EurAnalysis

Here is what this guy is referring - I never bothered to correct his opinion since I don't give a rats ass about it.

I wrote we entered back to channel on end of february in last top of this chart.


He thought I was talking about this channel and wanted to begin arguing on that. I just ignored his comment.


Now because of this I am totally incompetent in TA - Though I never claimed to anyone that I would be an expert

20 minutes to NY close. The E/U is flat lining, somebody bring in the defibrillator. This sucker needs a jump start.

I guess we have to wait till Monday.



http://realdoctorstu.files.wordpress...or-paddles.gif

COT Report

Looks like there is now more room to short...

EUR shorts -99K vs -116K
JPY shorts -42K vs -19K
GBP shorts -42K vs -37K
CHF shorts -15K vs -19K
CAD longs +26.7K vs +26.0K
AUD longs +67K vs +62K
NZD longs +13K vs +17K

Full report

From Forexlive





http://1.gravatar.com/avatar/b38e4b7...0&d=retro&r=PG
IMF says Greece could face ‘disorderly euro exit’

By Adam Button || March 16, 2012 at 19:34 GMT
|| 1 comment || Add comment
A staff report from the IMF reads like a kick in the balls to Greek bondholders:

1. Greek will remain accident prone
2. Program failure could lead to Greek default
3. Setback would require more debt restructuring
4. Greece will need a decade or more to address competitiveness

Someone in Washington has their eye on a nice piece of real estate in Santorini, it seems.

I'm off for the weekend. Have great time, enjoy your lives and remember to rest.

Here is a wisdom for the weekend:

"We all need to find our X"

http://www.marctomarket.com/2012/03/...ff-matrix.html

i miss that correlation

I don't. Finally we might get away from the risk-on/risk-off concept where everything moves in tandem and start seeing currencies move on their own merit... like the good old days

Thanks Kno.. Much appreciated....

I hear ya but my daytrading career doesn't go back that far.

Me neither.

But I would be happy if it did because then I could take more positions without greatly increasing the overall level of risk.

Try this:

http://www.ecb.int/stats/money/long/html/index.en.html

PT it looks like shooting star in the weekly USDOLLAR Index whats your take on it? +pos for eu?

Yes it could be. We will know more on Monday. Shooting stars formations on weekly candles can go either way. If the next candle breaks the low, it doesn't look good for Euro bears.

ok

Yea that seems a bit too much work and a lot of information I don't really need either. For future reference your idea might be a good alternative if no website compiles the data in a logical and simple way.

I did come across some info on eurostat, you could get daily prices however it only gives data for the small eu countries i.e Hungary and Slovenia for some reason it doesnt provide it for France Germany etc, only on a long term basis. However Infinitus was kind enough to post a better link on the thread for us which I think may come handy. It may not be as small a time frame as you're looking for but its a start anyway!

Happy St.Paddy's day, the greatest Irish Beer fest of the year and I have a football match in the morning! Luckily Monday is a Bank holiday

happy st. pattys day


markets are closed and I'm bored. some charts to look at EUR/USD

Heiken Ashi candles and Stoich 10,3,3


Monthly

http://i1264.photobucket.com/albums/...7/3afe2f59.jpg

Looks to indicate a change in trend, Heiken ashi doji candle, with stoics crossed up <20


Weekly

http://i1264.photobucket.com/albums/...7/fe1fd4ef.jpg

However the weekly looks to indicate bearish trend


D1

http://i1264.photobucket.com/albums/...RUSD_Daily.jpg


Things look bearish on the daily, the green hekien ashi candle looks like it could be just a pullback. Howerver the stoich is <20 and crossed up, indicating undersold conditions.


H1

http://i1264.photobucket.com/albums/.../EURUSD_1H.jpg



The H1 stoich say >80, and crossed down, indicating oversold condition.
Can't figure out if it'll:

1.) test the 61.8% and then continue bearish trend
2.) test the 50% level shoot up to the next 78.6% fib level:


http://i1264.photobucket.com/albums/...RUSD_H1fib.jpg


What do you guys think? Still consider myself new to this and want to make sure I develop the correct analysis outlook

I have no link and it comes from Gains Pains And Capital...

March 17, 2012

What the End Result of the Fed's Cancerous Policies Will Be and When It Will Hit

Yesterday I noted that the "addict/ dealer" metaphor for the Fed's intervention in the markets was in fact not accurate and that the Fed's actions would be more appropriately described as permitted cancerous beliefs to spread throughout the financial system, thereby killing Democratic Capitalism which is the basis of the capital markets.

Today I'm going to explain what the "final outcome" for this process will be. The short version is what happens to a cancer patient who allows the disease to spread unchecked (death).

