Tuesday, July 5, 2011
EUR/USD update
Well, euro showed us that it is only one sovereign debt downgrade away from a train wreck. Portugal is in the mix in the last 45 minutes. As I mentioned before support comes in @ 1.4400 level, with 50 day sma, weekly pivot, and 50% fib around there as well. This level has to hold for longs to feel in control. Stop hunt is probably the game plan for Asia session, as Europe is closed and US is winding down. Longs will try to hold on but should news flow deteriorate, watch out below. Still rate hike coming on Thursday, balanced act here, not a one-way down, imho...
Oil and Gold update
Oil broke out of falling wedge I discussed in my post last week http://viewonmarkets.blogspot.com/2011/06/oil-part-2.html Price has sliced through 200 day sma and is fighting 200 day ema, which is also in 50-61.8% fib zone. Traders are going to be on a lookout for a trip to $100 on WTI CLQ1 (yours truly included), which is around 50/150 day sma laminate. Trailing stops are going to be placed below $94.34 and $93.45 There is an inverted head and shoulders on 4 hr with neck @ 95.70 resulting in $6 distance. That implies a target of $101.70 or so, which is also upper bollinger band on daily.
If you missed the move wait for a pullback and trade your plan http://viewonmarkets.blogspot.com/2011/07/trade-plan.html
Gold is acting strong after hitting 100 day sma support last week. Above 1514.80 resistance it has 50 day sma to fight @ 1522 on GCQ1. Daily stoch has crossed into positive and is above the 20 line.
After two consecutive closes above 50 day sma, shorts better beware...
If you missed the move wait for a pullback and trade your plan http://viewonmarkets.blogspot.com/2011/07/trade-plan.html
Gold is acting strong after hitting 100 day sma support last week. Above 1514.80 resistance it has 50 day sma to fight @ 1522 on GCQ1. Daily stoch has crossed into positive and is above the 20 line.
After two consecutive closes above 50 day sma, shorts better beware...
Econodata July 5 and Forex update
New Zealand: Biz Confidence is up strongly. Huge rebuilding efforts (after Christchurch earthquake and aftershocks) are under way. Kiwi (NZD) is at multi-decade high against USD and looks unstoppable. China has a lot to do with this move, as they have announced their intentions to invest NZ$6 billion in New Zealand.
Australia: AIG Svc Indx a bit weaker. Trade balance stronger than expected.
Of very high importance! RBA (Reserve Bank of Australia) left the rates unch @ their meeting last night. Furthermore, they sounded very dovish in their comments downgrading the Australian growth for the rest of the year to less than expected. This pretty much takes care of any hikes in foreseeable future. AUD will probably settle into a range here, due to this development.
Europe: UK Svc PMI in-line. Pound continues in its 1.60 - 1.61 range. This coiled spring will shoot like a rocket once it breaks out. No idea which way yet...
EU final Svc PMI slightly weaker, as well as retail sales. Euro is still under some pressure from S&P comments on "selective default" of Greek bonds. They downgraded Lehman to selective default, as I remember. We know what happened shortly after...
US: factory orders slightly below expectations. USD is getting a bid across the board. Not sure what is the deal, but a few ideas would be: Greek worry due to rating agencies, and rumor of a possible repatriation tax holiday on overseas profits by US corporations. The latter has been in a discussion for a while as a tool to boost domestic investments, by bringing here otherwise dormant funds sheltered overseas. The bill is in congress and perhaps some are speculating on imminent positive outcome. Similar legislation back in 2004 failed to achieve its intended results: job creation. Lets see if law makers attach some stipulations to current bill, which would guarantee job creation by corporations subject to tax holiday.
Australia: AIG Svc Indx a bit weaker. Trade balance stronger than expected.
Of very high importance! RBA (Reserve Bank of Australia) left the rates unch @ their meeting last night. Furthermore, they sounded very dovish in their comments downgrading the Australian growth for the rest of the year to less than expected. This pretty much takes care of any hikes in foreseeable future. AUD will probably settle into a range here, due to this development.
