Friday, 25 May 2012

Uncertainties, uncertainties & more.....

TGIF folks!!!

"Where do we go from here?.... " monetized that move?

E$ continue its roller coaster ride casting doubts in the mind of the bulls and bears. I was expecting a firmer finish but instead it closed nearer to the day's low despite a late bounce in the equities. Dow Jones has already had 7 straight weeks of losses and will this make it the 8th?

Technically, a break and with price trading below the major trend lines is definitely not good for the bulls and a weak close yesterday continue to reinforce that gloomy picture. To add, it is gets even more worrisome when more are talking about the record level in the net E$ short positions. On the other hand, I cannot ignore the fact that bullish divergence has emerged and it signals that we are close to a near term bottom. In situations like this, chances are that we may see another very sharp sell-off followed by a sharp reversal to complete the last wave before a more elaborate recovery.

That should guide one not to jump headlong into selling. Bottom fishing? may need more signals to commit for now. Just remember, whatever it is, always place a stop.... the market is always right!

For today on wide, 1.2400/30 to hold and 1.2620/30 to cap for now. All the best and I will resume my update from the 6 Jun.
E$ Weekly Chart

Thursday, 24 May 2012

Where do we go from here?......

Good morning folks!!

Given a longer period like 2 to 3 years, the E$ may gravitate towards parity considering the fact that the American economy has probably seen the worst during the Lehman crisis and Europe is still struggling with a potential time bomb that has not even exploded yet...... but I am not holding my breath.

So what now? European leaders met, they discussed, they agreed on some things, they disagreed on some and they went home feeling accomplished, just like the past meetings. Will Greece leave the Eurozone? I may be wrong but I reckon they do not have the government in place to make that executive call for now. Fundamentals are definitely supporting a lower E$ but CFTC positions are screaming record net short levels. Most of the downside stop losses have been flushed yesterday leaving mainly buy stops above with a notable size one at 1.2695. If E$ were to fall further, profit taking will kick in and buy stops will naturally be cancelled too.

On the technicals front, E$ has slipped back into oversold territory but not extreme yet. Bullish divergence has emerged but short to longer term momentum have not turned up yet. As of this point in time, I would place a 55/45 chance that technical signals are supporting a rebound.

So how best can one devise a plan to massacre the market resulting in both buyers and sellers losing their pants? One more sharp jab at 1.2480/520 region to clear some more sell stops and draw in more sellers before reversing to close the day firmer with follow through upside momentum tomorrow to close the week nearer to the upper half of the range? Let's see what happens.....

I will take a calculated risk to buy dips today. 1.2480/520 to hold 1.2620/30 first resistance. For those who may want to ride the rebound, hold to see 1.2820/30 retested sometime next week where I will be holidaying with my family.
All the best!

Wednesday, 23 May 2012

Just Grexit!!

Good morning folks!!

Though I expected the E$ to turn lower yesterday but it fell way short of my target of 1.2870/80 before it happened. My initial thought as outlined in Monday's "More reasons to sell E$, take a moment...." was a return to the 1.2670/80 region in the next 48 to 54hrs. I am glad the guideline had limited my exposure on the long side and managed to get away with only a small loss. But what irks me was the fact that I did not monetize on this big move which I foresaw! But let's move on and look for another opportunity :)

Yesterday was really an event filled day with the following news hitting the market:
1. First trigger was the downgrade of Japan by Fitch
2. Fitch report that Eurozone need for further LTRO
3. Greek official disclosed that contingency plans are underway for Greek exit

Here's where the existing stop losses are residing based on yesterday's information:
1.2875 / 1.2850 / 1.2840/45 / 1.2820
1.2640 / 1.2624 (Large)

Trading today will be tricky. If 1.2624 is not breached yet and rebounded, look to sell around 1.2720/30 for the test and break of 1.2624.
However, if 1.2624 is breached first, I will not get overly bearish but instead look for buying opportunity around 1.2580/90 (to be confirmed) with 1.2720/30 to cap for today.
E$ Monthly Chart
All the best!!

Tuesday, 22 May 2012

Consolidation with upside bias...

Good morning folks!

Nearer stops were taken out at 1.2815/20 level last night with another batch lurking around 1.2870/80.
Based on the firm close overnight, I would expect further consolidation today with a slight upside bias targeting the buy stops. Support on first test would be 1.278ish (see chart trendline).

Can't get overly bullish when market trades to 1.2870/80 for today.

So for today, I would expect an up > down market. 1.2770/80 to hold on first test and 1.2870/80 to cap and market potentially reversing to day low levels.
All the best!

Monday, 21 May 2012

More reasons to sell E$? take a moment....

Good morning Monday!!!

E$ hit the low of 1.2642 last Friday and rebounded strongly to close the week at 1.2777.

