Wednesday, 31 October 2012

Trapped again....

Good morning folks!!

US market will be opened today in time for the month end closing. But do note that month end positioning can create erratic price pattern especially during the NY session as they are the one closing the trading day.

This Friday's US employment numbers will be crucial as it can in a small way sway some voters either way. A strong positive number will help Obama and a weaker-than-expected number to Romney. As I have mentioned before ("U.S. Election result to dictate...", 22 Oct 12) that this period prior to the U.S. election, as long the polls show a split, market will stay range bound and how either incumbent wins, the impact it has on E$.

From a strictly technical point of view, E$ is staying above pivot levels in the longer term chart, at this moment, to allow bulls to have an upper hand. My take is... an Obama win should see E$ break up from its consolidation into the 1.32/3400 band since Ben Bernanke will be around for a while to continue with QE Infinity. However, a Romney win can send E$ down to 1.26ish level first before a rebound. Shall watch.....

Order book as of this morning:
Stop loss: 1.2840, 1.2870 and 1.3020/25
Limit: 1.2880/85, 1.3000/10 and 1.3020/25

Technically, from intraday to the daily chart, E$ is stucked like in between a whole series of moving averages and other technical supports and resistances. Shorter intraday momentum is pointing to consolidation to down with nearer resistance at 1.2980/90. Daily close yesterday still below 21DMA (see chart) but bounced off the 50DMA. Intraday bullish divergent signal and backed by a daily bullish piercing pattern on the candlestick should continue to back a E$ recovery.

For today, during Asian to European session, look to sell rally, with tight stop above resistance, and take profit above support at 1.2920/30. Abandon trade idea if 1.2920/30 is seen first. Then look to buy dip on first test of the 50DMA + lower trend line around 1.2870 and take profit 1.2920/30.

All the best. Stay nimble and infront of your screen if you are to scalp.

E$ Daily chart - Still trapped

Tuesday, 30 October 2012

Full moon....

Good afternoon folks! Update from tomorrow should be back to normal timing. This is in no way an indication that I will be stopping my blog :)

Frankly, like it or not, currencies need to take some direction from the U.S. market though of course corporate orders can still be channelled for execution through their Asian/Ldn offices. Liquidity is definitely sub-optimal and is susceptible to whipsaw price action. This is made worse by the fact that we are in the full moon zone. I have to admit that I am not exactly too keen to engage the market because technical analysis works best in a liquid environment and there will be anomaly like the month end closing which can affect the market differently.

Update on order book today:
Stop loss: 1.2870, 1.2950/60, 1.2980 and 1.3020/25
Limit: 1.2880/85, 1.3000 and 1.3020/25

Technically, intraday momentum is pointing firmly higher coupled with a bullish divergent signal (see chart). This has increased the probability of a base being formed around the 1.288ish level. However, I have to give certain amount of discount on the strong momentum from the surge from the 1.289ish to 1.2949 as market is illiquid.
I remain conservative and will await to buy dips to 1.2840/60 with a tight stop and take profit around 1.2900/20 for today, if I have to trade.

All the best!
E$ 2-hourly chart - Bullish divergence

Monday, 29 October 2012

Tricky conditions....

Good afternoon, folks! Apologies for the late update. Completed the first half but had to rush out to meet friends from overseas and only just got back about an hour ago.

Hope everyone had an enjoyable Halloween weekend. But definitely not forgetting our friends living around the North Eastern shore of the U.S. of America as Hurricane Sandy heads for landfall within the next 24-36hrs. Do take care!

Admittedly, I have hardly been tricked by the market twice within a week, but I was last week. In view of that, it is getting apparent that market liquidity is probably sub-optimal (made worse today by the shutting of the US market today) and getting jittery ahead of the U.S. election. Understanding that we are already into that zone before the huge risk event, I will have to change my trading strategy and adapt accordingly in this environment by increasing the notional amount marginally and trade within a tighter range instead of the wider expected daily range (i.e. within support/resistance).

CFTC speculative accounts showed that net euro short contracts have increased very marginally to -55,219 vs -53,495. Net short jpy has flipped to -18,196 vs +10,086.

