May 9 - May 14

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May 9 - May 14

Post  Levaz on Sat May 08, 2010 12:26 pm

Wow - what a week - some never before seen moves in the market. The regulators and Control Bourses as still trying to figure out how it all happened. They know what happened and where, but not how it was allowed to happen. Somewhere, the system failed to shut down, which it should have done automatically when the market dropped 10% within 30 minutes!!

Now, we must realize that in our current state of panic driven markets, technical analysis is pretty much "out the window", but that does not mean the old and tried analysis is dead. The ONLY things that WILL still hold are the oldest indicators - Moving averages, support and trend lines. The problem with these indicators right now is that they have been heavily skewed with the recent huge moves. These moves will throw off most of the more recently developed indicators, which are not designed to handle such markets.

We have a few major fundamental issues to keep our eyes on - The new UK government - will it be conservative or will the Labor manage a deal to squeeze back in?? What kind of policy compromises will they accept to gain /retain power? The proposed "back-stop" by the Eurozone, and, more importantly, the upcoming changes to the Charter itself. Will they have to re-ratify the entire thing (by the general population), or will it be a political decision left to the ones in control right now (who were too spineless to be proactive the first two times). Will they include strict clauses that punish non-compliant members, give teeth to the bodies responsible for budget governance, include the right to expel non-compliant members, the details of whether such members can or not use the Euro upon being expelled? They are obviously many more question, but these are what comes to mind right now.

Also, we have to take the rosy employment figures from USA and Canada with a grain of salt. Why so negative, you would think?? Well, the governments in both countries have expanded by leaps and bounds in the past few years. They are running these governments based on huge deficits. US debt:GDP ratio is almost 90% and that percent is growing quickly (Greece was only just above 100% when their problems started. Of course, the two economies are vastly different. Greece has probably not contributed anything since ancient times with the exception of Aristotle Onasis until he too died). Their current budgets are based on unrealistic numbers (all in the name of job creation) - which leads me to my pessimistic view of the job numbers - just how many of those "new jobs" were non-government or non-government sponsored? Once you try to answer that, you will be buying tickets on my boat too!! My feeling is that most of those lovely jobs were simply hiring by ministries and agencies to fill up spots before they lose the allocations in the next year's budget due to non-usage.

I know for a fact that my wife's dept (and she works for the ministry at a Provincial or equivalent State level) recently hired 4 new staff members. The original size of their dept. was 6 members including a Sr. Manager, 4 policy Staff and an admin staff. They now have 10 members who are sharing the very little work that they had originally!! Multiply this by all the departments between all the States/Provinces and you will arrive at a very high number. This means that private hiring may have contributed less than 10% - 20% of that "Oh look, job numbers are GREAT" new release.
Mind you, as long as GM, Chrysler, BofA, etc. are government owned, I count them as government jobs too!! It is only fair. Do you think that the Senators/MPP's, Governors/Ministers, City councilors, various underlings thereof, etc. have no bearing on who exactly gets the jobs in those companies - so this qualifies them as government jobs. Let us see how these number look for the next few months. And more importantly, after the forthcoming elections, both in the US and Canada.

USD 5,000 / oz of Gold is not looking too unrealistic right about now - Razz

Well, that should be a lot of reading for now. Let us see how it all unravels in the next weeks and months.

Levaz
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Re: May 9 - May 14

Post  Levaz on Sat May 08, 2010 12:46 pm

As a post script, let us not forget our Chinese friends, who are desperately trying to douse out an impending housing bubble. They have taken many measure to reduce this bubble which is not going away very soon. They will also very happily announce the appreciation of the Yuan/Reminbi by the much sought after 5% figure. They have nothing to loose - their USD holding are much more valuable now, the USD has gained 15% against most currencies, what is a 5% raise in value - they are still ahead 10% on average - ha ha ha.

Sadly, knowing all of this and probably much more than I am aware of, the market will still take this as a psychological victory and the USD will increase in value further and probably by much more than 5% - making the whole exercise seem utterly stupid. But it will happen anyway.

As a side note, the Japanese pumped USD 21 billion into the market on Friday to prop up the Yen cross pairs.

Market outlook:

We expect a stop-loss package to be announced (or agreed upon) over the weekend. This will give the Euro some reprieve, and we can then short it at much higher levels. 1.3000 is obviously the first target. We may get more lucky to see 1.3150 - 1.3200 this week. That would be sweet. We will keep you posted, of course. Remember, over all target for the Euro is parity!!! with the USD. While the ECB want to protect their currency, they are not all that unhappy about it losing value - they can export more (cheaper to buy products priced in Euro) and Import less as it gets much more expensive to consume foreign products.

