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Archive for October, 2012

My prayers for those who were severely affected by Hurricane Sandy. Hope the recovery will be swift so everyone can get back to their places as soon as possible. But on the bright side for all the groveling New Yorkers, at least the subway will be cleaner after 7 days of soak.

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Right so, that does mean US markets will be back online to the joy of traders everywhere. Although these past few days may have brought a welcomed break, where it has left us as far as positioning is precarious, and very advantageous.

What we have here are three risk-correlated assets (in different degrees), GBPUSD, the Dax30 futures, and Spanish IBEX35 futures. All three have entered the cloud, and these few days of inactivity have led them to re-test, but fail the Span A (upper) resistance. With the current low volume-higher risk complacency trading atmosphere, a large return of volume tomorrow could start pushing risk lower.

Secondly, RSI14 have dropped below 50 on all three assets. There may be a retest above, but overall sentiment has turned negative (which hasn’t been seen in quite some time), and trend is expected to return to the oversold region again. 50 has proved a strong support resistance (depending on direction of test) for all three, and shouldn’t be discounted this time.

Risk-reward is excellent, with a stop around 0.250% above the span A and first limit (of whichever is first) at the cloud bottom. This gives around 10:1 in about a month. Second limit would be the equal to the Span B line minus the SpanA-SpanB gap.

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The Sterling: see that breakout candle on the second day? That was because of the GDP-induced productivity. Same thing happened for the Kiwi during the Rugby World Cup, so I’ll definitely be closing out before the next CPI report on Nov 11th (also mind you there’s a BoE decision, the second to last by Governor King) and looking for another short entry on this or GBPAUD, depending on position at the time.

HA doesn’t give as good as a signal due to the extreme chop. This should be used as a confirmation or rejection in the days to come. Stop is a daily close above 1.6140.

 

The DAX30 and IBEX35 are following the same drivers: topping at current range, HA turning moderately negative (which gives a bit more confidence than the pound). Additionally, the markets are still waiting for Spain’s final request. Even though that is a catch-22 with yields being brought down greatly due to the promise to purchase, Spain would be admitting they can’t really pay back all that debt at these rates. Nevertheless, anything short of a request will not restore confidence in the European markets, and will pressure the indices lower. Again, stops should be placed at daily closes above 20% of the span A top.

 

Remember to maintain enough margins! To the best of good buys.

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this is the one… without the ring and for $6.99 from india. lack of infinity focus only makes it good for… macro shots.

soo…. for a portrait lens, im just going to buy a ef 85mm f/1.8 or 50mm f/1.8

 

 

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Closed out the trade I had a few days ago – looking for a re-entry unless to sell at 1.56349 and continue with the bearish bias… unless something awful happens.

To the best of good buys.

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There was definitely a BFTD air in the markets today, especially with gold which dropped $10 in a minute, and then did it again. It has passed a major fib, but its proximity to the senkou span B gives some support.

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Anyways, there are a lot of technical supports calling for a bounce. The first bias is that gold is undergoing a reverse cup and handle, though the cup isn’t exactly round. This of course, may be in line with the overall double topping, but this trade will only be for 2, 3 days (FOMC on Wednesday). Confluence of fib supports and CMA regional low gives enough support for a moderate bounce up to $1750. Price target is half of the last major move between the fibs, and estimated to be around the slower moving kijou-sen.


Second bias is from a head and shoulders with a descending neckline. Same fib, CMF and ichi supports are in play.

Anyways, this was the exit of my XAUUSD short from a few days ago. Lots of event risk from the US starting on Wednesday and ending Friday. Will be waiting for a right shoulder or handle completion before diving in again. Stop is at $1710 on a daily close, $1705 hard.

For the FOMC position, USDJPY or CADJPY is giving some good positions, though CADJPY needs a bit more time… fundy and techy analysis on that tomorrow or later this weekend.

To the best of good buys.

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This pair, which has the best trends I have seen (other than the Nikkei) is running out of upward momentum. From the outperformance of the pound on Eurozone matters (Spain asking for money),risk-diverging from the continued dovish rhetoric of Mr. Stevens (again, on China and the deterioration of RIO and BHP) during the past few weeks, GBPAUD has run up once again to a point of near exhaustion.

So the trades…

Aggressive: short anywhere now, stop at a daily close above 1.5860 (20 pips above the nearest resistance fib, where there were 2 recent attempts). Targeting LT break of cloud and finally at 1.4850 or so. Close out if price bounces off the tenkan-sen (upper boundary of cloud) and goes past the 1.54580 fib.