In the case of the Fed's actions we will see a similar "death" of Democratic Capitalism and the subsequent death of the capital markets. I am, of course, talking in metaphors here: the world will not end, and commerce and business will continue, but the form of capital markets and Capitalism we are experiencing today will cease to exist as the Fed's policies result in the market and economy eventually collapsing in such a fashion that what follows will bear little resemblance to that which we are experiencing now.
The focus of this "death" will not be stocks, but bonds, particularly sovereign bonds: the asset class against which all monetary policy and investment theory has been based for the last 80+ years.

Indeed, basic financial theory has proposed that sovereign bonds are essentially the only true "risk-free" investment in the world. While history shows this theory to be false (sovereign defaults have occurred throughout the 20th century) this has been the basic tenant for all investment models and indeed the financial system at large going back for 80 some odd years.

The reason for this is that the Treasury (US sovereign bond) market is the basis of the entire monetary system in the US and the Global financial system in general. Indeed, US Treasuries are the senior most assets on the Primary Dealers' (world's largest banks) balance sheets. To understand why this is as well as why the Fed's policies will ultimately destroy this system, you first need to understand the Primary Dealer system that is the basis for the US banking system at large.

If you're unfamiliar with the Primary Dealers, these are the 18 banks at the top of the US private banking system. They're in charge of handling US Treasury Debt auctions and as such they have unprecedented access to US debt both in terms of pricing and monetary control.
The Primary Dealers are:

1. Bank of America
2. Barclays Capital Inc.
3. BNP Paribas Securities Corp.
4. Cantor Fitzgerald & Co.
5. Citigroup Global Markets Inc.
6. Credit Suisse Securities (USA) LLC
7. Daiwa Securities America Inc.
8. Deutsche Bank Securities Inc.
9. Goldman, Sachs & Co.
10. HSBC Securities (USA) Inc.
11. J. P. Morgan Securities Inc.
12. Jefferies & Company Inc.
13. Mizuho Securities USA Inc.
14. Morgan Stanley & Co. Incorporated
15. Nomura Securities International Inc.
16. RBC Capital Markets
17. RBS Securities Inc.
18. UBS Securities LLC.

I'm you'll sure you'll recognize these names by the mere fact that they are the exact banks that the Fed focused on "saving" thereby removing their "risk of failure" during the Financial Crisis.

These banks are also the largest beneficiaries of the Fed's largest monetary policies: QE 1, QE lite, QE 2, etc. Indeed, we now know that QE 2 was in fact was meant to benefit those Primary Dealers in Europe, not the US housing market.

The Primary Dealers are the firms that buy US Treasuries during debt auctions. Once the Treasury debt is acquired by the Primary Dealer, it's parked on their balance sheet as an asset. The Primary Dealer can then leverage up that asset and also fractionally lend on it, i.e. create more debt and issue more loans, mortgages, corporate bonds, or what have you.

Put another way, Treasuries are not only the primary asset on the large banks' balance sheets, they are in fact the asset against which these banks lend/ extend additional debt into the monetary system, thereby controlling the amount of money in circulation in the economy.

When the Financial Crisis hit in 2007-2008, the Fed responded in several ways, but the most important for the point of today's discussion is the Fed removing the "risk of failure" for the Primary Dealers by spreading these firms' toxic debts onto the public's balance sheet and funneling trillions of dollars into them via various lending windows.

In simple terms, the Fed took what was killing the Primary Dealers (toxic debts) and then spread it onto the US's balance sheet (which was already sickly due to our excessive debt levels). This again ties in with my "cancer" metaphor, much as cancer spreads by infecting healthy cells.

When the Fed did this it did not save capitalism or the Capital Markets. What it did was allow the "cancer" of excessive leverage, toxic debts, and moral hazard to spread to the very basis of the US, indeed the entire world's, financial system: the US balance sheet/ Sovereign Bond market.

These actions have already resulted in the US losing its AAA credit rating. But that is just the beginning. Indeed, few if any understand the real risk of what the Fed has done.

The reality is that the Fed has done the following:
1) Set itself up for a collapse: at $2.8 trillion, the Fed's balance sheet is now larger that the economies of Brazil, the UK, or France. And with capital of only $54 billion, the Fed is leveraged at 51 to 1 (Lehman was at 30 to 1 when it failed).

2) Called the risk profile of US sovereign debt into question: foreign investors, now fully aware that the US's balance sheet is suspect (the US has lost its AAA credit rating), are dumping Treasuries (see China and Russia). This has resulted in the Fed now being responsible for the purchase of up to 91% of all new long-term (20+ years) US debt issuance.

