have more flexible plans in the works to get the economy back on track, and will not use as blunt of an instrument as the last rounds of asset purchases.

2. Failure of the last two, as shown by the skewed-left curve of the S&P500 in one year. This sows that as long as the fed keeps buying, the markets go up. Once they exit too soon, the markets plummet hard. What is this “too soon?” and when will it be enough? The fed doesn’t want to enter boldly into a quagmire it can’t get itself out of.

3. Interest rates, which are already at record lows (even dipping below 0% for 3mos, which gives twisting it or trying to ease borrowing even harder. Plus, LIBORS are still pointing upwards due to risk-related demand of the buck. With lower yields, demand for dollars will be weaker, damaging the strength of the buck. And I hope Uncle Ben knows there’s no possible way for America to export their way out of this. Have you driven an American car before?

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What to do? If ol’Bennie is to announce a new one, it better be bigger than the last two. QE2 was only 600 billion dollars last time, and serve as the heavy medicine to the the US truly out of this spiraling decline. Additionally, it must not be so big this time, as most of the money from the last purchases somehow ended up in the hands of large corporations and banks again (like the TARP funds only less overt this time) and not in the hands of consumers who must be able to spend the economy out of the recession. Whatever the plan is, hopefully the professor knows best, though experience tells me there will be a cock-up somewhere along the way. But 3rd time’s the charm.

I shall be scalping the market tomorrow since my first lecture isn’t until noon. Watch closely EURUSD and USDJPY for the immediate impacts. Buy risk-on ZAR, RUB, MXN, CAD, MYR… if there is a clear statement towards additional easing. Keep buying dollars against the Euro and the Sterling if there is no conviction.

btw… FRBStL President Bullard said today that the Fed will be prepared to “act if economy worsened or went into deflation”… indicative of what’s to come?

There’s money to be made out there again tomorrow. To the best of good buys.

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Definitely form now until Friday, when Benny should reveal additional support for the equities, though most likely not to the scale of QE3. But from equity futures and volume (they are now positively correlated for the first time in a month), large traders are also expecting some kind of bouy from das Amerikanische Zentralbank.

So how to trade right now and prepare for what may be another easing on Friday?

The ground rules…

1. For the past 5 times since the last FOMC press conference, the dollar drops whenever the Ben opens his mouth

2. Trade currencies directly related/amplifies US growth or slowdown, ie the CAD and MXN

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Starting for my penchant of weirdness and trading exotic pairs… the Mexican peso, which is more or less dependent on US consumption. Although China is starting to become a large trading partner, that’s not really an issue at hand come Friday or so. The true question, however, is if the FOMC/FRB will issue more statements announcing their support to keep the economy growing. Without anywhere lower on the interest rates spectrum, the only monetary policies that can feasibly be pursued is

1. expansion of the balance sheet

2. somehow magic up some dollars to feed the world with <<- this case may require the dollar to appreciate so the US can spend everyone back to prosperity. Japan, Korea, Indonesia, Malaysia, AU, NZ all wall this to happen, but then again, markets decide the exchange rates. And people don’t really want US dollars but treasuries… hmm I wonder if we can still print interest bearing treasury demand notes

Which reminds me, happy 40th birthday of Nixon shock.

The Japanese are stil in uproar. But why did they sign the Plaza again?

The view is for the peso to gain come additional easing. The weekly chart confirms it. RSI shows top of channel, and has broken-well out of its channel. The fact that it’s falling slowing from its top gives almost a 4-1 risk/reward down to 11.30 with a stop at around 12.20.

Why weekly charts? It’s to fit with my less-trading more-studying plan. And the daily chart is out of whack after last week’s volatility.

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Now for the Canadian dollar, the pair which has (at last charting) -80% correlation with the S&P500. The reasons are self-explanatory.

Same story here as the Mexican, except with lower spread, but also less volatility. Interestingly, the up/down/up/down pattern from last week is still there. And, it’s being worked between the lesser and even lesser fib resistances, with the wicks showing downward pressure.

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Right-o, with that short bit of non-analysis, it’s time to speculate on whether or not das bankfurher will once again (and somehow) stimulate the economy. The fear running right now (as Perry so toff-ly proclaims as treason) is that additional “printing’ will cause inflation. True, but what the fed worries the most about is if the inflation is “transitory,” meaning that it’s being driven up by commodities and foods/non-core goods, conveniently priced in a weakening dollar.