Order book from last Friday revealed the following:
Stop loss: 1.2880 & 1.3025
Limit: 1.2800/05, 1.2850, 1.2880 and 1.3000

Technically, intraday indicator is nearing o/s level though not at extreme. Intraday to daily momentum continues to point lower though the weekly is still pointing higher (may be lagging). There are conflicting signals and that is not totally unexpected at this stage. However, a few signals will continue to weigh on E$ at this point in time:

  • Price unable to stay above the 21DMA (see graph).
  • If price action continues to hover around current levels, it will soon trade below the rising trend line.
  • Bearish divergent signal has already emerged on EURAUD which has increased the probability that it has formed a top and in its counter-directional move i.e. down.

For today at this point (1.2898), expected range 1.2830/40 to 1.2960/70. I would look to buy on dip closer to 1.2830/40 on first test for a bounce for 1.2880/90 with a tight stop. For the next few days into the U.S. election, I will be adopting smaller range scalping
E$ Daily chart - Retested 21DMA but above rising trend line

Friday, 26 October 2012


TGIF and Selamat Hari Raya Haji to all my Muslim friends!

Kinda like an up and down day for me yesterday but overall happy. Just to share what I did for the purpose of learning. Reference the expected range from "Resilience..." (25 Oct Thu). Bought the E$ around the lower band and took part profit at the first resistance (down trend line - see graph). As bearish divergence emerged, I squared the remaining long E$ position higher than the first. Awaited for the dip and bought in again but this time in a smaller notional with a tighter stop and was hoping for the pair to test the stronger resistance. As E$ price action started to look uncertain, I decided to cut loss ahead of the stop on the 2nd position with a small loss. Net profit for the day. This is another lesson on how one should protect their profit based on the logic of reducing notional amount as you chase the market higher as the probability of winning reduces - inverse relationship. An important area in successful trading is in the ability to protect profits and limit the losses (though an obvious but many got carried away and allowed emotion to take over).

Clearly from the stop loss orders, market is quite torn on the eventual direction of E$ in the next 18hrs:
Stop loss: 1.2850, 1.2880, 1.2920, 1.3000, 1.3010 and 1.3040.

Technically, intraday indicator is at pretty neutral levels. Intraday to daily momentum continue to point to consolidation to lower though the weekly continues to point higher. More conflicting signals: E$ closed below the DMA21 (though already flirting that level for the past 3 days) but still above the longer term rising trend line (see graph).
In summary, I have this trading principle to avoid engaging the market when around the apex where we are right now. Allow the market to show its side, patience will pay in the long run.

I will be out with my family to the beach since its a public holiday in Singapore today. Will be back for Europe session later and will update the blog if anything.
All the best!

Update1: The breakdown has materialized. Rejected on retest of the DMA21 and broke the rising trend line have increased the probability significantly. E$ should be targeting 1.2830/40 level today.

E$ 8hourly chart - Rejected back and forth

Thursday, 25 October 2012


Good morning, folks!

Tricky move on the E$ yesterday (as far as I am concerned) as it took a deeper dip to test the rising trend line (see graph). Admittedly, it was one of those days where I was caught off guard by the move and was almost swayed once it broke through the 1.2950/60 level. However, I am so glad I stucked to my discipline. That is, in the event when stop is triggered, do not jump back into the market on impulse, emotion must be controlled. Take time to analyze the latest technical signals as per how I would each and every single time especially when the move was unexpected. That premature bullish divergent signal I mentioned in my update prevented me from turning short. Not trying to be philosophical here but to share an important lesson to learn.... one can only get profitable only after you know how to limit your losses.

Update of the order book this morning revealed the following:
Stop loss: 1.2880, 1.2920, 1.3000 and 1.3010

Technically, intraday momentum has turned and broken higher on the back of the bullish divergence. With a close back above the daily MA21 again, a "doji" candlestick pattern was formed. These signals have increased the probability for higher E$ today. As long as E$ stays above the rising trend line (see graph), the prospect of 1.3170 being retested remains realistic. However, one has to be aware that EURAUD does look heavy for now.
For today, I would attempt again to buy the dip with risk to just below yesterday's low of 1.2920. Expected trading range 1.2960/70 to 1.3010/30 (1.3030/40 stronger resistance).

