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  • #138,841
  • Jan 25, 2016 10:10am Jan 25, 2016 10:10am
/CL down $1.30 and last Thur-Fri oil bounce will be erased if the glut news keeps coming in. US equities will need the Fed to sing the dove song or the bears will stay for dessert there too
"If The Fool persists in his Folly he will become wise." - William Blake
  • #138,842
  • Jan 25, 2016 11:03am Jan 25, 2016 11:03am
Do anyone expect anything from draghi today ... Will there be any action with his whatever comment ...
Re-Incarnated
  • #138,843
  • Jan 25, 2016 11:09am Jan 25, 2016 11:09am
Quoting The Fool
/CL down $1.30 and last Thur-Fri oil bounce will be erased if the glut news keeps coming in. US equities will need the Fed to sing the dove song or the bears will stay for dessert there too
Indeed, technically speaking both US equities and European (even less) left a handful of points untested on the lows (ref: S&P 1789.xx and DAX 9220). Not that is necessary for the mid and long term floor to be set but it will make things a lot cleaner for trading and allow going all in equities for Q2/Q3.

Same for OIL we pretty much killed the current leg but those few ticks to the $26.xx handle are a pain in the ass to say the least. Its clear that OIL collapse is far from over. Markets seem to be still waiting for a one more RISK sell off (via China and commodities). As long as China doesn't find a short term floor that door will remain open.

However, is clear that the last panic legs triggered CB attention. ECB is full committed to more QE and a dovish FED will pretty much guarantee the floor in Equities for the foreseeable future. Like all CB intervention/actions the main effect of the moves will be felt in currencies that are set to break correlations if things end up as expected with the FED/ECB...

Important FOMC given the last panic selloff more than the actual outcome or change in monetary policy decisions ...

We'll see, but for now ECB is cleared so FED/ monthly combo will 100% set the tone for the rest of the Quarter....

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,844
  • Jan 25, 2016 11:56am Jan 25, 2016 11:56am
Quoting roobii
Hey sisse..... with fundamental news coming out later this week for Kiwi and Yen.. Do you think Japan will miss inflation targets and start quantitative easing? Do you think they will cut rates in New Zealand? If so, could this be potential for a double whammy of yen strength and kiwi weakness for a trend trade?
Hi roobi,
I don't follow this pair and am just curious as to your conclusion of Yen QE leading to Yen strength ..till now I was always under the impression of QE leading to currency weakness so is there something different this time with the Yen or am I missing something here? ..thanks
The spoken word is your master, the unspoken word your slave.
  • #138,845
  • Jan 25, 2016 12:37pm Jan 25, 2016 12:37pm
I may be wrong but yea the initial announcement of QE should weaken the currency and then strength will come gradually over time. But from what Im reading Kuroda thinks he will hit inflation targets or close too which might delay QE... which I think could shock the market for yen strength... that coupled with Kiwi ... I could be on to something but then again Im just still learning how to formulate information to get the general flow of the market and find trades in that direction.. If anyone has better insight on the topic I'm all ears...



Quoting CommercialB
{quote} Hi roobi, I don't follow this pair and am just curious as to your conclusion of Yen QE leading to Yen strength ..till now I was always under the impression of QE leading to currency weakness so is there something different this time with the Yen or am I missing something here? ..thanks
  • #138,846
  • Jan 25, 2016 12:41pm Jan 25, 2016 12:41pm
...and that was pretty much it for the day. A yawning day except in wild OIL where lately +/- 5% moves are the norm. Eyes on 30.6x for those looking for reloading opps for a chance to test the lows and bit beyond ....

On the Euro, as widely expected since the morning 1.084x held Europe without much trouble and without surprises we are set for an irrelevant roll across the board.

Quoting roobii
thanx much appreciated on your feedback... trying to find retracements to be way ahead of the news as we speak!! fingers crossed .... {quote}
There are major FA in play with very very very interesting legs in play. I personally would prefer/look at the double whammy swing or a double flop as any other outcome will clash both FA sides in a very wide, spiky and untradable environment.

Bears have the upper hand especially after last week Kuroda comments. NJ 77.4x was/is the cheap ticket for the BOJ/RBNZ play. 76.4x is the rain maker for the swing for a quick test 71.3x with extension 69.8x and to the other side with BOJ action, a direct retrace to the 79.5x before deciding next steps ...

