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FX Analysis: Casting A Wide Net
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Aspen Trading Group
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Aspen Trading Group
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Traders, yesterday's 'Elliott Wave 101' webinar has been recorded and is now available to view online. For those of you who would like to rewatch or were unable to attend click the link below
[URL="http://www.screencast.com/t/XPDv5bw5q2Iu[/URL]
[URL="http://www.screencast.com/t/XPDv5bw5q2Iu[/URL]
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Traders, I bet you are pretty bearish today given what we are seeing thus far. However, you may want to take a look at the video update below regarding the S&P's. As you know the S&P's can often times be a solid driver of FX markets, especially for EUR/USD in light of how bad/weak EUR/USD as been performing.
As of now, we have not established a short EUR/USD position but are itching to do so (we currently have recommendations out on short EUR/AUD positions from 1.2035 - looking sweet there!).
However, the S&P sell-off today may not be the start of bearish trend and thus a sustained push lower in EUR/USD....watch the video below for all the details.
S&P & EUR/USD Video Analysis
As of now, we have not established a short EUR/USD position but are itching to do so (we currently have recommendations out on short EUR/AUD positions from 1.2035 - looking sweet there!).
However, the S&P sell-off today may not be the start of bearish trend and thus a sustained push lower in EUR/USD....watch the video below for all the details.
S&P & EUR/USD Video Analysis
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Traders, I had not noticed this earlier - while US markets are soft today - off very modestly on the day, both the DAX and EuroStoxx 50 are up 1.25% and 1.80% respectively. Additionally, European bank stocks touched new low's on Wednesday evening, only to rally 5-10% in just two sessions since then. Has something fundamentally changed in Europe due to Draghi's comments last week?
Perhaps. Consider this:
"If Draghi can get the Germans to go along with a multi-pronged approach to speed up the rescue funds bond purchases, flanked by ECB purchases of Spanish/Italian debt in the secondary market, stocks can run further. This is not a solution. But given the extreme stress in the Spanish credit markets, it is now or never, for they may lose Spain to the bond markets if nothing is done and then there is no telling where the markets end up. So spending a little capital now to insure Spanish and Italian yield curves do not invert, may be money well spent. I do not see how Germany can refuse an ECB plan because if they do, German banks are at risk along with French banks and every other major banking center in Europe."*
* Source: MIR
The flip side of this positive observation though is that EUR remains very weak. Regardless, we do want to be careful of not getting too complacent about sustained EUR weakness. While I have no interest in trying to pick a bottom (as Warren Buffet says, bottoms are more fun to look at than pick) but I do not want to ignore potential outcomes ahead of three very key Central Bank meetings this week. -DF-
Perhaps. Consider this:
"If Draghi can get the Germans to go along with a multi-pronged approach to speed up the rescue funds bond purchases, flanked by ECB purchases of Spanish/Italian debt in the secondary market, stocks can run further. This is not a solution. But given the extreme stress in the Spanish credit markets, it is now or never, for they may lose Spain to the bond markets if nothing is done and then there is no telling where the markets end up. So spending a little capital now to insure Spanish and Italian yield curves do not invert, may be money well spent. I do not see how Germany can refuse an ECB plan because if they do, German banks are at risk along with French banks and every other major banking center in Europe."*
* Source: MIR
The flip side of this positive observation though is that EUR remains very weak. Regardless, we do want to be careful of not getting too complacent about sustained EUR weakness. While I have no interest in trying to pick a bottom (as Warren Buffet says, bottoms are more fun to look at than pick) but I do not want to ignore potential outcomes ahead of three very key Central Bank meetings this week. -DF-
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What does the 2.3% drop in oil today suggest, if anything? Is it simply related to slow/thin summer trading - or is it indicative of further economic weakness ahead, thus negatively impacting asset classes?
At this point, it is not clear as the likes of EUR/USD and AUD/USD are holding up well. We will need to keep an eye on this though.