All the best!
E$ 8hourly chart - If this trend line holds

Wednesday, 24 October 2012

Ifo & FOMC to dominate...

Good morning, folks!

Indeed, the early warning signal from USDSGD and USDJPY has helped to guide my read on E$ (U.S. election result to dictate... 22 Oct Monday). Basically, the NY session was dominated by stop loss seeking as it wasted no time to plough through  to 1.2952 where strong bids emerged. 61.8% fibonacci retracement level at 1.2946 is deemed to have been achieved. As I have found out from experience that certain candlestick pattern can be doubtful when market is caught within a range consolidation and therefore one has to adjust the weightage accordingly in different situations. Highlight for today will be the German Ifo business climate number this afternoon at 1600hr (Sin/HK) and FOMC at 0215 and 0400hr (Thursday).

I have not received updates on the order book yet but based on yesterday evening's remaining orders:
Stop loss: 1.3085, 1.3100 and 1.3120
Limit: 1.2950 and 1.3130

Technically, shorter term intraday indicator is at o/s level and the past hours of uptick is starting to unwind that situation. Intraday momentum is starting to turn from down to consolidation. Though E$ closed near to the lower day range, it still managed to stay above the 61.8% fibonacci level and daily MA21. I have various bullish signals from here but countered by the bearish engulfing candlestick pattern.
In summary, though there are conflicting signals but I prefer to go long E$ for today. Expected trading range 1.2950/60 to 1.3040/50 (1.3090/3100 expanded) within a wider 1.2800 to 1.3170.

All the best!

Update1: Went long E$ but got stopped out with tight stop. E$ having broken through 1.2950/60 may open up 1.2820/30 now but there is a premature bullish divergent signal on the momentum as it bounced mildly off a rising trend line at 1.2920. Staying out for now and await new signals. But for now, the bears have an upper hand at 60/40. Watch EUR/AUD as I see the recent uptrend has probably ended.
E$ 2hourly chart - Close to 61.8% correction target at 1.2946

Tuesday, 23 October 2012

Fundamentals eclipse technicals...

Good Tuesday, folks!

In my update yesterday, I mentioned about increasing IPOs and M&As are prelude to stock market top. I have friends asking if its imminent. My answer is quite simple, I will not be able to put my finger on the date, but it is an early signal. Google and read on the reasons for previous market crashes and one will gather that there had been a consistent pattern besides interest rise. However, I do not see a sharp selloff if that was what many would tend to expect. Instead it may be a long protracted downturn as we are not as leveraged as we used to be. It can be sharp if central banks decide to drain the liquidity out of the market after years of quantitative easing but that should not be the likely scenarion for now.
If stock markets were to turn down, does that imply that the USD will move higher? My answer will be.... not necessarily as this correlation could break down. We can discuss on this topic the next time.

For now, market will be watching closely the U.S. poll results as we get nearer to election day, as it can affect the currency positioning ahead. Based on current level, E$ has factored in QE Infinity, a Mitt Romney victory can drive the E$ down to 1.26ish. But that may not imply a change in underlying bullish E$ trend that I continue to subscribe to. If poll results are not showing any clear signals whatsoever, the probability of E$ trading within 1.2800 to 1.3170 is high.

No update on the market order book for now and these information is based on what had been gathered the evening before as an indication:
Stop loss: 1.2990-93, 1.3000 and 1.3100
Limit: 1.2980 and 1.3000 (see graph)

Technically, shorter intraday indicator is close to extreme o/s level and that should provide some support for now. Momentum is suggesting consolidation, but since price is close to the lower band, there should be some support around the 1.3010/20 for a rebound. This scenario is also supported by the daily bullish piercing pattern. The only conflicting signal is the break in the trend lines (see graphs below).
In summary, I shall maintain trading the range with a skew to favor selling into rallies. The expected trading range for today 1.2990/3010 (1.2960/80 news induced) to 1.3100/10 on first test. Remember to stay disciplined and nimble in a more fundamentally driven market ahead.