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,847
  • Jan 25, 2016 2:27pm Jan 25, 2016 2:27pm
Quoting roobii
I may be wrong but yea the initial announcement of QE should weaken the currency and then strength will come gradually over time. But from what Im reading Kuroda thinks he will hit inflation targets or close too which might delay QE... which I think could shock the market for yen strength... that coupled with Kiwi ... I could be on to something but then again Im just still learning how to formulate information to get the general flow of the market and find trades in that direction.. If anyone has better insight on the topic I'm all...
...of course, you are correct it's all about expectations and what the market may have already "baked in". Thanks for explanation and good luck with your trade if things pan out as you hope
The spoken word is your master, the unspoken word your slave.
  • #138,848
  • Jan 25, 2016 2:42pm Jan 25, 2016 2:42pm
Quoting CommercialB
{quote} ...of course, you are correct it's all about expectations and what the market may have already "baked in". Thanks for explanation and good luck with your trade if things pan out as you hope
We will see... currently selling off the 77 area retracement so hopefully I can get a nice move to the downside and hold on... pray... and do a couple rain dances for good luck....
  • #138,849
  • Jan 25, 2016 2:51pm Jan 25, 2016 2:51pm
Quoting roobii
{quote} .... pray... and do a couple rain dances for good luck ....
Ha ha, sometimes ya gotta do whatever it takes .
Oil & stocks falling at the moment may help with risk-off sentiment & Yen strength so you might be off to a good start at least!
The spoken word is your master, the unspoken word your slave.
  • #138,850
  • Jan 25, 2016 3:30pm Jan 25, 2016 3:30pm
or maybe this mean rain dance I'm doing is making oil and stocks fall.....lol

Quoting CommercialB
{quote} Ha ha, sometimes ya gotta do whatever it takes . Oil & stocks falling at the moment may help with risk-off sentiment & Yen strength so you might be off to a good start at least!
  • #138,851
  • Jan 25, 2016 4:02pm Jan 25, 2016 4:02pm
...and we rolled with no surprises 1.084x all day long as expected...

Quoting sisse
....... NJ 77.4x [check early today] was/is the cheap ticket for the BOJ/RBNZ play. 76.4x [in play] is the rain maker for the swing for a quick test 71.3x with extension 69.8x and to the other side with BOJ action, a direct retrace to the 79.5x before deciding next steps ... sisse
More importantly OIL lost foot on the energy close and for those following roobii NJ, we lost 76.4x triggering Imminent Break Down alerts for the BOJ/RBNZ combo play.

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,852
  • Edited 9:53am Jan 26, 2016 1:53am | Edited 9:53am
China is looking ugly; oil is pervasive, and it means we failed to hold last weeks open on (S&P,JPN225) following the strong rejection of yearly levels. That basically killed momentum and we topped off DAX(Ger30.) with 9780 in play from the other side.

The longer this goes on the bigger toll it will charge on US normalisation this year so starting to be increasingly wary of a dovish FED outlook tomorrow and a trickier range-bound environment on Fiber.

Can't help but feel there's an unduly large sensitivity to Oil/China fueled by a global slowdown narrative so would be interested to see how/if that decouples with a bit of strong data from elsewhere.
  • #138,853
  • Jan 26, 2016 5:48am Jan 26, 2016 5:48am
Quoting sisse
{quote} Indeed, technically speaking both US equities and European (even less) left a handful of points untested on the lows (ref: S&P 1789.xx and DAX 9220). Not that is necessary for the mid and long term floor to be set but it will make things a lot cleaner for trading and allow going all in equities for Q2/Q3. Same for OIL we pretty much killed the current leg but those few ticks to the $26.xx handle are a pain in the ass to say the least. Its clear that OIL collapse is far from over. Markets seem to be still waiting for a one more RISK sell...
Sisse,

As per right now the markets seem to me to be pretty unpredictible/untradable. completely agree that equities/oil both look like being in no mans land waiting for the final short term/intraday move to the lower-lows. But with FED in play its all even more complicated.

If you had to guess hows FED gonna be - dov/haw - what would you say? From your previous post it seems you expect dovish FED.

