Aspenalysis: Simple To Follow FX Trade Ideas

Good afternoon traders. It was another day where we saw more action in the S&P's than in FX. Granted, pairs like EUR/USD and EUR/JPY had some decent downside action in the overnight session, but once NY rolled into town, the S&P's were the better vehicle, as EUR/USD and EUR/JPY tapped out and went sideways - see the charts below.

However, this bifurcated market should continue to remain on traders radar screens. Cyprus appears to be 'old news' if you listen to the financial entertainment channels, but that to me is the rub. Cyprus does matter and it may be gaining traction if you look in the right places. European markets lost around 1% and more importantly, debt markets in Italy, Spain, and Portugal began leaking worse than they did yesterday, and Greece was hit pretty hard. Additionally, bank stocks in Europe continue to be under pressure. Additionally, if the party is so great in equity land, why is volume in SPY and QQQ at levels last seen on the Thanksgiving and Christmas breaks?

I believe this is why you saw EUR weak across the board and the S&P's begrudgingly going higher. I came across a new word today that might accurately describe what equity bulls are taking these days - 'hope-ium' - thanks to Bill Fleckenstein for that. I continue to play the S&P's only on an intra-day basis because of this event/headline risk.

With the S&P's chipper to the upside, some clients have noted they are hesitant to be short EUR/USD or other EUR crosses. In the past I think this was a valid argument but as you will see in the chart below, that is not the case presently - EUR is going down regardless of the S&P's going higher. Welcome to the alternative universe we trade in presently.

http://www.aspentrading.com/uploaded....13eurVSsp.png

That said, traders intent on chipping away at EUR/USD to the downside should consider this chart for the next 8-12 hours. (the remainder of this article is available to Aspen clients)

Have a great evening.

Dave

Video Update: One heck of a short in the S&P's if the bears can catch a break...

http://www.screencast.com/t/XTH50ViggPL

Video Update: Why Traders Need A Story Line

Trading is far more than charts and indicators - you need to be looking a variety of different asset classes and scenarios. Creating a story line and building on it each day is one way to increase you odds of succeeding.

This video offers a brief overview of how I incorporate a story line into my trading each and everyday.

http://www.screencast.com/t/QkNlBZVP

Trading S&P's?

Trading AUD/JPY

Likely stating the obvious here, but you cannot trade one without monitoring the other.

Good evening traders - to say it was an eventful day is an understatement. Between the events in Boston and the sell-off in markets, the world became a very interesting place...again.

Tonight's video should help put some perspective on the action.

April 15th NY Wrap Up Video

EUR/USD better set-ups elsewhere in FX land (video analysis)

http://www.aspentrading.com/freeresearch/?id=6885

What do traders fear most? Well, the answer can vary depending on the individual, but largely speaking it boils down to some broad categories:

Fear of not making money or losing money
Not being disciplined
Not having a plan - or perhaps executing it
Not knowing when to step aside

The last one is the focus of my video today. Trading is not your typical 9-5 job where you do your tasks like a drone in a cubicle and collect your paycheck. Not only is it vastly different....but requires a completely different mindset. Learn how to work towards that mindset....

Thinking Like A Trader

Hey - we have all been there. That rush to book profits to feel really good about ourselves - only to see prices move higher - or worse - digging your heels in and ignoring the warning signs.

No approach is 100% perfect - but I will show you today one that will greatly enhance your ability in managing trades and thus making more money.

Learn how this simple but effective approach works....watch the video now

EUR/USD back below 1.3000 - this pair has lower levels written all over it.

Make a stand - stops at 1.3200 and walk away or play some golf

$ES_F (S&P 500) why stocks will continue this glacial and surgical move higher

http://www.bloomberg.com/news/2013-0...nd-yields.html

Had a good question from a client on AUD/NZD outlook - I believe you will find my answer helpful

http://www.screencast.com/t/QEeFa3kAX

$ZN_F (10-year Treasuries) looks like a solid short, technically speaking - tough to call tops though

During a week that just saw weak ADP jobs data, a dovish Fed and with the ECB and NFP still to come, Aspen offers on overview of what to expect and how to beat the market.

Aspen's FX/S&P 500 Outlook

I found this observation from short seller Jim Chanos pretty interesting. I have to admit, I never really picked up on this...

