Be Careful What You Wish For!
By Mike Conlon | June 25, 2010
Overnight, the US Congress unexpectedly came to a deal and has agreed on bill regarding financial reform and regulation. The uncertainty surrounding this bill has been weighing on the markets, as it was unclear what the outcome might be.
As news trickles out of the 2000+ page document and what it means for the banks and the market in general, at least the uncertainty has been removed. Uncertainty= volatility. Now, whether or not this bill will actually accomplish what it is intended to remains to be seen. What my experience tells me is that no matter what is in the bill; Wall St. has already prepared for likely scenarios and has already devised ways to circumvent regulation. In addition, enacting legislation of this magnitude always comes at a cost, and the brunt of that cost is likely to be paid for by consumers, and not the banks themselves. Banks will simply pass through the new cost so that executives can still buy beach houses. If you don’t believe this will happen, take a look at bank stocks that are trading higher in the pre-market.
This comes ahead of this weekend’s G-20 meeting, where the US will push other nations to consider enacting similar reform.
Economic data is out showing that US GDP grew 2.7%, vs. an expectation of 3% and personal consumption figures were at 3% vs. an expectation of 3.5%. This falls in line with what the Fed said the other day that we are seeing growth, albeit moderate.
Overnight, Japanese CPI figures came in at -.9% vs. -1.1% showing signs that deflation may be subsiding.
The market started out in risk taking mode, but it appears that may be reversing.
In the forex market:
Aussie (AUD): New Australian PM Gillard has backed away from the mining tax that was the eventual downfall of her predecessor and is open to discussion and negotiation. The tax was largely seen as anti-investment in one of Australia’s biggest industries.
Kiwi (NZD): The Kiwi is lower despite a widening trade balance surplus but the market is concerned about a potential Chinese slowdown which could hamper demand for exports. However, this figure fell short of expectations (814M vs. 850M).
Loonie (CAD): The Loonie is higher this morning as its major trading partner (the US) appears to be the only country not entertaining the idea of reduced spending. Unlike the other commodity currencies which are more tied to China, expect the Loonie to benefit as long as the US maintains its spending spree.
Euro (EUR): The Euro is lower continuing the trend of heightened fear from the debt crisis. Today marks the fourth day in a row that European stocks are lower as we head into the G-20 weekend.
Pound (GBP): The Pound is mixed this morning and it will be interesting to see what (if anything) comes out of the G-20 meeting. The UK “tax and axe” strategy is diametrically opposed to the US strategy of “spend, extend, and pretend”.
Dollar (USD): The Dollar is somewhat mixed today as the market figures out exactly what this new financial regulation means. In addition, GDP figures were lower than expectations, but showed that growth, while moderate, is occurring.
Yen (JPY): The Yen is higher this morning, as CPI data showed that deflation came in less than expected. In addition, minutes from the rate policy meeting showed that there was actually talk of inflation. The Nikkei was down overnight, and speculation that the G-20 will not come to a consensus over global economic policy has strengthened demand for the safe-haven of the Yen.
All of my years on Wall St. have taught me one thing: that politicians in Washington DC cannot compete with the brainpower of Wall St. Today, champagne is flowing as the uncertainty over the worst-case scenario from financial regulation has been lifted. True, this isn’t a “home-run” for Wall St.; but I can tell you that they have been prepared for EVERY possible scenario to come out of this and already have plans in place to line their pockets at the expense of the general public.
While regulation is good in theory, it always brings about unintended consequences and in the end it is always the consumer that gets hurt. Now that this is out of the way, the G-20 meeting will be the focus of the weekend but don’t expect anything of substance to come out of it.
The major problem here in the US is jobs. Period. Next week’s Non-Farm Payrolls report will show if we are gaining any jobs in the private sector. If this is a bad number, look out below.
So there is potential for risk over the weekend, but my guess is the G-20 will be a non-event.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
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Sell in May, Go Away!
By Mike Conlon | May 5, 2010
“Sell in May, Go Away” is an old Wall St. adage that seems to be proving why it has become a popular investing strategy over the course of time. I can’t think of a time when it has been more prescient; in light of the market sell-offs taking place. Yesterday, world stock markets sold off big time, as did commodities prompting the flight to safety trade and the safe haven dash for the US dollar.
There is a lot of risk and fear in the markets right now, as the Euro zone debt crisis is not inspiring confidence. Notice that this crisis is no longer just about Greece, as contagion appears to be ready to complicate matters in the EU.
In addition, China’s intentional slowing of its economy may be a major drag on world demand, which is not good for growth world-wide. This is having a negative impact on commodity prices, which is generally a positive for businesses and consumers alike, but it is taking down the commodity currencies in the process and causing the unwinding of carry trades as investor rush for the door.
On a positive note, the UK elections will be over tomorrow and that may take one risk element out of the equation.
World stock markets are lower again this morning, as are US stock futures and commodities heading into the market open. At this point there is very little that can be done to change the market mood from risk-aversion, and this could be the sell-off that many doomsday economists have been predicting.