The best scenarion would be if we make the last bearish moves pre-FED and be just sitting on the lows for dovish FED - great for equities - do u think that can actually evolve? (guess that would be too easy)

  • #138,854
  • Jan 26, 2016 5:54am Jan 26, 2016 5:54am
...another massacre in Chinese Equities early overnight and cracks starting to appear in the OIL supply front (this is a KEY factor to track for a potential bottom) with Irak and to lesser extend Russia starting to mention cuts ...supply wall wont last much longer as a solid front and It's going to end bad really bad (like in the 70s) for the mid and small size producer ...

Euro easily held again 1.084x for the European session completing the micro retrace as widely expected since the W roll to 1.086x. Consumer Confidence on the opening range is the last stop before the FED.

Not expecting much but soft continuation across the board... for now nothing to see, same levels, same plays, same all...

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,855
  • Jan 26, 2016 5:59am Jan 26, 2016 5:59am
sisse
I have an FA confusion that I hope you'll be able to clarify.
The correlation between markets seem very funny recently. While dollar is correlated between EURUSD, USDJPY, USDCHF, and between AUDUSD, NZDUSD, USDCAD, the two groups are not acting in correlation.
For one thing, the second group are all commodity currencies, as opposed to the first group. From your past posts, I'm concluding that this is because of the oil price collapse, but what is the mechanism behind this activity? Especially since you stated last week that all markets are aligning for a breakout.
Would understanding the mechanism behind that help us in determining the timing step that you always emphasize?
Andrew
  • #138,856
  • Jan 26, 2016 6:17am Jan 26, 2016 6:17am
time to stay away from the market extreme ranging conditions.
{Promotion Removed}
  • #138,857
  • Jan 26, 2016 6:43am Jan 26, 2016 6:43am
Quoting sisse
...another massacre in Chinese Equities early overnight and cracks starting to appear in the OIL supply front (this is a KEY factor to track for a potential bottom) with Irak and to lesser extend Russia starting to mention cuts ...supply wall wont last much longer as a solid front and It's going to end bad really bad (like in the 70s) for the mid and small size producer ... Euro easily held again 1.084x for the European session completing the micro retrace as widely expected since the W roll to 1.086x. Consumer Confidence on the opening range...
Agree on that point. The market will very likely test this rhetoric from Iraq - as there exists a huge chasm between these words and OPEC and non-OPEC members - namely Saudi Arabia and Russia and, to a lesser extent, Iran - agreeing on, and sticking to, lower production quotas.
  • #138,858
  • Edited Jan 27, 2016 4:35am Jan 26, 2016 6:52am | Edited Jan 27, 2016 4:35am
Quoting ws121
sisse an FA confusion that I hope you'll be able to clarify. The correlation between markets seem very funny recently. ...Would understanding the mechanism behind that help us in determining the timing step that you always emphasize? Andrew
Andrew,

Let me answer you with a long reply as many people ask the same question about how to start understanding correlation....

--> First don't bite off more than you can chew. Understanding correlations and seeing the market as a whole is complex process and require time and a lot of experience to track and understand whats going on. I would recommend you to keep it simple and to the key variables first before you go into details.

--> Start with the core components: EUR/USD (the king for everything else) and add a couple of simple variables so you can have a broader picture of the currency board with USD/JPY as a gauge of general risk and CAD (any other commodity currency AUD, NZD, etc will work here) for gauging the impact of commodities (right now s very important because of the collapse of commodities , etc etc etc)

--> With those 3 components you will have enough info (and homework for a week) to have a general grasp of the board. Now you need to split each component in their parts. So you have DOLLAR, EURO, YEN and CAD/AUD(or any other).

--> Only now you can dig one step deeper and go to the inner factors (just the main don't go overboard here as you are only aiming for a MACRO view and correlation of the FX board). To start with, keep it simple using the 3 main factors: CB (monetary policy), Macroeconomic Factors and RISK.

--> With a simple exercise you can define with + and - in each factor which are positive for the currency or negative (e.g 3 / 3 ). For example:

  1. EURO

    1. ​CB -> Negative rates and QE = [ - - - / 3]
    2. Macroeconomic Factors -> Deflation. Periphery found solid bottom but EZ macronumbers still sluggish. Equities on retrace. [ - - / 3 ]
    3. RISK -> Collapse in China and commodities is pushing massive flows to EZ given low interest rates+QE and safety from emergency countries. Carry trade when risk is off [ + + / 3 ]​




  2. DOLLAR

    1. ​CB -> Hikes Dec. Gradual Normalisation on the way. = [ + + + / 3 ]
    2. Macroeconomic Factors -> Solid employment. Inline inflation but global jitters are weighing heavier on Equities. [ + + / 3 ]
    3. RISK -> Collapse in China and commodities keep coming to DOLLAR and as long as Equities hold the storm and the election jitters stay constrain to the TV debates and BS from the candidates ... [ + / 3 ]



--> Only now you can star reconstructing the step back. Weight your + and - and crossed to the Pairs.