At this point, it is not clear as the likes of EUR/USD and AUD/USD are holding up well. We will need to keep an eye on this though.
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Nightly Video:
Todd discusses EUR/USD trade set-ups on CNBC's Money in Motion Show
Watch Video*
*Link will redirect you away from this page
Todd discusses EUR/USD trade set-ups on CNBC's Money in Motion Show
Watch Video*
*Link will redirect you away from this page
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A bit of a long post today, but one that is timely in my opinion. Love to get feedback as this market is certainly ripe with contradictions:
Traders, we know, as evidenced in recent price action, that the S&P's are giving off some mixed signals. While the S&P's did break above 1389 last Friday and maintained that bid into yesterday and today, the count does look labored (but not incorrect) so we do not want to discount it at this time.
Todd, took that same observation of overlapping and choppy action to derive an equally probable bearish count.
So what do we do? Well, long-time clients know that charts alone are inadequate for thorough analysis as they leave out other key components to price forecasting - mainly Inter-Market Analysis - the 'I' of the our robust IPA Trading Methodology.
Here are some observations using the IPA Methodology however, here too we have data points that argue both bullish and bearish:
- The big-cap, blue-chip stock indexes have all exceeded their respective July 3-5 highs, while the secondary indexes, which include the small-cap and mid-cap indexes, have remained beneath their equivalent highs. This divergene itself is not an outright bearish signal, but few would argue that withour broad participation, sustained rallies are less likely.
- Dow Transports continue to lag the Dow Industrials - a Dow Theory sell signal? Perhaps, but the Transports have lagged now for over a year and still no significant sell-off in the Dow and/or S&P's.
- 10-year Treasury yields are looking a bit bid and threaten to push higher (lower bond prices). This would actually be supportive of equities as it suggests better rates of return outside bonds. Bear in mind, there have been 2-3 instances already this year where rates looked poised to move higher.....but ultimately did not.
- Commodity prices, via the CRB Index show 5-waves off the recent lows - early signs of a rebound economically?
- Lastly, the overlay chart since the Sunday open offers some interesting insights - EUR leading the likes of AUD & NZD higher while commodities are really leading to the upside.
So, mixed observations to be sure, however, it is August 7th and summer trading conditions prevail. This needs to be factored in to some extent, however, with such solid bullish and bearish patterns in the S&P's we cannot afford to be complacent and discount everything to summer trading conditions. Something is brewing here and we need to be on top of it.
Stay tuned for updates in Trader Insight. -DF-
Traders, we know, as evidenced in recent price action, that the S&P's are giving off some mixed signals. While the S&P's did break above 1389 last Friday and maintained that bid into yesterday and today, the count does look labored (but not incorrect) so we do not want to discount it at this time.
Todd, took that same observation of overlapping and choppy action to derive an equally probable bearish count.
So what do we do? Well, long-time clients know that charts alone are inadequate for thorough analysis as they leave out other key components to price forecasting - mainly Inter-Market Analysis - the 'I' of the our robust IPA Trading Methodology.
Here are some observations using the IPA Methodology however, here too we have data points that argue both bullish and bearish:
- The big-cap, blue-chip stock indexes have all exceeded their respective July 3-5 highs, while the secondary indexes, which include the small-cap and mid-cap indexes, have remained beneath their equivalent highs. This divergene itself is not an outright bearish signal, but few would argue that withour broad participation, sustained rallies are less likely.
- Dow Transports continue to lag the Dow Industrials - a Dow Theory sell signal? Perhaps, but the Transports have lagged now for over a year and still no significant sell-off in the Dow and/or S&P's.
- 10-year Treasury yields are looking a bit bid and threaten to push higher (lower bond prices). This would actually be supportive of equities as it suggests better rates of return outside bonds. Bear in mind, there have been 2-3 instances already this year where rates looked poised to move higher.....but ultimately did not.
- Commodity prices, via the CRB Index show 5-waves off the recent lows - early signs of a rebound economically?