All the best!
E$ 2hourly chart - Trading below trend line

Monday, 22 October 2012

U.S. Election result to dictate...

Good Monday morning folks!!

Market has decided not to show its side the whole of last week as E$ continues to stay above pivot of 1.2990/3000 and below 1.3170. Focus this week should be this Wednesday's German Ifo Business Climate report at 1600hr (minor) and main focus on FOMC (Sin/HK Thursday 0215hr/0400hr) though I don't see how much this FOMC will add value since Fed is already on unlimited QE.
So chances are that we will be 'stucked' within the recent defined range until after the U.S. election on the 5 November 2012.
A couple of scenarios I have been thinking about to better prepare me in reaction:
1. Anticipation of a Mitt Romney win or the initial impact of an actual win will be USD positive. Why? Romney is very likely to fire Ben Bernanke and end the unlimited QE. At least for now, market finds him to be more pro business vs Obama's tax hike plan.
2. Anticipation or an actual win by Barack Obama will see E$ break out of its recent range continuing with its current trend as the recent Fed's decision will be here to stay.
Do note that this election is a major fundamentally driven event and it can throw technical rhythm off momentarily.

CFTC speculative accounts update showed that net euro short positions have been reduced to -53,495 from -72,570. This could be the result of the early week short squeeze and subsequently market was no longer keen to take on directional trades.

Noteworthy orders are as follow:
Stop loss: 1.2970/80, 1.3000, 1.3013, 1.3100/06 & 1.3150
Limit: 1.2950, 1.2970/80 & 1.3150

Technically, intraday indicator is at pretty neutral zone. But momentum is exhibiting a mixed bag of information across the different time intervals. The shorter term momentum is pointing to consolidation but with price at the lower band of that range, there is scope for uptick. However, daily momentum is pointing lower but the weekly is still pointing firmly higher (though can be lagging).
In summary, tough call but will go ahead and trade the range of 1.2990/1.3000 to 1.3100/10 on first test.

All the best and have a nice week ahead. Tomorrow's update will be delayed :)

Update1: Just thought I shared a couple of observations.
1. Last Friday after golf, one of my golf mates exclaimed that there are so many IPOs to choose from nowadays. Today in Singapore Business Times headline 'IPO pipeline hots up for Q4 burst'. History has it that prior to every stock market down trend, there were always that period where IPO hots up and accompanied by mergers and acquisitions. First sign?
2. Breakup momentum in USDJPY and USDSGD is good signal and may last into the U.S. election. This should be good early warning on how we should position for E$.

E$ 8hourly chart - Range ahead of U.S. election 

Friday, 19 October 2012

Spectre of 19 Oct 1987...

TGIF folks!! Happy Anniversary  :)

My elaborate update will be delayed till around 1400hrs (Sin/HK) today as I will be heading off for my 18 holes.

But generally, the E$ has finally been rejected above 1.3100 and the recent high of 1.3139 is very likely a near term top. With a bearish piercing pattern on the candlestick pattern based on yesterday's price action, the probability of follow through pressure on the E$ is high.

I expect 1.3100/10 to cap (1.3150/70 news induced - EU Summit) and 1.2990/3000 (pivot) to be tested. If pivot point fails to hold, it may open up 1.2850 to be retested again.

Midday update of noteworthy orders:
Stop loss @ 1.3040, 1.3100/10, 1.3150, 1.3170/72 & 1.3200
Limit @ 1.3000-20 & 1.3150

Technically, intraday indicator has unwound from its o/s condition but with still lots of room on the downside. Shorter term intraday momentum has turned from consolidation to down though the daily and weekly are still pointing up in the meantime. As mentioned earlier, the bearish piercing pattern has already pressured E$ to break below yesterday's low of 1.3055 to today low so far at 1.3046. From here, technical signals are suggesting E$ to target 1.2990/1.3000 support level but 1.3030/40 would offer an initial bounce. Range for today 1.2990/1.3000 to 1.3100/10. Expanded range (news induced) 1.2950/60 to 1.3150/70. 1.2990/1.3000 is an important pivot, a close below would increase the probability of E$ testing the 1.2850 level next week. For those who are still holding their short E$ from Wednesday or yesterday, should look to take some profit above the pivot and put on a trailing stop.