  1. Example if Dollar factors are (+) and lets say JPY are (-)
  2. Now you can define the general correlation between the reports/news or whatever in one single pair:

    1. USD goes up (e.g A new hike rate tomorrow) and nothing happen in the yen: USD/JPY goes up
    2. USD goes down (e.g A dovish FED tomorrow) and nothing happen in the yen: USD/JPY goes down
    3. USD goes DOWN up (e.g A dovish FED) and yen goes down (e.g A BOJ QE): USD/JPY messy NEUTRAL (avoid for trading)
    4. USD goes DOWN up (e.g A dovish FED) and yen goes up (e.g A BOJ flop): USD/JPY goes down Double whammy (fasten your seatbelt and enjoy the ride)
    5. etc etc




​As you can see only doing this basic exercise will give you a huge edge and wide range of trading option (despite your TA that is irrelevant for this conversation).

--> Once you are clear with that you can start moving to complex correlation. Not going in details here because is too long and you will need to do your homework first otherwise you will never get it yourself:

  1. You will have to do the same exercise but this time with Doubles. For example, if USD/JPY goes up and EUR/USD is going down what will be the weight for each inner move. If both come from the same side = Direct correlation. If they don't at all means = No correlation. If they come partially from one side = Inverse correlation....

Only when you reach these level of understanding you will feel comfortable with correlation so take it slowly and start from the basics and build upon ...

I hope it helps you and others who have asked ...

sisse

Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,859
  • Jan 26, 2016 7:28am Jan 26, 2016 7:28am
All eyes on NY to see the reaction on Equities.

Expecting a quick day after the news until Europe goes home. No surprises with 1.084x s only level in play until the FED. Expecting inline reports for soft moves in the EURO. Failure unlocks a quick test to the 1.09xx handle with a direct micro move from 1.084x to then sit around 1.086x for the FED play. To the other side, current lows are naked since ECB with soft stops sitting at the low of the 1.08xx handle that will propel the move when taken....

GL all trading, planning to trade or simple waiting for tomorrow ....

sisse
Pending conversations? PM for a chat...I am mainly in OTM now
  • #138,860
  • Jan 26, 2016 8:02am Jan 26, 2016 8:02am
Quoting sisse
{quote} Andrew, Let me answer you with a long reply as many people ask the same question about how to start understanding correlation.... -- ... I hope it helps you and others who have asked ... sisse
Well, Thank you sir for this explanation, I'm sure everyone is going to benefit from your wisdom as always.
I'm just confused about the USD and JPY example you used
Quoting sisse
{quote}

  1. USD goes up (e.g A new hike rate tomorrow) and nothing happen in the yen: USD/JPY goes up
  2. USD goes down (e.g A dovish FED tomorrow) and nothing happen in the yen: USD/JPY goes down
  3. USD goes up (e.g A dovish FED) and yen goes down (e.g A BOJ QE): USD/JPY goes down Double whammy (fasten your seatbelt and enjoy the ride)
  4. USD goes up (e.g A dovish FED) and yen goes up (e.g A BOJ flop): USD/JPY messy NEUTRAL (avoid for trading)
  5. etc etc

Was there any typo here, and if so, am I correct to think it should be:

  1. USD goes up (e.g A new hike rate tomorrow) and nothing happen in the yen: USD/JPY goes up
  2. USD goes down (e.g A dovish FED tomorrow) and nothing happen in the yen: USD/JPY goes down
  3. USD goes up down (e.g A dovish FED) and yen goes down (e.g A BOJ QE) goes up (e.g A BOJ flop): USD/JPY goes down Double whammy (fasten your seatbelt and enjoy the ride)
  4. USD goes up down (e.g A dovish FED) and yen goes up (e.g A BOJ flop) goes down (e.g A BOJ QE): USD/JPY messy NEUTRAL (avoid for trading)
  5. etc etc

?
I'll make sure to do my homework this weekend.
With much appreciation.
Andrew

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