- Lastly, the overlay chart since the Sunday open offers some interesting insights - EUR leading the likes of AUD & NZD higher while commodities are really leading to the upside.
So, mixed observations to be sure, however, it is August 7th and summer trading conditions prevail. This needs to be factored in to some extent, however, with such solid bullish and bearish patterns in the S&P's we cannot afford to be complacent and discount everything to summer trading conditions. Something is brewing here and we need to be on top of it.
Stay tuned for updates in Trader Insight. -DF-
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Hey Traders - let's bear in mind we are winding down the summer so the next couple of weeks are likely to be light and offer little insight.
With the S&P's hanging tough at 1400 we are tracking both a bullish and bearish count. With action since Friday essentially flat we must be patient and wait for clearer signals. Nothing wrong with keeping our powder dry in here. We just close out some solid shorts in EUR/AUD and EUR/NOK so we are not pressured to perform at this juncture.
Here are a couple of thoughts/charts from today however:
- S&P's catching a bid here; AUD/USD breaking to day lows and testing the 1.0500 support level. Something does not add up.
Interesting price dynamics, but we must remember it could simply be a function of low volume/volatility summer trading. Stay tuned.
- Copper prices can often be a solid gauge of overall economic and equity performance. There has been in recent weeks a disconnect between copper and equities, but one should never discount the relationship - just when you do, it often comes back into play.
- Lastly, we have not been tracking USD/CHF in recent weeks, but it looks like it is time to place back on the radar screen....
With the S&P's hanging tough at 1400 we are tracking both a bullish and bearish count. With action since Friday essentially flat we must be patient and wait for clearer signals. Nothing wrong with keeping our powder dry in here. We just close out some solid shorts in EUR/AUD and EUR/NOK so we are not pressured to perform at this juncture.
Here are a couple of thoughts/charts from today however:
- S&P's catching a bid here; AUD/USD breaking to day lows and testing the 1.0500 support level. Something does not add up.
Interesting price dynamics, but we must remember it could simply be a function of low volume/volatility summer trading. Stay tuned.
- Copper prices can often be a solid gauge of overall economic and equity performance. There has been in recent weeks a disconnect between copper and equities, but one should never discount the relationship - just when you do, it often comes back into play.
- Lastly, we have not been tracking USD/CHF in recent weeks, but it looks like it is time to place back on the radar screen....
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Traders, while the following commentary and chart does not relate directly to FX, the implication is still profound. The growth in HFT (high frequency trading) is staggering. I have no opinion on it either way - it certainly does impact the markets.
HFT On The Rise
HFT On The Rise
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Traders, join us tomorrow as we spend 30-minutes breaking down live trading opportunties in AUD/USD. Can the Aussie Dollar continue it's trend or is it getting ready to break down? Join us and let's talk about it.
When: Wednesday at 4 PM EST
Where: On-line Register Now
When: Wednesday at 4 PM EST
Where: On-line Register Now
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Traders, thought this quote from Dennis Gartman today was interesting:
"Since August 3rd the Dow has traded in a range of 128 points (or 0.98%). In percentage terms that is the narrowest 8 day trading range since at least 1950"
Media Alert: Aspen's Todd Gordon will be appearing on CNBC's Fast Money Half-Time Report at 12:40 PM EST (5:40 GMT)
"Since August 3rd the Dow has traded in a range of 128 points (or 0.98%). In percentage terms that is the narrowest 8 day trading range since at least 1950"
Media Alert: Aspen's Todd Gordon will be appearing on CNBC's Fast Money Half-Time Report at 12:40 PM EST (5:40 GMT)
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For those that attended (even those that did not)....
If you took the trade (short AUD/USD) on Wednesday you should be up roughly a 100+ pips! Is there still profit left in this trade? Watch this 6 min video and find out!
aud update - Aspen_Trading's library
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Traders: News Flash!