“In virtually all cases of major financial market fraud over the past 20 years, the only people who really brought forth the fraud into the light were either internal whistle blowers, the press, and/or short-sellers. It was not the normal guardians of the marketplace – regulators, law enforcement, external auditors or people like that - that did it."

S&P 500 ($ES_F) upside target seen at 1660 but a pull-back into early next will unfold first

Good evening traders. It is my hope that quotes and passages like the one below help round out our understanding of markets at large. While the insights gained (whether you agree or do not) may not determine our next NEW TRADE ALERT, they certainly allow for us to frame longer-term investment/trading scenarios going forward.

However, think about it, if you have a longer-term investment thesis and it begins to play out, your conviction level will be elevated thus allowing you to fully capitalize on the move/scenario. Contrast that with someone who just reacts to whats going on - like the old saying says: 'if you stand for nothing; you will fall for anything.

That said, this quote from TIS Group is spot on in my opinion:

"Restructuring or outright liquidation of debt in the Western world is necessary to re-start economic growth. The U.S. is nearing the QE phase where the markets, the politicians and the Fed realize that for Main Street, another approach is needed which includes fiscal reform and structural entitlement reforms, not just another shot of monetary juice."

That will represent a major shift and certainly asset classes will get crushed (bonds) while others will benefit greatly (gold?). Naturally FX markets will be rocked too and thus we will be better prepared if and when this situation develops.

Dave

Did You Take These 3 Simple Steps Before Your Last Trade?

Learning to trade can be one of the most rewarding, and at times frustrating, experiences. The lure of trading for a living remains the #1 reason individuals pursue the markets.

However, without a plan, the odds of success are near zero. But many traders ask:

What is the plan?
How do I develop a plan?

Your journey to become a profitable trader does not need to be overly complex initially, but it does need to be practical.

Here are 3 simple steps to develop YOUR trading plan that will also keep you on the right side of the market:

Trade in the direction of the trend

Determine which time frame you are trading on (15-min, 60-min, daily) then use tools such as ADX, trend-lines or Aspen's Top 5 to align your trades with that trend

Use a simple stochastic indicator to prevent you from buying tops and selling bottoms

Stochastics won't show you when and where to enter the market, but they will ABSOLUTELY tell you when not to enter the market

Target Fibonacci levels to establish positions

Once you know the trend of the market, using minor sell-off and rallies (i.e. corrections) to get long/short is a lower risk way to get exposure. Key Fibonacci ratios like .382, .500 and .618 are simple enough to determine.

While these may sound too simplistic - they are not. They are the building blocks of successful trading and will be refined and enhanced over time. Trust me, these 3 simple steps will provide a very robust framework from which to operate and grow.

Traders, while the normal day to day focus is on identifying trades that might have a duration of a few days, there is a lot of work that goes on behind the scenes here at Aspen. Not just chart work but attempting to piece together macro data points and cause/effect scenarios. Not only is it beneficial for longer-term investments/trades, but that research absolutely complements the shorter-term trades too.

That said, last weeks limit down day in the Japanese bond market (JGB's) struck me immediately. How can that be, the BoJ is The Fed on steroids right now, yields should at a minimum remain flat or go down. I know the answer but I am asking to prove a point.

A colleague of Bill Fleckensteins offers this insightful nugget. You can be sure this only further heightened my interest in keeping a very close eye on Japan.

"He believes we need to keep our eyes closely peeled on Japan because in the very short run, the stock and currency markets there have acted like they are (preemptively) rejecting the concept of money printing.

He pointed out that while the yen has tanked 15%, and Japan's bonds have backed up 25 basis points (though merely back to January/February levels) from a base of 50 basis points(!), beneath the surface the volatility has increased in such a way that it might begin to cause problems for Japanese derivative books. When you are in a country such as Japan, where interest rates have been zero for so long, you can be sure that all manner of volatility has been sold, in an attempt to enhance yields, at the wrong price. So if volatility and interest rates increase, we could see quite a lot of chaos precipitated from Japan, just like when the housing bubble burst, when it wasn't just declining housing prices that caused problems, it was the levered up exposure to mortgage-backed assets and other crazy products."

My short-term update on EUR/USD

I forecast for prices to move lower in EUR/USD earlier today when prices were at 1.2970'ish - they have since fallen 40 odd pips.

There is more downside in the days to come, but first prices look set to rally modestly towards 1.2940/60 before another wave of selling takes over.... continue reading