This would be the one-two punch for dollar bulls, whose expectations of a rate hike by the end of this year have been dashed last week, and the additional support will inevitably result in the flow of easier dollars. There will be small blips of strength with fear and bond purchasing (given yields are still above that of JGBs) but the longer run until mid-2013 will seem to be weaker.

The other prospect, which seems increasingly unlikely now given the data and what the fed has done (most notably the further easing of borrowing, which is do nothing or god-forbid tighten credit. Dollar will rally on risk, everyone dusts off their Dow 10k hats, the US may enter hooverville again, and I will somehow find a way to attach an outboard motor to my miata and driving to Switzerland… which is landlocked.

But Benny and his friends save for Kerchlakota and the Dallas one are Keynesians. And he loves his printing press.  85-15 chance.

Also – divide between yields (government borrowing) and LIBORS (intrabank borrowing) rates…. and FRA-OIS spreads. May mean further oil to loosen the gears? possibly…

So, anticipation will be rising in the markets until Friday’s Jackson hole. And after that? Austria? Of course, everyone is speculating because no one knows the truth until it happens.

Hold onto your hats, good sirs, whether they may be cowboy, Dow 10k, k-pots or tricornes. It’s going to be a wild ride again. To the best of good buys.

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Semester Challenge ACCEPTS

A new semester, dragging it out in Berkeley, a school that I have lost all feelings, respect and adulation for. Especially the teachers. If I ever run an operation, I swear to forbid any unions, tenures and job securities. That is what Berkeley and more than a few shit dogs/professors has made. me. into.

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But some things for the GO:

1. Trading: 180% returns by December with a shift towards longer term

2. Quant: Program some MT4 strategies

3. Career: Some kind of analysis/trading offer at a bank for the name

4. Academics: 1 B only

5. Language: Japanese middle school level

6. Projects: Get TravelersCurrency at least off the ground

7. Happiness: Try to extract it out of misery

And here’s a EURSEK chart… dead in the water. Keeping away from the dollar except for scalping on Friday.

To the best of the latter half of 2011, and to the best of good buys.

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Jackson Hole is this Friday

The markets are  taking a beating not because of risk off, but because of the gradual withdraw of stimulus left over from QE1 and mostly QE2. Without easy money, those minute withdraws are being amplified in the markets as major swings, day in and day out. Will there be another round of stimulus as the US economy slows down again, now joined by Europe and even China? Not likely, but decisions aren’t exactly choice A and B in the world.

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Gold: the golden boy in the markets these last weeks. If there is a QE3 or QE2lite, the direction won’t be exactly too clear. Obviously easier US dollars access in the market will make gold more dear, but in the recent weeks, gold has been pushed up by capital flows coming out of the equities markets and into gold. If there is another expansion of the fed’s balance sheet, then there may be a short-term jump in the price of gold, then weakness as money returns to higher yielding and riskier assets, funded by easy money.

On that note, USD 3 month and 12 month LIBORS aren’t exactly coming down yet despite the fed’s “promise” to hold rates low until 2013.

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Treasuries: no real story there. If there is additional support through these measures, then the same downward trajectory continues in the long run, punctuated by short periods of stress and safety demand.

However, I think the treasury has been undoing what the fed’s been doing. By purchasing bonds, the fed is pushing rates down on the open markets as well, not just through FOMC fixings. However on the neighboring side of the east coast, the treasury has been issuing more and more, on behalf of the government and whatever else feeds the idiots in congress. ネガチブゲーム!

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The dollar: which is enjoying its rally in the recent weeks (especially against the Canadian as Canada basically depends on the US) may be seeing some heavy volatility. Could this be the turning point of the world going towards another reserve currency? Possibly… possibly but this excuse is because I don’t know anything and have no convictions. That’s why instead of trading risk on/risk off pairs, I have moved towards nordies pairs with the Euro.

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RMB: the PBoC actively fixing upwards the rate and doing everything to keep inflation imported from the US at bay? I’d say keep buying it, even if it’s unleveraged. Plus, it is of national duty to have a strong currency and to step forward after a century of shame. By building up the economy and  military.

Let’s see what next week brings. If past behavior is any indication of the future, it will be another volatile ride.

There’s money to be made. To the best of good buys.

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Decided to pitch night.I am so tired I swerved ~5, 6 times. And I’m sunburnt,  though only on the left side. And smell like gasoline.

At least there’s a starbucks ALLL RIGGHHHH

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Hello, Miata

Hello there, please treat me nicely on the way home. もう幸せは、加速する

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