US CFTC data reveals that under the speculative accounts, net E$ shorts have build to a record position of -173,869 vs last week's -143,984.

The relatively strong counter directional move last Friday has turned short term momentum bullish and longer term momentum has also turned up which has increased the probability E$ has already formed a temporary bottom. One should now be mentally prepared for further short squeeze to flush out the weak shorts who have established their positions in the last 2 week on the back of those overwhelmingly negative Eurozone news. I will not be surprised that the gap at 1.3080 will now be the centre of attraction!

For today, 1.2820/30 should cap this morning rally for a corrective move lower through Europe to NY session. Over the next 48 to 54hrs, we may see range consolidation with potential probe back to 1.2670/80 first where I will be reviewing if its good to establish long positions for a deeper pullback.
All the best and have a great week!

Friday, 18 May 2012

Zero gravity.....

Good morning friends!!

What happens when market becomes directionless and goes into a limbo? Chances are that it will go in the path with least resistance and gun for stops. Based on yesterday's information, these were the levels.... 1.2624/1.2640/1.2765.

Gathered that last evening's sell interest around 1.274ish came from a diverse group which included real money managers, CTAs, hedge funds and a couple of sovereign names. Stronger offers are lurking around the 1.2800 region (trendline).

Overall trend remains bearish with 2012's low of 1.2623 within sight but E$ held up pretty ok despite Fitch and Moody's downgrade of Greece and Spain respectively.

Back to pure technicals...... short term momentum is neutral but longer term is still pointing down. E$ remains in oversold territory with bullish divergence emerging. I continue to believe that a sustained downward move on the E$ is limited for now and it is still worth a try buying on dip but only nearer to 1.2620/30 for 1.2730/40. 

Will update again later if any change in signals.
All the best and have a great weekend.

Thursday, 17 May 2012

The pause and rebound.....

Good morning, folks!!!

E$ has met my initial bear target of 1.27/2800.

So what now?

E$ shorts from the 1.2960/70 region should take profit now if you have not already.

Oversold conditions coupled with bullish divergence signals have suggested limited downside from here and have increased the probability of a rebound. Short term momentum has turned up but I have yet to see the longer term ones turn. But I reckon if price action continues to consolidate around 1.2730/40 region into the European session, signals should all have turned near term bullish.

Risk/reward favours buying dips for today.

1.2690/2700 to hold (1.2640/50 news induced) and 1.2800/20 to cap.

All the best!

Friday, 11 May 2012

Thursday, 10 May 2012

Sell on rumour buy on fact.....

Good morning Thursday!!!!!

PIIGS has done it again.... the ultimate driving force behind E$'s depreciation!
Will Greece or even Spain opt out of the E$? Will and can Francois Hollande backpedalled on all the aid agreements made by the Merkozy pair?
Until such time when we get the answers, E$ will continue to be a sell.

Back to the technicals...... E$ has finally succumbed to pressure and staying convincingly below the neckline at 1.3000. The inability to close the gap at 1.3065 to 1.3080 is a strong signal that the bears are in full control for now. Short to longer term momentum are pointing down now which has increased the probability of further downside pressure.

For today, 1.2850/70 to hold and 1.2960/80 to cap (a break above 1.3000/10 weakens near term bearish view).
1. If 1.2850/70 is being tested ahead of 1.2960/80, take profit on your E$ shorts and look to sell again
2. If 1.2660/80 is tested first, add on to E$ shorts

I am looking at 1.2750/1.2780 as initial target for this wave.

Note: Fed Chairman Bernanke will be speaking tonight at 21:30. This could be the catalyst if the market had not moved throughout the day.
E$ mirror image
All the best!!

Update1: E$ shorts take note that downside momentum is waning and be mentally prepared for a pull back towards 1.2980/00. However, no change in overall bear trend.

Wednesday, 9 May 2012

Gravity wins.....

Good morning folks!!!

Once again E$ rebounded off support level but fell short of target as it topped off at 1.3044 last night in reaction to Greek conservative party head Samaras' statement that he was ready to tolerate a minority government.

Though short term downside momentum has weakened to neutral, the longer term momentum continues to point down which shouts caution. Past 24hrs price action suggest further pressure on the E$ as it failed to come close to covering the gap at 1.3080 in its second attempt. E$ looks heavy today and the sell stops below 1.2950 is attracting lots of attention.

1.3010/20 to cap (1.3080/3100 news induced) and targeting 1.2880/2900 and subsequently 1.27/2800.

All the best!

Tuesday, 8 May 2012

What goes down must come up?

Good morning folks!!!

Be patient with me, I am a technical trader. When overwhelming news hits the market (especially during full moons) causing irregularities, it throws my technical signals off and I need a few hours for the market rhythm to resume before I am confident to make a call. Remember the Sun Tze, Art of War (Full moon effect - 4 May 12)? Pure discipline and no guessing game here!

