Quick little instructional video explaining how to correctly identify the difference between an impulse or correction - http://www.screencast.com/t/yK1mUZUD
Traders, to say the markets are a touch quiet is an under-statement. As Bill Fleckenstein noted yesterday:
"...it almost seems appropriate to change the name of the column from the Market Rap to the Daily Doldrums. I'm sure that dullness will abate at some point, but the combination of a secular bear market, which has been underway for a decade or so now, and money-printing has basically turned the market into a giant taffy pull interspersed with periods of wild volatility. Just look at last year, where the S&P traveled over 3,000 points only to finish unchanged."
However, don't let the price action lull you to sleep. With a 4th wave correction unfolding in the S&P 500, there is still enough room to make a run towards 1300/20 - an area we see as solid resistance and should be a big decision point for traders.
Using this as our backdrop/template for the Inter-Market Analysis component of our trade selection, pairs like AUD/USD are poised to trade higher in conjunction with the S&P's. Upside target(s) on AUD/USD seen at 1.0400/50
While the selling pressure today on top of JP Morgan's earnings and the 'rumored' downgrades of France & Austria is intense, the overall bullish wave count for the S&P's and risk related FX pairs like AUD/USD remains intact.
Assuming this pattern/wave count is to remain valid - 1269 [Wave (i) high] must hold. A break below and the bullish view will be negated. We are finding much cleaner technical set-ups (shorts) that largely avoid the headline driven price action in the likes of EUR/GBP, EUR/AUD, EUR/NZD and AUD/NZD.
Thought this 60-min webcast recording would shed some light on how we view, interpret and forecast the FX market. There were many great question from clients that allowed us to provide some pretty solid education/analysis.
Note: this was a client presentation so there is a promo slide in the beginning - I am posting this recording not for that but for the content within the webinar.
.....if so, don't get too long those risk related FX pairs like AUD/USD. This is a pretty delicate balance in here. Bulls are waiting to buy the break higher in the S&P's or use it as a catalyst for FX trades, but we would be very cautious. Break-out trades rarely work and assuming the S&P count is correct, not an area to be establishing long entries.
The slow grind in the S&P action continues. The bulls are on the verge of euphoria as a breakout above 1310/18 looms - while the Elliott Wave count we are tracking suggests solid resistance at 1310/18. Add in the Dollar Index (looks bearish to us) and you get a real mixed bag. Consider the following chart:
The one thing that jumps out at us is the lagging price action in risk related currencies like AUD, CAD and NOK. To us, without those currencies confirming the S&P's we remain a bit cautious on getting bullish in here.
Hopefully this type of a posting, while not offering a specific trading recommendation, provides a solid back-drop for scouting out the time when conditions are ideal for a trade - this not being one of them...yet. Remember, chart patterns alone will not provide consistent trading results - only a thorough and comprehensive view (inter-market analysis) will provide the higher probability trading set-ups.
Given that the markets are at what we would consider some key technical points here - complacency cannot become part of ones plan right now. So, with that said, I though a comprehensive posting would be in order today:
Good morning traders - I had to hit the side of my monitors this AM to make sure they were still receiving data - once again, little price action overnight to assist us in making the next move:
- Fade this move higher in the S&P's and risk related FX pairs like AUD/USD and USD/NOK?
- Or continue to wait patiently for clearer signals?
Todd and I were having a short discussion on IM while I was laying out the outline for this piece and we were both looking at the really nice wave count/structure of USD/NOK and considering if we should get short into the Fibonacci cluster:
Technically it is a pretty solid set-up, stops are pretty tight at just above the invalidation level at 5.9812, but, this trade requires that the S&P's continue higher. Based on this wave count that seems like a tall order.
...but in the context of today and heading into the weekend - taking trades that demand higher S&P's now does not sit well with us. So once again we are left taking the temeprature of the market in order to determine the next most likely move - at this point we still do not have all the pieces in place - we know the scenarios to look out for - but none have unfolded just yet.
Meanwhile crosses like EUR/GBP and AUD/NZD are trading within solid Elliott Wave counts and are not as sensitive to the indecision in the S&P's and Dollar Index (DXC), so these might be worth considering for clients who are looking to manage their own trades in here.
So - that is where we stand at present, all dressed up but nowhere to go....just yet. As Todd and I made clear to attendees of a webinar we did last night - avoiding being surprised about how a trade unfolds is key. A trader should always factor in the various scenarios that could unfold. This approach allows traders to anticipate markets rather than react to markets.
For those that may not know, my biz partner at Aspen Trading is Todd Gordon. Long-time friend and colleague. He also is part of the line-up on CNBC's Money in Motion Show.
The video below takes some of the content from yesterday's show and combines it with some standard Elliott Wave & Fibonacci analysis to give a potential short entry in AUD/CHF. This is a nice combo of technicals and fundamentals.
Are you long AUD/USD? If so, keep reading.......been beating this drum for a couple of weeks now - the resistance level in the S&P's at 1310/18. Prices are now in that area but have failed to react negatively just yet.