Europe: UK Svc PMI in-line. Pound continues in its 1.60 - 1.61 range. This coiled spring will shoot like a rocket once it breaks out. No idea which way yet...
EU final Svc PMI slightly weaker, as well as retail sales. Euro is still under some pressure from S&P comments on "selective default" of Greek bonds. They downgraded Lehman to selective default, as I remember. We know what happened shortly after...
US: factory orders slightly below expectations. USD is getting a bid across the board. Not sure what is the deal, but a few ideas would be: Greek worry due to rating agencies, and rumor of a possible repatriation tax holiday on overseas profits by US corporations. The latter has been in a discussion for a while as a tool to boost domestic investments, by bringing here otherwise dormant funds sheltered overseas. The bill is in congress and perhaps some are speculating on imminent positive outcome. Similar legislation back in 2004 failed to achieve its intended results: job creation. Lets see if law makers attach some stipulations to current bill, which would guarantee job creation by corporations subject to tax holiday.
Trade The Plan
I can not say enough about this rule. This is probably one of the most important aspects of trading, and undoubtedly has contributed to demise of so many traders.
In trading, we are the biggest obstacle to our success. Most of our mistakes come from our inability to follow our rules. I am not saying anything new here that has not been well-documented in trading teaching and mentoring books. Any of them could be a big help and should be read on regular basis. But I will concentrate on just a few details in this post, and try to reflect on our very hard profession.
I would be rich if I had a dollar every time I heard traders say: "I just want to concentrate on my next trade". Of course you do, but have you learned anything from your last one? I bet I would get a quick "yes". Well, then why do you make the same mistakes over and over? In chart analysis I look in the past to predict the future. It is similar in trading. If you can look at your previous trades and learn from your mistakes, you could adjust your trading to avoid the same outcome. Once you do that, you can develop a carefully-designed trading plan, and follow it religiously for your future success. Once you develop the plan, stick with it. Please do not change it, if it brings you success. It is ok to change some details and adopt to different trading conditions. But do not scrap your plan altogether because you heard about some new best thing since sliced bread, or found a "holy grail" indicator. We doubt ourselves too much with questions on when to trade, why we are in the trade and when to get out while in the trade, and when to get back in. If you have a plan written down you would know, just refer to your notes, read over them daily if needed, and follow them all the time. This is a simple formula for survival in this profession. Yes, you heard me right - survival. Only 5% of all traders make consistent profits (well-documented fact). The other 95% either break even or lose on consistent basis, with many dropping out due to blowing their accounts. With such startling statistic, it is understandable why our profession is one of the hardest of all. Odds are stacked against us before we even begin.
Some folks say that trading is gambling and it is not a profession. Everyone is entitled to their opinion. You know what I think. I am still here, still trading, still surviving, just following my plan...
In trading, we are the biggest obstacle to our success. Most of our mistakes come from our inability to follow our rules. I am not saying anything new here that has not been well-documented in trading teaching and mentoring books. Any of them could be a big help and should be read on regular basis. But I will concentrate on just a few details in this post, and try to reflect on our very hard profession.
I would be rich if I had a dollar every time I heard traders say: "I just want to concentrate on my next trade". Of course you do, but have you learned anything from your last one? I bet I would get a quick "yes". Well, then why do you make the same mistakes over and over? In chart analysis I look in the past to predict the future. It is similar in trading. If you can look at your previous trades and learn from your mistakes, you could adjust your trading to avoid the same outcome. Once you do that, you can develop a carefully-designed trading plan, and follow it religiously for your future success. Once you develop the plan, stick with it. Please do not change it, if it brings you success. It is ok to change some details and adopt to different trading conditions. But do not scrap your plan altogether because you heard about some new best thing since sliced bread, or found a "holy grail" indicator. We doubt ourselves too much with questions on when to trade, why we are in the trade and when to get out while in the trade, and when to get back in. If you have a plan written down you would know, just refer to your notes, read over them daily if needed, and follow them all the time. This is a simple formula for survival in this profession. Yes, you heard me right - survival. Only 5% of all traders make consistent profits (well-documented fact). The other 95% either break even or lose on consistent basis, with many dropping out due to blowing their accounts. With such startling statistic, it is understandable why our profession is one of the hardest of all. Odds are stacked against us before we even begin.