Of course, I could be wrrooonnnnggggg!!!!!!

Levaz
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Re: May 9 - May 14

Post  Levaz on Sun May 09, 2010 5:45 pm

Today, we stay out of the market as there ECB, Japan and SNB intervene to their hearts delight to save their respective currencies from getting too weak or strong as the case may be.

The ECB has not made a unanimous decision, so the market will be trading on rumors, which is very dangerous, unless, you know how to hedge and FAST.

I suspect the Euro will climb, it has already opened at 1.2880, approx. 120 pips above NY close on Friday. We should wait patiently for them to run out of ammunition - there is ONLY so much they can print per day!! The more they print the money, the weaker it's value is bound to get.

Small trade, with very well managed Stop Losses or hedges, is the way to go. STAY AWAY from the Yen crosses for the time being.

Levaz
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May 9, 2010

Post  Levaz on Sun May 09, 2010 8:12 pm

Most pairs show a continuation of the current trends. The huge moves of the past few days makes it difficult to gauge future movements with a decent level of confidence.

We feel this one may have some merit though.

GBPCHF short at 1.6529 (or 1.6571) SL 1.6700 TP 1.6100

You may want to wait for the higher entry so as to reduce the risk, if anything. We are entering at the lower entry point.

The idea here is that the Euro is in turmoil, the USD is improving but more from the weakness of other risk pairs - EUR, GBP, etc., The Yen has been heavily over bought and actively protected by the Jaspanese, which leaves us the CHF, which although protected by the SNB, does not seem as much interference in this pair!!

Add to this the current indecision of the British to clearly demonstrate their displeasure with the existing government - uncertainty means more downside. The only problem for us is IF and WHEN a new government is established. It will either make or break our trade. I am on the side that it will make our trade.

Levaz

PS - we do expect resistance at 1.6500 so be aware that we just may not get picked up on this one.
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Re: May 9 - May 14

Post  Levaz on Mon May 10, 2010 7:08 pm

Yesterday's trade - GBPCHF, lock in 10 - 20 pips of profits, just in case. The British government looks like it will be formed shortly and it will be a new government. This will give some strength to the GBP bulls backed with the European version of USA's TARP.
We have an expected range of 1.6422 - 1.6676. Although the indicators show that the pair is trending down, it may be in the process of reversing also and continuing the last major trend back up. So it may consolidate before giving us a firm direction.

We may get a better short at around 1.7000 area.

Levaz
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Re: May 9 - May 14

Post  Levaz on Mon May 10, 2010 7:29 pm

This may be a bit of a risky trade, but we are using the justification mentioned above.

GBPUSD long at 1.4790 SL 1.4690 TP 1.5200 (Target of 410 pips)

You can reduce the SL 1.4750 if you want, as our expected range for tomorrow is a low of 1.4783 and a high of 1.4986. Bear in mind that we are still in very volatile markets, which fear lurking just beneath the surface, which is why we chose a larger SL value.

Levaz
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Re: May 9 - May 14

Post  Levaz on Tue May 11, 2010 11:11 am

I would lock in 50 pips - we are currently about 110 pips in profit. While the negotiations to form the government are still in progress, there is bound to be volatility. If we get stopped out for 50 pips of profit, and it does go further, we can always get back in where we were started!!

Levaz

Levaz wrote:This may be a bit of a risky trade, but we are using the justification mentioned above.

GBPUSD long at 1.4790 SL 1.4690 TP 1.5200 (Target of 410 pips)

You can reduce the SL 1.4750 if you want, as our expected range for tomorrow is a low of 1.4783 and a high of 1.4986. Bear in mind that we are still in very volatile markets, which fear lurking just beneath the surface, which is why we chose a larger SL value.

Levaz
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Re: May 9 - May 14

Post  Levaz on Tue May 11, 2010 11:13 am

Hope you guys managed to get some additional pips than I did off of the GBPCHF trade. I closed the trade much earlier, and then it dipped a bit. This is a very volatile (and fun) pair to trade, but rather dangerous under current circumstances. So better to collect smaller profits, than be in the hole!!

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May 11 2010

Post  Levaz on Tue May 11, 2010 6:59 pm

We are going to stick with our GBPUSD trade. We are expecting a range of 1.4805 - 1.5126. Chances of the GBP coming down to the range low is not very good. But, since our data shows that this is the possible low, we must be prepared for such volatility.