Prices topped out at 1.0573 - a touch above our forecast resistance zone, and are now off 120 pips. The overall dynamics of long trades remains intact however. As the chart below shows, we would be considering long entries into this pull-back.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments. The impact of such events is already factored into market prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Aspen Trading Group that you will profit or that losses can or will be limited in any way. Loss-limiting strategies such as stop loss orders may not be effective because market or technological conditions may make it impossible to execute such orders. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only, was obtained from sources believed to be reliable, but is in no way guaranteed.
OK folks, gonna let my biz partner, Todd Gordon, take this posting. He did a great overview of short positions in EUR/NZD on Fast Money on CNBC today. Along the way he ruffled the feathers of one panelist who says he does not use stops - really? Seems foolish to me....and Todd. Enjoy
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments. The impact of such events is already factored into market prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Aspen Trading Group that you will profit or that losses can or will be limited in any way. Loss-limiting strategies such as stop loss orders may not be effective because market or technological conditions may make it impossible to execute such orders. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only, was obtained from sources believed to be reliable, but is in no way guaranteed.
Will the blow-out earnings from AAPL provide the catalyst to build a stronger bullish conviction? We tend to think so. While we had been tracking a bearish count in the S&P's that indicated the 1310/18 level could cap the rally - the underlying tone to the market has been anything but bearish. The result was our consideration for this bullish count:
One has to think this will now become the primary count unless the FOMC scares the markets tomorrow or the market loses the 'love' for AAPL's earnings both events seem unlikely.
Thus, from an FX perspective, it looks like the usual suspects in the 'risk on' category are the ones to be focusing on:
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. Risks include the potential that changing political/economic conditions may substantially affect the price/liquidity of a currency. Investors may lose all or more than their original investments. The impact of such events is already factored into market prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Aspen Trading Group that you will profit or that losses can or will be limited in any way. Loss-limiting strategies such as stop loss orders may not be effective because market or technological conditions may make it impossible to execute such orders. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only, was obtained from sources believed to be reliable, but is in no way guaranteed.
Just following up on the posting from Tuesday afternoon - Jan 24, 2012 2:47pm (see below). The Fed offered the catalyst to finally set in motion a sustained move in the markets.
We went with AUD/USD to express our long bias as seen below and have booked partial profits at 1.0665 this AM and raised the stop-loss. USD/NOK and EUR/USD were also viable pairs for this scenario. To us, this looks like the makings of a sustained move and will be looking to add to or establish other long positions.
Will the blow-out earnings from AAPL provide the catalyst to build a stronger bullish conviction? We tend to think so. While we had been tracking a bearish count in the S&P's that indicated the 1310/18 level could cap the rally - the underlying tone to the market has been anything but bearish. The result was our consideration for this bullish count:
Good afternoon/evening traders - just wanted to post some analysis on AUD/USD that illustrates how to use simple Fibonacci techniques within wave analysis to project likely price target(s).
A decisive sell-off today in EUR/GBP - right to a Fibonacci projection level - sets the stage for a corrective rally from which to get short.....details in the chart below.
We got this question from one of our clients yesterday - I thought it was quite timely given the current price of EUR/CHF.
"Hi guys,
How about going long EURCHF with a stop bid a little ABOVE the current market, in case SNB intervenes?
It is a new month, and 1.2000 is close..."
Thanks for the question, a couple of points from our perspective:
- EUR/CHF is essentially not a free floating currency at this time due to the SNB intervention threat at holding EUR/CHF above 1.2000
- A 'stop bid', as you note, above current levels (buy limit order) would not be the best approach if we were getting long based solely on SNB interention. Your order would be triggered and you would be filled at the next price - presumably 100-200 pips higher.
- For us - the complete lack of wave structure or any component of Inter-Market Analysis within the IPA Pyramid - offers us little to work with.
- Lastly, monetary authorities tend to view markets with a longer term view than market participants who agonize over every small move. Very significant losses can be incurred at a time which central bankers consider relatively stable. A move below 1.2000 for a short period of time may be viewed with indifference by the SNB. Case in point, USD/JPY dropped to 3-month lows last week after a big spike higher earlier in the week - as of now - still no sign of the BoJ - traders who went long USD/JPY expecting the BoJ to ride to the rescue are licking their wounds right now.
So - just my 2 cents. There are many ways to determine logical trade set-ups - however, within our framework of the IPA Pyramid - longs in EUR/CHF do not work for us at present. -DF-
....there is some sideways consolidation taking place presently in USD/NOK. This should be expected as generally speaking USD/NOK and DXC move in tandem.
....we need to make sure that related markets confirm this wave count. Generally speaking crude oil prices are a solid barometer for USD/NOK given Norway's large oil export market. However, as the overlay chart below shows, oil and USD/NOK have not had a very clear correlation in some time.
So while that inverse relationship may not be strong right now (correlations are always in flux), as long as crude oil prices remain within a trend higher, that should provide enough of a backdrop to support lower levels in USD/NOK. Based on our wave count, crude oil is approaching some key support and should turn higher with the $115/bbl the immediate target.
Certainly other risk related markets like the S&P 500 will be a useful inter-market analysis barometer as well, but for now, there is a somewhat incomplete scenario developing. That is not to say a short in USD/NOK does not make sense, one just needs to be aware that all of the pieces that support the trade are in place.....yet.