It is August 28th and the last week of summer - trading in here can be dangerous to ones trading account. See explanation below:
This is only the 4th time since the birth of the credit crisis that the daily range on the S&P cash has broken below the 9.0 handle. This is typically a support level, which means after the 9.0 level is breached for a few days S&P volatility tends to mean revert to the 20-30 points per day. Put most simply - for traders like us volatility is our best friend. Sub-10 handle ranges are challenging to put up profits in these slow grinding markets.
Our 2 biggest profitable months since we kept keeping results were March 2011 and September 2011 that are both highlighted in green. Both of these green highlights isolate an expansion in range (volatility). We always harp on this key statistic, but it's important point to keep in mind;
You will make 70% of your profits during only 30% of the time.
70% of the time we trade with capital preservation as the top priority. During the remaining 30% of the time we trade to aggressively grow capital. Right now we trading with capital preservation (and recently moderate growth), but when the S&P recaptures the 20+ range per day we will quickly shift gears to aggressive capital growth.
Take some time and relax before markets get busy again after Labor Day.
It is August 28th and the last week of summer - trading in here can be dangerous to ones trading account. See explanation below:
This is only the 4th time since the birth of the credit crisis that the daily range on the S&P cash has broken below the 9.0 handle. This is typically a support level, which means after the 9.0 level is breached for a few days S&P volatility tends to mean revert to the 20-30 points per day. Put most simply - for traders like us volatility is our best friend. Sub-10 handle ranges are challenging to put up profits in these slow grinding markets.
Our 2 biggest profitable months since we kept keeping results were March 2011 and September 2011 that are both highlighted in green. Both of these green highlights isolate an expansion in range (volatility). We always harp on this key statistic, but it's important point to keep in mind;
You will make 70% of your profits during only 30% of the time.
70% of the time we trade with capital preservation as the top priority. During the remaining 30% of the time we trade to aggressively grow capital. Right now we trading with capital preservation (and recently moderate growth), but when the S&P recaptures the 20+ range per day we will quickly shift gears to aggressive capital growth.
Take some time and relax before markets get busy again after Labor Day.
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Hey Traders, our Director of Client Education - Bart Marek - will be hosting:
Trading Gold with Elliott Wave Webinar Part 2!
at 4 PM EST. There is no cost to attend and you can register below:
Traders, last week we took a look at trading Gold with Elliott Wave during our Wednesday 'What's Working at Aspen' webinar. Following our bullish call on Gold we now see the precious metal higher by 2%, will Gold continue to break out of it's year long slumber. Join us today at 4PM ET and find out!
Register Here: https://www3.gotomeeting.com/register/184182958
Trading Gold with Elliott Wave Webinar Part 2!
at 4 PM EST. There is no cost to attend and you can register below:
Traders, last week we took a look at trading Gold with Elliott Wave during our Wednesday 'What's Working at Aspen' webinar. Following our bullish call on Gold we now see the precious metal higher by 2%, will Gold continue to break out of it's year long slumber. Join us today at 4PM ET and find out!
Register Here: https://www3.gotomeeting.com/register/184182958
Aspen Trading Group
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Traders, not exactly an FX play here - although the implications could be dramatic across many asset classes, including FX. Nonetheless, 10-year Treasury rates are beginning to sneak higher - they bear watching and could offer up a nice long trade in the likes of TBT
big push higher in yields today; TBT up 3%!
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Here is a 40-minute video recorded yesterday (Wednesday) that looks at EUR/USD through the lens of Elliott Wave and the IPA Trading Methodology. Nice to see that 24-hours later - the analysis isolated a nice long opportunity if one was so inclined.
Watch Video
Watch Video
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The clip below is from CNBC's Friday edition of Money in Motion where Todd discusses the AUD/USD and the dynamics at play when compared to the S&P 500 and the Hang Seng.
Watch Video
Watch Video
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Nightly Video:
Some weakness in the S&P's today and continued weakness seen in AUD/USD and oil....what's next?
Watch Video
Some weakness in the S&P's today and continued weakness seen in AUD/USD and oil....what's next?
Watch Video