In all honesty, I closed my trade at around 1.4974 for approx,. 180 pips, hoping to get back in at a better price. We are currently at 1.4915, which is a better price, but I have an order as low as 1.4825 - - - just in case Razz I will be watching the Asian session, and place my BUY STOP at 1.4950 if I need to get back in a hurry!! The new government has been established, although the compromises made by the Tories need to be clarified. This will give us an indication of where the GBP is headed in the near future.

Please do not add to this trade if you did not close out for more than 100 pips at the very least.

Levaz


Last edited by Levaz on Tue May 11, 2010 7:32 pm; edited 1 time in total
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May 11 2010

Post  Levaz on Tue May 11, 2010 7:22 pm

Here is another good possibility for a long term trade

GBPJPY long at 136.67 SL 135.80 TP 144.00 (Target 733 pips, risk 87 pips).
GBPCHF long at 1.6475 SL 1.6370 TP 1.7000 (Target 525 pips, risk 95 pips).

Here is the risk, the higher our entry point, the better the chances of being picked up.
The downside, if while we sleep, the new British government coalition details turn out to be all socks, we then risk more than we would like to!!

Ideal entry points is 137.90 which then makes our Stop loss value at 210 pips, which is pretty reasonable for the target we are aiming, but still a hard pill to swallow for some of us.

That said, I have my entry at 136.67 based on the the daily chart candles showing HUGE movements, and I am hoping for another day of such movements, enough to pick up our orders and start the move upwards.

The expected range for tomorrow is 137.35 - 141.06 - so we are not really that far away from the expected low for tomorrow. With such a volatile pair, it is not really presumptuous of me to expect to be picked up at our preferred entry.

Levaz


Last edited by Levaz on Tue May 11, 2010 7:44 pm; edited 3 times in total
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Re: May 9 - May 14

Post  Levaz on Tue May 11, 2010 7:30 pm

You all must have noticed that I am staying out of ANY Euro trades. This is because it has now become currency non-grata. There is downside expected, of course. However, the Chinese are planning to revalue the Yuan shortly with a money basket. They have no shortage of USD, they will have to add Euro and GBP to that basket. It is a potential for the Euro to rise suddenly. Also, now that the ECB has the funds and the authority to DIRECTLY participate in secondary and tertiary markets, they are liable to intervene around 1.2500, which is where I expect the Chinese to start buying their Euros too. And I certainly do not want any of us to get caught in the middle of this as it is bound to get ugly. Not to mention that the BIS (The banker of Central Banks) has been shorting the Euro every time it come to 1.2750 area - claimed to be acting on behalf of the French!!

So until the dust settles, OR if I get a really good high number to place a short order, I will be simply watching and learning from this experience, so in another 3 - 5 years when this happens again, we will know better from previous experience.

And it WILL come back, as all the ECB has managed to do is kick the problem down the road by 2 - 3 years. As has been done by the US. It is so ridiculous that no one learned from the Japanese mistakes of the 1980's - look where the returns on the Yen are - less than 1% for almost 20 years!!! And the best part is that the Chinese are now probably in the same boat as well.

Maybe we should all start learning to do our own sustenance farming!! - ha ha ha

Levaz
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Re: May 9 - May 14

Post  Levaz on Wed May 12, 2010 7:35 am

Cancel the GBPJPY and GBPCHF orders for now. We did not get picked up last night and we do not want to be picked up when it is coming down.

Levaz
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May 12 2010

Post  Levaz on Wed May 12, 2010 7:01 pm

We are not getting any clear indications of direction. So no new trades for today.

If you have any open trades, lock in your profits.
If you have a trade that is currently in a loss, either close it now or move the Stop loss closer than the original signal issued.

We expect more consolidation, but larger moves are imminent. There is no clear indication of which direction though.

Levaz
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May 13, 2010

Post  Levaz on Thu May 13, 2010 7:04 pm

We have the following trades to consider:

EURUSD short at 1.2613 SL 1.2679 TP 1.2300

Being the only drawer of the Central Bank swap line from the FED, the Euro zone has confirmed that they are looking to ease the money supply in the Euro zone for the interim. China has a DNT options expiry at 1.2500 so we can expect them to protect the low. I believe the high of the "Double no-touch" (DNT) option is 1.2800, which is why there was selling by the BIS (Bank of International Settlement, a.k.a. the Bank of the Central Bankers) yesterday and the day before every time the Euro tried to make a comeback at the 1.2740 levels.