3) Put the entire Financial System (not just the private banks) at risk.

The Financial System requires trust to operate. Having changed the risk profile of US sovereign debt, the Fed has undermined the very basis of the US banking system (remember Treasuries are the senior most asset against which all banks lend).

Moreover, the Fed has undermined investor confidence in the capital markets as most now perceive the markets to be a "rigged game" in which certain participants, namely the large banks, are favored, while the rest of us (including even smaller banks) are still subject to the basic tenants of Democratic Capitalism: risk of failure.

This has resulted in retail investors fleeing the markets while institutional investors and those forced to participate in the markets for professional reasons now invest based on either the hope of more intervention from the Fed or simply front-running those Fed policies that have already been announced.

Put another way, the financial system and capital markets are no longer a healthy, thriving system of Democratic Capitalism in which a multitude of participants pursue different strategies. Instead they are an environment fraught with risk in which there is essentially "one trade," and that trade is based on cancerous policies and beliefs that undermine the very basis of Democratic Capitalism, which in the end, is the foundation of the capital markets.

In simple terms, by damaging trust and permitting Wall Street to dump its toxic debts on the public's balance sheet, the Fed has taken the Financial System from a status of extremely unhealthy to terminal.

The end result will be a Crisis that makes 2008 look like a joke. It will be a Crisis in which the US Treasury market implodes, taking down much of the US banking system with it (remember, Treasuries are the senior most assets on US bank balance sheets).

I cannot say when this will happen. But it will happen. It might be next week, next month, or several years from now. But we've crossed the point of no return. The Treasury market is almost entirely dependent on the Fed to continue to function. That alone should make it clear that we are heading for a period of systemic risk that is far greater than anything we've seen in 80+ years (including 2008).

The Fed is not a "dealer" giving "hits" of monetary morphine to an "addict"... the Fed has permitted cancerous beliefs to spread throughout the financial system. And the end result is going to be the same as that of a patient who ignores cancer and simply acts as though everything is fine.

That patient is now past the point of no return. There can be no return to health. Instead the system will eventually collapse and then be replaced by a new one.


My research has been featured in RollingStone, The New York Post, CNN Money, the Glenn Beck Show, and more. And my clients include strategists at many of the largest financial firms in the world as well as numerous hedge funds.


Graham Summers
Chief Market Strategist
Phoenix Capital Research

Dear Trader,

The trading week has come to an end and below is the TradeTheNews.com Weekly Wrap-Up - fresh off the press and free to non-subscribers online!

Market Weekly Wrap-up: Mar 12th - Mar 16th

- Investors dumped funds into risk assets this week, pushing most US and European equity markets higher. Among risk-on catalysts were better US economic data, Tuesday's FOMC statement, the release of the annual CCAR bank stress tests and the removal of the Greek drama from headlines. 15 of 19 major institutions passed the latest Fed stress tests, and most of those firms took the opportunity to increase share buybacks and hike dividends, boosting financial sector stocks. In Tuesday's FOMC statement, the Fed acknowledged the slowly improving economic conditions while also cautioning that rising oil prices will feed higher inflation. There was no mention of anything resembling QE3, in either the statement or a subsequent speech by Chairman Bernanke. Fed Governor Lacker spoke later in the week, strongly suggesting that exceptionally low rates will not be required through 2014 while calling for tighter policy as early 2013. The treasury yield curve on the benchmark steepened around 25 basis points for the week following the FOMC statement, reflecting the move out of safe havens as overall yields hit their highest levels since last October. VIX volatility index also sank to its lowest levels in nearly five years. China revealed on Monday that its trade balance plunged $31.5B into the red in February, the largest deficit since 1989, as imports overwhelmed exports. Chinese Premier Wen offered further commentary on his nation's new 7.5% GDP target, which he claimed is needed to transform China's growth to higher quality and also defended property tightening measures. The S&P500 and Nasdaq racked up their fifth straight week of gains, rising 2.4% and 2.2%, respectively, and the S&P500 closed above 1400 for the first time since mid 2008. The DJIA rose 2.4% this week.

http://www.actionforex.com/action-in...0120317161641/

Weekly Review and Outlook

Dollar Index Failed to Stand Above 80, Greenback to be Pressured by Risk Rally?

The Japanese yen remained the weakest currency last week on risk appetite, rising treasury yield as well as expectation of further BoJ easing. Meanwhile, dollar's fortune seems to be turning as stocks extended recent rally on relatively upbeat comments from Fed. In particular, Dollar's pull back gathered some steam after S&P 500 broke 1400 psychological level for the first time since 2008. Dollar index also dipped sharply to close the week below 80 level. The near term focus will be on whether risk markets would get exhausted or could they sustain recent momentum, and whether dollar would return back to it's negative correlation with risks.