Do note that market has yet to close the gap at 1.3080. Though E$ ended yesterday with a Doji close at 1.3050, it could be a matter a stretched rubber band snapping back. That being said, a close above 1.3000 does indicate near term strength. Bearing in mind that most sell stops had been flushed and market is potentially more E$ short following the election results, one has to be prepared for more upside test first before lower again over the next few days.

Short term downside momentum has waned and is at neutral now but it does have a slight skew towards the upside. Not going to be a high percentage call but today should be another buy dips day. 1.2990/310 to hold, 1.3070/80 resistance to watch and 1.3110/20 to cap. A break of 1.2955 invalidates this short term buy dips view.
E$ Daily chart
All the best!

Monday, 7 May 2012

Post election woes....

Good morning Monday!!!

Just to share a couple more of last Friday's full moon effect on the market. See the whipsaw price action pre and post the data. Subsequently a quick surge to a high of 1.3178 before turning all the way lower and opening with a gap this morning.

Full moon effect - the whipsaw before and after US employment data

I was so glad I followed my trading rule and took whatever small profit I had on Friday night from my long E$ position and enjoyed my weekend without having to think about the possible outcome of the elections.
Market tested 1.3178 very briefly, way short of my target of 1.3240/60 (Revisiting previous bear targets - 3 May 12) and stalled, resuming the bear trend on Friday night. There was market talk of a 1 yard E$ order up there.
Having opened a gap roughly between 1.3080 to 1.3065, market will somehow try to close it subsequently. Question is when.....  Sell stops were pretty much flushed after 1.2974 (previous low) was taken out. The selling stopped as it touched the 61.8% level at 1.2955.
I have to admit that I am not very familiar with this price action and compounded by London being out today, I would prefer to stay clear for now and observe for the next few hours.

But one thing is clear for now, the bears are in charge and we are indeed revisiting the previous targets I was looking at..... 1.28/2700. Will update when the signals are clear.

Friday, 4 May 2012

Full moon effect.....

TGIF folks!!

For the past twenty over years, I often have people laughing at me when I talked about the Full Moon effect...... Somehow very coincidentally, there will be some important economic data or news release during that few days window. Here's a typical example (milder version) in the price action during European/NY session last night.
Chart 1 - Full Moon Effect
With the Japanese still out today, we should expect another lackluster session in Asia or even Europe as market is bracing for tonight US employment numbers.
No change in my 48hrs assessment from yesterday's "Revisiting Previous Bear Targets....", just need to fine tune the intraday levels.
1.3110/30 to hold on first test (1.3040/60 news induced or second test) and 1.3240/60 to cap.

All the best and have a great weekend!

“If you know the enemy (market) and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy (market), for every victory gained you will also suffer a defeat. If you know neither the enemy (market) nor yourself, you will succumb in every battle” 
― Sun TzuThe Art of War

Thursday, 3 May 2012

Revisiting previous bear targets....

Good morning friends!!

Before we start, may I remind all that we are within the full moon zone from today till next Monday (wolves howling in the background....)

E$ finally broke out of its consolidative price pattern with an impulsive move lower breaking the 1.3200 baseline convincingly. The rejection at the 1.3280/300 resistance band speaks volume for the immediate trend and one would naturally jump very quickly to targeting 1.3000 again (but wait....).

In a bigger picture, the descending triangle formation has increased the probability of pressurizing the 1.3000 baseline. But we should expect some consolidation as it tapers towards the apex which a break will accelerate a move towards 1.27/2800 region.

But before we get there, let's stay focus on what is expected in the next 48hrs.

Based on the move yesterday, I would expect some spillover momentum to test the 1.3100/20 support during the European session. But I am also mentally prepared for a powerful short squeeze thereafter towards 1.3240/60 before the bears take charge again.

1.3100/20 to hold (1.3040/60 news induced) and 1.3190/200 to cap (1.3240/60 news induced).
All the best!

Wednesday, 2 May 2012

Things getting tight here.....

Good morning folks!!!
Can you imagine I actually have done the following this morning..... went down to register a place for my youngest son in a premier nursery/kindergarten and brought my domestic helper to apply for a visa for our month end holiday. Feeling so accomplished!  :)

Ok, back to the market.....

E$ finally tested the resistance band of 1.3280/300 and topped at 1.3284 before plunging back towards the baseline around 1.3200.

Frankly, the technical signals are very mixed, coinciding with price action tapering towards the apex.
Today's call will be a low percentage one but if a gun was to be pointed to my head, I will choose to be a seller on rally.

1.3250/70 to cap (1.3290/320 news induced) and 1.3140/50 to hold (1.3110/20 news induced).
For today, good luck..... we will need it!  :)