For the above reasons, we have kept a very tight stop loss as the expected range for tomorrow is 1.2462 - 1.2629. If they manage to buy enough Euro's to move the pair up, then 66 pips is all we will give them. You can bring that Stop Loss down to 1.2659 if you wish to reduce your exposure, once you see that they are making a strong rally back up. But I don't expect that that will be the case. Does not look good for risk currencies - Stock markets are down, Commodities are down, China is sitting on a Real Estate BOMB, Europe is trying their best to underplay their problems, UK is a financial disaster in the same proportions as Greece (maybe worse), and everyone is forgetting that the US disaster will start coming back within the next 2 - 3 years, starting with Dubya's TARP handout to his wall-street buddies.

Levaz
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May 13 2010

Post  Levaz on Thu May 13, 2010 7:14 pm

Here is another long shot, that has nothing to do with analysis and goes totally against the trend.

EURCHF long at 1.4005 (entry upto 1.4015 is okay) SL 1.3990 TP 1.4050 (up to 1.4300 if you see that there is huge and fast movement while the trade is still open).

This is an long shot Vanilla trade - we are only risking 15 pips for a potential 50 - 300 pip profit. Straightforward, we are counting on intervention by SNB. We know they will show up, we just don't know when- HAHA. Hopefully before they stop us out. Do not expand the Stop loss, as the pair is headed down. This was the reason we had that 3 month trade last summer, as they SNB kept protecting their currency. I recall mentioning the following - if not for all the SNB intervention, the currency should have been at 1.4300'ish. Well, we are way past that, and now they are doing it again - first AT the 1.4300 level, and now retreated to the 1.4000 level.
If it does fall, and surely it will, we are simply hoping that they will let us make some money first - Smile

Levaz
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May 13, 2010

Post  Levaz on Thu May 13, 2010 7:32 pm

We have another good trade:

GBPUSD short at 1.4718 (may not make it past 1.4700) SL 1.4878 TP 1.4475

The British has a coalition government in place, with lots of compromises made already by both parties just to ensure that the Labor party is out of power. This is not a basis to form a government, as the people did not get rid of the Labor party themselves. That is the politics.
The British has a 10% fiscal deficit, which is as bad as the Greeks, and not quite as bad as Italy or Spain. Also, the markets are not supporting risk currencies. And every one and their uncle is trying to focus attention away from the Euro (the USD has become the temporary darling) to the failing GBP. we expect more downside. We are forced to keep a larger stop, just in case, as the daily movement has exceeded 200 pips for several days.

Our entry is placed at the expected high for the GBP tomorrow, let us see if we get picked up first!!

Levaz
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Re: May 9 - May 14

Post  Levaz on Fri May 14, 2010 4:44 am

It is 4:40AM and I woke up to see if the Europe early session would fill our orders. We missed all three orders by 15 - 30 pips. If your orders have not been filled, please cancel them. The 1.2500 options barrier has been breached, so there is a possibility of a relief rally. which may go as high as 1.2700 or more. This relief rally may take out the stops on our orders.

Levaz
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7:40AM May 14 2010

Post  Levaz on Fri May 14, 2010 7:52 am

Okay guys, the EURUSD has breached the 1.2500 line, and is now consolidating. None of our orders were picked up last night. I am hoping that any of you awake and trading the European session would have managed to get in at the highs. If not it is okay.

There is a Vanilla expiry at 1.2450 and this one is owned by the Hedge funds. They like to place their options just below the Sovereign expiration's so they can count on the added protections to hedge their hedges if thing look really bad for them.

So, we now have two possible scenarios. Both will involve a retrace eventually. the first one is that 1.2450 will be taken out, with a sound rejection at the low 1.2420's and it may bounce back to 1.2700. Alternatively, the hedges will manage to protect their option with real money purchases, and drive the Euro higher anyways. If option two comes to play, then the possible high is anyone's guess - 1.2700 - all the way up to 1.3000

Right now, I am guessing based on historic behavior, however, "Panicked /Stressed" markets tend not to follow history or technical settings.

All that said, I have entered a short - a very small order that I will martingale every 150-200 pips - at 1.2472. Based on this strategy, I am obliged to protect my entry at 1.2612 - 1.2662 region, which is where I would prefer you guys get into a short trade. At the 1.2600 area. It is a bit risky to get in now, from my perspective.

Levaz

PS - The reason that I martingale is that my first order, and subsequent double up, can withstand 20,000 pips of movement against me before the account reached critical levels!!! So it is a very very low risk trade for me. Even so, if the pair manages to breach 1.3000 with any level of authority, then I will hedge with a larger than normal order so I can get out at break even with less than a 50 pip move.
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