Policymakers delivered a more hawkish statement after the March FOMC meeting. Changes in languages in several areas indicated that the central bank has turned more confident in the economic outlook. This has in turn lowered speculations for further QE later this year. The Fed decided to left the Fed funds rate unchanged at 0-0.25% at least until late 2014 and to continue operation twist announced in September. The 'most hawkish' member Richmond Fed President Lacker dissented the decision as he believes that economic conditions are unlikely to warrant exceptionally low levels of the Fed funds rate through late 2014. More in Fed Turns More Hawkish As Economic Data Improves.

In Europe, Luxembourg prime minister Juncker said in a statement that "the euro area member states have today formally approved the second adjustment program for Greece. All required national and parliamentary procedures have been finalized." Also, the first installment of Greek's EUR 130b bailout, at EUR 39.4b, is approved to be released in several tranches. IMF approved EUR 28b in funding for Greece over the next four years, with EUR 1.65b immediate release granted. IMF Chief Lagarde said that the second bailout will "Greece to address these challenges while remaining in the euro zone" but warned that "risks to the program remain exceptionally high, and there is no room for slippages".The updated estimates from IMF showed that Greece will need EUR 165b of funding through the end of 2014 and that should be well covered by the combined funding of IMF and EU.

Fitch upgraded Greece's rating four notches from restricted default to B- and was assigned a stable outlook. Fitch said that the completion of the debt swap has "cured the rating default event" and the "distressed debt exchange and the losses imposed on bondholders have significantly improved Greece’s debt service profile and reduced the risk of a recurrence of near-term repayment difficulties on the new Greek government securities".

However, Fitch also considers that significant and material default risk remains in light of the still very high level of indebtedness" and "profound economic challenges."


Dollar index reached as high as 80.73 last week but retreated sharply since then and closed below 80 level. A short term top is likely in place and some consolidations could be seen. Another rise will be mildly in favor as long as 79.07 minor support holds above 80.73 will target 81.78 and above. Nonetheless, we're like to point out that upside moment has been clearly diminishing with bearish divergence condition in daily MACD. We'd expect strong resistance at 61.8% retracement of 88.70 to 72.69 at 82.58 to limit upside to finish the whole rise from 72.69. However, break of 79.07 will revive the that that dollar index has indeed topped out at 81.78 and bring deeper fall to 74.72 support and below.

http://www.actionforex.com/images/st...20120317w1.gif

http://www.marctomarket.com/2012/03/...ff-matrix.html

One of the most important developments in the foreign exchange market is the fragmentation of the risk-on/risk-off matrix that was a key feature since the onset of the financial crisis. While cognizant of the non-linear nature of the capital markets and the fact that returns are not normally distributed, we continue to find use in monitoring the correlation between individual currencies and the US S&P 500. Numerous portfolio managers we talk to also watch these closely.


The break down has taken place over a range of currencies and we summarize the developments here. The correlations are calculated on the basis of the percent change in the foreign currency and the percent change in the S&P 500 on a rolling 60 day basis.


The euro's correlation to the S&P 500 may be the most closely followed. In early December the euro's correlation made what appears to be a record high just below 0.86. It now stands near 0.45. The correlation over the past 30 days has stands near 0.42, indicating a even weaker relationship more recently.


The yen's correlation with the S&P 500 reached a 7-year high in mid-January of around 0.42. The relationship is now inverse, with the 60-day correlation now at about -0.11.


The Australian dollar and Canadian dollar's correlations with the S&P 500 have also come off sharply, but remain comparatively high. The Aussie's correlation stands at around 0.71 now, down from the peak of 0.92 at the end of December. The Canadian dollar's correlation has fallen from 0.90 in mid-December to 0.68 now.


We looked at a couple emerging market currencies to see if the break down of the risk-on/risk-off matrix extended outside of the majors and sure enough it did. The Mexican peso's correlation has fallen from about 0.84 just before Xmas to 0.62 now. At the same time, the South African rand's correlation has fallen from a little above 0.86 to about 0.61 now.

To round out the exercise, we took a quick look at gold. Gold is seen as the ultimate safe haven and yet it often is positively correlated with the S&P 500, a risk asset. This is the case now. Since the middle of November (even though the European debt crisis was intensifying), gold has been positively correlated with the S&P 500, giving the sense that gold is acting more as a momentum trade than a safe haven. The recent peak of the correlation was in late January near 0.63, which was the highest since April 2010. Today it stands near 0.30.

Thursday, March 15, 2012

Fragmentation of Risk-on/Risk-off Matrix