Some folks say that trading is gambling and it is not a profession. Everyone is entitled to their opinion. You know what I think. I am still here, still trading, still surviving, just following my plan...
Monday, July 4, 2011
Happy Independence Day to US Traders
This would be the perfect time to discuss US debt. While this is the country which is known for its strive for independence, one can not deny that US depends on outside creditors for its debt. China and Japan are the largest holders of our government debt; other sovereigns have been investors in our treasuries as well. It is widely known that Big Panda has been diversifying its foreign reserves out of US dollar and debt into other assets around the world*. Japan has been concentrating its reserves on endless domestic problems: fight with deflation and lack of growth, as well as post-earthquake recovery efforts. Many of the sovereigns have been pulling back from our treasuries for various reasons. So who has been buying all of our debt? FED. It is now the largest holder of our govt debt through purchases in QE1 and QE2. Speaking of QE2, while it just ended, FED will still reinvest the interest on treasuries that it accumulated. So all those who think it is over - it ain't. QELite is here to stay for a while. Mr. Bernanke said at least 2-3 FOMC meetings will pass before the end of the easing campaign. FED's balance sheet has swelled by $3 trillion, a lot of interest is paid on that principal (perhaps as much as $200-300B in the next 12 mo). Many have been saying (and have been wrong for a while) that treasuries are the next bubble to burst. This notion has been keeping bond funds like PIMCO on sidelines lately, further reducing the pool of available treasury purchasers. To throw a monkey wrench into all of this, our government has decided to have a stalemate debate this coming week about raising the debt ceiling. Except for Domino's working overtime to deliver pizza to hungry politicians, as they work into the wee hours of the night to get this done quickly and go on canceled Summer recess, I see no point in all of this. Congress has been very ineffective this year, and I would not be surprised when the news about the lack of progress on this issue will weigh on equities in July.
So why all the details about US debt here? As a trader I have to be aware of major catalysts which could create the opportunity of a lifetime. How many times have we had our debt ceiling reached? I am preparing myself for a possible ugly day or a week in equities in July or August, when the debt ceiling is not raised and US default is imminent. Do I think the default will happen? NO. Mr. Geithner will look around inside of his Treasury murse and find as many Benjamins as needed to keep us afloat until debt ceiling is raised (poor man will be so exhausted by then, "he finds his job too taxing" and he will be leaving, that had to be the funniest thing I have heard about him). But perception is the reality now in the trading world. Let's see if we can have another Dow 777 point decline, like we had after failed TARP passage on first attempt. Politicians got the message and passed it days later, when they realized their constituents just lost that much of their net worth, as more than half of Americans own stocks in their retirement portfolios. Opportunistic traders were ready back then and picked up the equities on the low from fearful. My SPX levels on the downside http://viewonmarkets.blogspot.com/2011/06/spx-levels-on-downside.html will come handy should the debt ceiling debacle happen. Be ready, plan ahead, and stick to your plan. (more on trading the plan in my next post)
* In late breaking developments China has been identified to be misleading US on its debt purchases. I remember Rick Santelli from CNBC screaming about huge increase in direct bidder percentage at auctions, and asking where the heck was all of this coming from. Well, we get our answer now http://www.reuters.com/article/2011/06/30/us-usa-china-treasuries-idUSTRE75T2MI20110630?feedType=RSS&feedName=topNews&rpc=71