Conservative: wait for a daily close below 1.5600 (what I did… though timing was wrong), red HA candle, half a position. If HA breaks its trend (which will also mean a similar break on price candles), add the rest of the position. First target at cloud top of 1.5360, with the rest at the 76.4% fib at 1.5080 (intraday limit order).

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Technicals: about to complete its 4th pivot and nearing a breakout in a few days. HA has stagnated and flatness bodes not well, especially since we are at a fib resistance on the HA chart. Negative RSI divergence may once again target bottom of RSI range. Tenkan-sen nearing current positioning, will lead to large break lower if GBPAUD does not bounce above the 76.4% at 1.5830 (where the stop is).

The fundamental reasons are quite bullish in general, and many of what to follow could be applied to EURUSD or AUDUSD as well. However, GBPAUD gives the best long-term positioning in my view. Overall, Spain will most likely request aid this weekend at the EU summit (I mean, what does it cost right now, even though the fear will come later?), but we have a few other things as well.

The positive case for the Aussie doesn’t originate in Australia, but once again the favorite promoter, China. Plenty of risk events coming out in the next few months, all around the November 8th announcement of the leadership change. We know who’s going to take over, but it’s the data leading up to that date that will drive overall risk and especially the Aussie. This week’s actually quite heavy in data

Inflation is the key data in China because everyone feels it. And if inflation is not quite to the people’s appetite (meaning high), the government is once again caught between stopping overheating and allowing the economy to bring prosperity to everyone. The government’s magic machine churned out 1.9% YoY this Monday, but even more importantly, USDCNY dropped to 6.2600. The fact that the government allowed the band to appreciate that much is to offset the impacts of new stimulus (eyeball some charts and you’ll see 1wk change before stimulus rumors is negative). And oh huh… Q3 GDP is expected at 7.4%, below the government’s 7.5% target (no matter how soft that is…). And GDP data joins the entire host of other leading data that shows the manufacturing sector is slowing (though strength is shifting to tertiaries).

Secondly for the antipodean nation, though slightly weaker, is spillover effects from South Africa. No more metals from ZA? Australia’s got your back… from some metals (copper most importantly, though ZA is PGMs and precious… hmm…) Last time I ran the correlations Australia was slightly positive… need to look at the trend again…

Also look up: CESIICNY (Citi’s inflation surprise index, still a bit more lower to go, meaning lower inflation likely) and CESICNY (overall Chinese surprise index)

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And for the UK, other than the fact that they are in another stall, Scottish independence and a general slowdown caused by austerity, there’s the speculation over who’s going to be the new King (governor of the Old Lady). There’s Tucker, who though dovish, is more known for the impending wave of finance controls. Other than that, we don’t really know what his polices are.

But there’s a second gentleman in the running: Lord Turner. This gentleman is basically the Janet Yellen in the British banking world, who said that QE is not enough, and there needs to be more unconventional forms of easing. One can speculate about his “new ideas” but from his tenure on the FSA, he’s noted that banks simply need more credit to restart the lending cycle. They’ve made progress, but there needs to be the one last big push to ensure the road to recovery. Whatever it is, there’s probably going to be quite strong easing from Turner’s tenure. Watch the announcements on December 5th, 2012. This might be a bit too long for this trade, but I’m watching Paddy Power as the odds develop.
So to recap, for this trade of around 1 month or so: China’s easing, Britain continues to be in a dire situation, and Draghi will simply pound the buy button as long as inflation is below 5% in Germany.
To the best of good buys.

 

And also… my current uridashi (though short term) trade. Targeting 3 yen up! HA good! …pls close above 42.620…

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Gold – kinks in the run up

Just a few charts –

Actively scalping the gold (not silver! and definitely not platinum unless you want to do the XAUXPT short thing). Heikin Ashi has turned negative on the daily and weekly candles are quite dead as well.

There’s an extremely strong correlation right now with EUR and GBP, non-growth risk currencies compared to AUD, NZD, CAD, SEK and NOK, hinting demand is due to dollar weakness instead of actual higher demand for metals (which are still somewhat correlated, as in base-precious).
Enjoy these charts. Time to study and recruit…
To the best of good buys.
Daily – failed test at 100% extension x 3, though there may be a weak support at 1768 or so. Stop set close on this short to re-enter again at the 100% retest.

Weekly – HA has petered out and flattening, warning of a trend reversal. 3 dead candles after QE3 ain’t meaning well. Catalyst may very well be European risk or as we have seen, better US data (Beige book is this Wednesday)

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