So today is an obvious risk aversion day.
In the forex market:
Aussie (AUD): The Aussie has gotten clobbered over the past few days and is rapid approaching .90 vs. USD. Despite good economic prospects at the moment, a reduction in Chinese demand would hurt the Australian economy the most. Despite the doom and gloom, building approvals came in much higher than expected, showing signs that the Australian economy may be more resilient than the market expects. A government pledge to tax mining companies at 40% isn’t seen as positive for business, however. This is one of Australia’s most profitable sectors.
Loonie (CAD): The loonie is lower as expected as well. The Loonie’s high correlation to oil prices has helped drag it lower, as oil has fallen from above 86 to start the week to 81.5 today. No news out of Canada until this Friday’s employment reports, which if not improved, could give the BOC reason to delay their expected rate hike.
Kiwi (NZD): The Kiwi is also lower, as China is New Zealand second largest market for exports. Tomorrow’s employment reports will show whether or not the economy is improving despite the risk-aversion in the markets.
Euro (EUR): I have never in my life seen a bigger mis-management of a crisis than what is taking place in the EU. Sovereign debt is obviously a major problem world-wide, and the inability of individual countries to debase their currency to help themselves is reflective of MAJOR structural problems with the Euro. When a unified government reacts to a crisis swiftly and with confidence, speculators back off as it is usually a fruitless endeavor to try to bet against a government. When a government fails to inspire confidence, the market smells blood in the water which then makes it much harder to deal with the original problem in the first place. This all comes before the German meeting to decide on the Greek bailout which could send the Euro over a cliff if this thing is not dealt with properly and with confidence. Much, much more to come. The Euro is at 1.28 and change and falling like a rock.
Pound (GBP): The Pound is actually showing some life and is positive against all but USD and Yen as risk themes are too much to overcome. The most recent polls suggest that the Conservative Party will be the victor in tomorrow’s elections and that they will be able to put together a coalition government which will avoid the dreaded “hung Parliament”. The Conservative Party has vowed to reduce the deficit more than the other two parties, and this could be a sign of the new paradigm taking place world-wide. Reckless spending has to be reigned in, and I hope that our idiots in Washington DC take note if indeed the Conservatives win.
Dollar (USD): The Dollar is higher on the flight to safety trade, and pending home sales were higher yesterday showing signs that the economy is recovering. What is Europe’s loss may be the US’s gain, as the Dollar is known as the “anti-dollar”.
Yen (JPY): Japan is still closed for the Golden Week holiday, but that hasn’t stopped Yen appreciation as carry trades are being unwound at breakneck speed. They could be in for a very rude awaking when their stock market reopens, especially if the EU doesn’t combat its debt crisis in a meaningful way.
Wow. All I can say is wow. Right now, the confluence of events taking place in the world is adding up to the perfect storm. There is virtually no leadership in politics anymore, and this couldn’t be more true than what’s happening in Europe.
I would not be surprised at all to see a break-up of the Euro going forward. The structural flaws are too many, and populist revolts are preventing politicians from showing some spine. Riots in Greece are typical and not unexpected, and already the streets are being filled with tear gas.
It’s ugly out there. Very ugly. I’m not certain what the EU can do now to prevent a death spiral. The inability to act may have damaged the Euro irreparably.
If you are still in stocks, I’d advise you to use serious risk management, including protective stops.
And if you’re not in the forex market yet, I implore you to get involved. Buying the Dollar could hedge your other investments against potential catastrophic losses.
To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!
To follow these events live with a free, real-time practice account, click here! Don’t miss out on the world’s fastest growing market!
Tags: account, AUD, Aussie, Australia, cad, canada, carr, carry trade, China, closed, commodities, commodity, course, crisis, currenc, currencies, currency, currency market, currency trading, dollar, dow, economic, economy, EUR, Euro, Europe, fear, flu, forex, forex market, free, fx, fxedu, gbp, gold, holiday, home, Il, invest, investor, IRA, Japan, jpy, Kiwi, life, live, loonie, lot, lower, market, meeting, Mike Conlon, new zealand, news, nzd, oil, pound, practice, practice account, rate, RSI, sales, ssi, stock, stocks, strategy, time, trade, trades, USD, Yen
Topics: What To Look At In The Market | 2 Comments »
Trading Concept: Inside Trading Days
By Sean Hyman | April 21, 2009
One concept that short term traders look for are “inside days”. What is this? It’s where a completed candle’s high/low of the day is within the range of the previous day’s high/low. See the chart below and I think you will see what I mean. Notice that the current closed candle is within the boundaries of the previous day’s high/low (blue lines).
When there are one or two “inside days” from a previous candle, it means that the volatility is compressing (or coiling up). When this happens, there is a huge chance of a sizable breakout to one side or the other.
The strategy is to put an order on either side of the breakout with a reasonable limit (15-20 pips). When one of the order triggers, cancel the order that would be in the opposite direction to ensure that it doesn’t get hit too.