So why all the details about US debt here? As a trader I have to be aware of major catalysts which could create the opportunity of a lifetime. How many times have we had our debt ceiling reached? I am preparing myself for a possible ugly day or a week in equities in July or August, when the debt ceiling is not raised and US default is imminent. Do I think the default will happen? NO. Mr. Geithner will look around inside of his Treasury murse and find as many Benjamins as needed to keep us afloat until debt ceiling is raised (poor man will be so exhausted by then, "he finds his job too taxing" and he will be leaving, that had to be the funniest thing I have heard about him). But perception is the reality now in the trading world. Let's see if we can have another Dow 777 point decline, like we had after failed TARP passage on first attempt. Politicians got the message and passed it days later, when they realized their constituents just lost that much of their net worth, as more than half of Americans own stocks in their retirement portfolios. Opportunistic traders were ready back then and picked up the equities on the low from fearful. My SPX levels on the downside http://viewonmarkets.blogspot.com/2011/06/spx-levels-on-downside.html will come handy should the debt ceiling debacle happen. Be ready, plan ahead, and stick to your plan. (more on trading the plan in my next post)
* In late breaking developments China has been identified to be misleading US on its debt purchases. I remember Rick Santelli from CNBC screaming about huge increase in direct bidder percentage at auctions, and asking where the heck was all of this coming from. Well, we get our answer now http://www.reuters.com/article/2011/06/30/us-usa-china-treasuries-idUSTRE75T2MI20110630?feedType=RSS&feedName=topNews&rpc=71
Econodata July 4
US is closed for Independence Day (my next post on this), but Australia, Europe, and Canada have produced slightly better to in-line to very weak econo numbers. Lets look at details:
Australia: Retail Sales weaker than expected. Building Approvals had a 7% miss on expectations. Australia's housing boom might be hitting a snag...
Europe: Swiss retail sales cratered. 8% miss due to lower food turnover. What, nobody eats Swiss cheese any more?
UK construction PMI in-line.
EU: Sentix Index way better - investors are optimistic. PPI -0.2%, not going to stop vigilant Trichet. Spanish jobless down 1.62%, not bad, they need more jobs fast.
Canada: RBC June Mfg PMI slowed from May. Both RMPI and IPPI lower than expected (they needed inflation to cool off). Did a little bird whisper some early numbers into Mr. Carney's ear a week and a half ago? His dovish comments make sense now...
Quick thought: with more than half of S&P earnings growth coming from overseas, we need to watch these numbers very closely.
Australia: Retail Sales weaker than expected. Building Approvals had a 7% miss on expectations. Australia's housing boom might be hitting a snag...
Europe: Swiss retail sales cratered. 8% miss due to lower food turnover. What, nobody eats Swiss cheese any more?
UK construction PMI in-line.
EU: Sentix Index way better - investors are optimistic. PPI -0.2%, not going to stop vigilant Trichet. Spanish jobless down 1.62%, not bad, they need more jobs fast.
Canada: RBC June Mfg PMI slowed from May. Both RMPI and IPPI lower than expected (they needed inflation to cool off). Did a little bird whisper some early numbers into Mr. Carney's ear a week and a half ago? His dovish comments make sense now...
Quick thought: with more than half of S&P earnings growth coming from overseas, we need to watch these numbers very closely.
EUR/USD July 4
We now have two consecutive closes above 1.4500 on daily to confirm the trip to 1.4700
Longs have Thursday ECB meeting on their side. It is widely expected that 0.25% hike will be announced then. We should also pay attention to JCT (Jean-Claude Trichet) press conference that day. Look for hawkish tone to continue. Be on the lookout for "strong vigilance" phrase, or something along the lines of "no change in our outlook". Just remember: ECB is a one-mandate central bank, with emphasis on below 2% inflation target. Last report showed annual inflation running @ 2.7% in EU, and not showing any signs of cooling off.
Shorts have a possible Greek debt default declaration by rating agencies, due to existing debt-swap/rollover proposals. This is also an issue for ECB, which said they will not accept Greek debt as a collateral in event of default. It could create one ugly headwind for Euro, as Greece's banks will be cut off from funding. If this happens markets will be roiled, to say the least. Not everything is perfect in our little paradise.
Longs are winning so far...
Longs have Thursday ECB meeting on their side. It is widely expected that 0.25% hike will be announced then. We should also pay attention to JCT (Jean-Claude Trichet) press conference that day. Look for hawkish tone to continue. Be on the lookout for "strong vigilance" phrase, or something along the lines of "no change in our outlook". Just remember: ECB is a one-mandate central bank, with emphasis on below 2% inflation target. Last report showed annual inflation running @ 2.7% in EU, and not showing any signs of cooling off.
Shorts have a possible Greek debt default declaration by rating agencies, due to existing debt-swap/rollover proposals. This is also an issue for ECB, which said they will not accept Greek debt as a collateral in event of default. It could create one ugly headwind for Euro, as Greece's banks will be cut off from funding. If this happens markets will be roiled, to say the least. Not everything is perfect in our little paradise.
Longs are winning so far...
Friday, July 1, 2011
SPX update
S&P bulls are chasing all bears out of town. Lets look at technicals on Sep futures contract: price is now outside of bollinger band on 1hr , 4hr, and daily - gasping for some air here. Like I said before, on days like these nobody cares. Short-term intraday traders are trailing 8 ema on 15 min and enjoying the ride. Let them ride folks, do not be in front of this train please! If one is lucky to be long here, possible resistance may come @ 1342.50 June 1st high and @ 1352.75 May 11 high. After that I see nothing else in the way above to the year high @ 1367.50 and beyond. On the downside 50/100 day sma will be looked at as a respectable support. All the memories about Greece erased, and greed has clearly taken over here. Fools rush in!! If you wanna get long - wait for a pullback.
UPDATE
Closed on the high of the day. You had to respect this if you were short. Established a higher low at 1258 on SPX cash - above the previous low 1249 earlier in the year. Now it is above 50 and 100 day sma and bulls are charging. My only question here is everyone positioned the same way now - long? I said at the beginning of the week that many traders wanting the same thing results in the opposite outcome. I am going to monitor the charts and sentiment indicators closely and will keep you updated.
UPDATE
Closed on the high of the day. You had to respect this if you were short. Established a higher low at 1258 on SPX cash - above the previous low 1249 earlier in the year. Now it is above 50 and 100 day sma and bulls are charging. My only question here is everyone positioned the same way now - long? I said at the beginning of the week that many traders wanting the same thing results in the opposite outcome. I am going to monitor the charts and sentiment indicators closely and will keep you updated.
Econodata July 1
US data: mixed to strong. I will start by saying ISM was a solid report. All components were higher, with exception of exports and imports. SOLID!! On the weak side consumer sentiment was revised down just a bit, and construction spending declined. Folks, we do not need any new homes in US, we have enough existing unsold homes to last us a good while. So ISM definitely wins the contest...
Asia and Australia: Japanese Tankan, both mfg and non-mfg came in weaker than expected. Poor Japan, just can not catch a break.
Chinese Mfg PMI also came in weaker than expected. Both gov't and HSBC surveys are showing a slowdown in Chinese juggernaut economy. Not Good!!! We are going to worry about this now and need to see what Dr. Copper says about it. For those who do not know, copper is a very good indicator of Chinese economy, as it is used for construction. Well, Dr. Copper is up today, so we are not as worried just yet...
Aussie AIG Mfg Index went up. Respectable number after weakness for 3 months in a row. Nothing to see here, mate...
Europe: weak numbers. Swiss PMI came in weaker than expected - another reason why CHF is down today.
UK Mfg PMI weaker than expected. GBP/USD took a dive below 1.60 but came back up, 1.60 - 1.61 range traders are having their couple of days of fun. I see a symmetrical hourly triangle forming. Anyone wanna take a guess which way it breaks out??
EU numbers across the board are stinky. Spanish and Italian Mfg PMI were 47.3 and 49.9 respectively, lowest since Jan. 2010 and Oct. 2009 respectively. Above 50 is considered an expansion and below 50 is contraction, need I say more? Those yesterday's comments by Mr. Trichet sound even more bizarre now. Mr. Trichet said yesterday: "Incoming information in recent weeks has confirmed a positive underlying momentum of economic activity in the euro area". Say what?? Has someone among his staff given him a wrong data? Or maybe his office window is facing North? Southern Europe is in shambles, Sir...