Yesterday, I noticed that there were two “inside days” on the daily charts. Remember, you have to wait until the candle closes at 5pm EST before you can say it’s closed. EUR/CHF and AUD/NZD were the two pairs. Since AUD/NZD has a much smaller spread to overcome, I’d favor the EUR/CHF pair.
Place an entry order on either side of the pairs previous day high/low by 1 to 2 pips. Also, include a limit order at that time too and a stop. The limit would need to be 10-20 pips (something near term). That way, any real spike could trigger your limit. You’d want a wider stop (you decide…but something wide enough to handle the volatility…maybe 50-60 pips). The thought being that there should be much more of a likelihood of the limit hitting than the stop, therefore making the wider stop worth its distance.
Keep in mind to practice these on a demo account first.
Sean Hyman
www.forextradingblog.com
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Tags: account, AUD, blog, breakout, charts, CHF, closed, demo, demo account, EUR, forex, forextrading, index, mywealth, nzd, oil, pair, pip, pips, practice, rate, Sean Hyman, ssi, strategy, time, trade, trader, You Tube
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For the Rest of Your Investments…
By Sean Hyman | March 27, 2009
Tags: blog, ETF, idea, invest, money, mutual fund, Sean Hyman, stock, strategy, technique, time, tip, trade, trend, video, wealth, You Tube
Topics: What To Look At In The Market | 4 Comments »
Update on the NZD/JPY Breakout Trade
By Sean Hyman | March 13, 2009
Back on March 11th, I gave a trade idea. You can see the link here: http://www.forextradingblog.com/what-is-going-on-in-the-market/two-long-term-potential-breakouts-about-to-happen/ that showed the NZD/JPY was likely to breakout soon. Well, that was back at 49.63. Now we are at 51.47 (up close to 200 pips) with more to go. Next target is 55 to 60 which we should see in the upcoming days to weeks. So get ready for more “kiwi” upside overall. Yes, there will be pull backs along the way, but overall we should be heading upward to these targets mentioned above.
Also, EUR/JPY is up about 130 pips from the chart snap shot in that article as well.
The initial thoughts for these trades were the recent diving fundamentals in
Spread the word to all of your trading buddies. Also, here’s the next steps to take:
Get your practice account by clicking on the “Practice Trading” tab above. This way you can have FREE, real time access to the currency market to see what it is like or click here:http://www.fxedu.com/practice-forex-account
If you want to learn more about this market, go here to get the most knowledge for the least expense and most convenience:http://www.mywealth.com/currency-trading.php
For those of you who are at the point to where you are ready for a live account, start with a micro or mini account here:https://secure2.fxcorporate.com/fxtr/?plugin=0&locale=en_US_FX_EDU_LLC
Sean Hyman
Tags: 2009, account, breakout, course, currencies, currency, demo, dollar, economic, education, EUR, EUR-JPY, euro, Europe, forex, fundamental, fx, idea, instructor, invest, investor, Japan, JPY, live, money, New Zealand, NZD, NZD-JPY, Sean Hyman, strategy, technical, trade, trader, trading, USD, wealth
Topics: What To Look At In The Market | 2 Comments »
Two Long Term Potential Breakouts About to Happen!
By Sean Hyman | March 11, 2009
Two potential long term breakouts are emerging in the most unlikely spots…the yen carry trade: EUR/JPY and NZD/JPY
Everyone has been used to yen strength this year and everyone has been accustomed to the idea of the “carry trade” selling off for even longer.
So if this breakout occurs in the upcoming days to weeks as I suspect it will, it will catch many traders off guard. There are still a ton of traders “short” on this trade that will be caught on the wrong side of the trade and will have to reverse their positions.
Also, there will be many former “carry traders” that have given up on the concept and will have written it off by now as a strategy. It’s about that time when these new, fresh breakouts occur.
Click on the EUR/JPY chart below and you’ll see what I’m looking at. If 126 is decisively cleared then the pair could move to the 130 level fairly easily.
The NZD/JPY looks the same way. Click on it below to enlarge it. If it clears 50 solidly, then we could see 55 hit pretty easily. Remember, these aren’t day trades. These are trades that could break out in the upcoming days to weeks. When they do, the trades would last probably for days to maybe a week or two. So we’re talking longer term trades but with a higher number of pips to potentially be gained.
Sean Hyman
Tags: carry trade, EUR, forex, forextrading, jpy, nzd, pips, Sean Hyman, spot, strategy, trader, trades, Yen
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Want to know the top 4 upward trending currency pairs?
By Sean Hyman | March 10, 2009
When almost all financial assets are going down in almost every market right now, these 4 currency pairs buck the trend. Want to know what they are?
Sign up for our free report and we’ll send it to you. http://www.mywealth.com/currency-strategy.html
Sean Hyman
Tags: crisis, currency, currency pairs, depression, dow, forex, forextrading, fxedu, market, money, mywealth, recession, Sean Hyman, strategy, trading, uptrend, wealth
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