So the underlying theme: world economic activity is slowing down. There are no two ways about it. "Slow patch"?? We will see...
Asia and Australia: Japanese Tankan, both mfg and non-mfg came in weaker than expected. Poor Japan, just can not catch a break.
Chinese Mfg PMI also came in weaker than expected. Both gov't and HSBC surveys are showing a slowdown in Chinese juggernaut economy. Not Good!!! We are going to worry about this now and need to see what Dr. Copper says about it. For those who do not know, copper is a very good indicator of Chinese economy, as it is used for construction. Well, Dr. Copper is up today, so we are not as worried just yet...
Aussie AIG Mfg Index went up. Respectable number after weakness for 3 months in a row. Nothing to see here, mate...
Europe: weak numbers. Swiss PMI came in weaker than expected - another reason why CHF is down today.
UK Mfg PMI weaker than expected. GBP/USD took a dive below 1.60 but came back up, 1.60 - 1.61 range traders are having their couple of days of fun. I see a symmetrical hourly triangle forming. Anyone wanna take a guess which way it breaks out??
EU numbers across the board are stinky. Spanish and Italian Mfg PMI were 47.3 and 49.9 respectively, lowest since Jan. 2010 and Oct. 2009 respectively. Above 50 is considered an expansion and below 50 is contraction, need I say more? Those yesterday's comments by Mr. Trichet sound even more bizarre now. Mr. Trichet said yesterday: "Incoming information in recent weeks has confirmed a positive underlying momentum of economic activity in the euro area". Say what?? Has someone among his staff given him a wrong data? Or maybe his office window is facing North? Southern Europe is in shambles, Sir...
So the underlying theme: world economic activity is slowing down. There are no two ways about it. "Slow patch"?? We will see...
Update On Markets
S&P and NASDAQ 100 charts are now firmly in bullish mode. What was resistance will now be support. Both are above 50 day sma and above 61.8% fibo retracement from their year highs to the low we had on 6/16. At the moment the price is above upper bollinger band on daily. It is not sustainable for too long and some selling here is expected by those who are long, as well as aggressive sellers. Bollinger bands tend to keep a lid on things, but nobody cares today, it is a huge risk on day. Support on the pullback could be found at 50/100 day sma laminate. Today's action is impressive and should be considered by all non-believers, who thought that US economy is in a dumpster. On this in the next post...
Gold is looking very weak and came down to Weekly S1 and 100 day sma, which I mentioned as a target a few days ago http://viewonmarkets.blogspot.com/2011/06/gold-rumor-rumor.html
Forex: Euro, Cable, Loonie, and Oz (Australian Dollar) are not sure whether to reward the dollar for strong ISM or punish it as a not-needed safe heaven. Hence no major deviation from y/day closes. Euro did hit 1.4550 overnight and sold off smartly down to daily S1, only to come back up again to where it started the session. If you like trading ranges, this was your day.
Yields on US treasuries are rising and that is a support for the buck against Swissy and Yen. Swissy is especially weak across the board due to Greek solution. It is now 500 pips below its high against Euro, which was reached just 5 days ago. Folks, that is a humongous move!
Gold is looking very weak and came down to Weekly S1 and 100 day sma, which I mentioned as a target a few days ago http://viewonmarkets.blogspot.com/2011/06/gold-rumor-rumor.html
Forex: Euro, Cable, Loonie, and Oz (Australian Dollar) are not sure whether to reward the dollar for strong ISM or punish it as a not-needed safe heaven. Hence no major deviation from y/day closes. Euro did hit 1.4550 overnight and sold off smartly down to daily S1, only to come back up again to where it started the session. If you like trading ranges, this was your day.
Yields on US treasuries are rising and that is a support for the buck against Swissy and Yen. Swissy is especially weak across the board due to Greek solution. It is now 500 pips below its high against Euro, which was reached just 5 days ago. Folks, that is a humongous move!