All the best and have a great weekend!!

E$ 8 hourly chart - Consolidation shall persist?

Thursday, 18 October 2012

One step back....

Good Thursday morning, folks!!

E$ spent most of yesterday's session hovering around the top end of its daily range after it rallied sharply right off the first hour of the day. We will be expecting the GDP number at 1000hrs (Sin/HK) to get a clue of the Chinese economic health and later today, the EU Economic Summit. All these with E$ starting the week gaining around 250pips from the low to the highest point. With first sign of bearish divergence yesterday coupled with weakening upside momentum overnight, the probability of lower E$ today has increased substantially.

Based on last night information, here are where the noteworthy orders are lurking:
Stop loss: 1.3040, 1.3150, 1.3160, 1.3170/72, 1.3180 & 1.3200
Limit: 1.3150, 1.3200, 1.3220 & for 1.3250 (Large barrier)
Clearly, the market is heavily loaded with buy stops around the previous high of 1.31718 which stick out like a beacon.

Technically, shorter intraday indicator is heading into o/s level, though not extreme yet but that should provide some support in the meantime. However, longer term intraday indicator is still in the o/b zone which suggest market may spend more time unwinding that condition and that should put pressure on E$ to trade lower. Intraday momentum is starting to turn from flat to consolidation which of course will put pressure on E$ too since it is still around the higher side of the range. Having said that, the daily and weekly momentum remain pointing up which supports an underlying bullish tone.
For today, I expect a correction of the recent rally which actually is healthier for E$ if it was to break above the recent range. Since the underlying trend is up, I shall be conservative on the support levels. I expect the trading range to confine to 1.3040/50 to 1.3150/70 for today. I will be a keen buyer when closer to 1.3000 but will put this on hold until price action unfolds later today as it may be a more news driven session.

All the best!
E$ 2hourly chart - Retest trend lines?

Wednesday, 17 October 2012

Bearish divergence....

Good day folks. Apologies for the late update, my body is taking longer to adjust to the Singapore time.

E$ was initially rejected twice at the resistance band at 1.3020-50 but on its third attempt it broke through convincingly to the high of 1.3124 after the NY market closed. I must admit that the spike up did surprise me. It is apparent that the market is going into Thursday's EU leaders meeting with quite a bit of optimism. Though I am bullish the E$ in the months ahead, I am expecting further consolidation
within 1.2800/20 to 1.3150/70 for at least another week before the breakout.

An update this morning of the noteworthy orders revealed the following:
Stop loss: 1.2933/30, 1.3121 & 1.3150
Limit: 1.3150

Technically, intraday indicator has gone into o/b territory with the shorter end showing sign of bearish divergence (see chart). This has increased the probability of a near term top in place and should warn against being too aggressively long at current levels. Momentum continues to point higher following the sharp run up and showing no indication of E$ turning down for now. However, if E$ slips below 1.3060/80 in the next couple of hours, the probability of a top being form will increase substantially.
For today, I expect another spike higher to break this morning's high of 1.3124 but capped below 1.3150/70 and subsequently fall back to support band 1.2990/3010.

All the best!! I will try to get up earlier tomorrow  :)

E$ Hourly chart - Sign of bearish divergence

Tuesday, 16 October 2012

Range is the word.....

Good day, folks!

Another day where market is happy just to stay within the defined range (1.2890 low to 1.2979 high) without much conviction ahead of Thursday EU leaders meeting.

To add to my observations yesterday, another sizable group of tourists who caught my attention was the Russians. They appeared to enjoy the sightseeing part rather than to indulge in branded goods. To conclude, it may just be a week out in Italy but it was very clear that tourists are no longer swarming the boutiques. Sadly, the salespeople did not seem to know the gravity of the situation but still happily enjoying their free time chitchatting. Wait till you read about France's Article 6 of the new tax law, which raises the top rate of capital gain tax from 34.5pc to 62.2pc. Its like trying to put fire out with petrol. Europe, I am afraid is going to get worse before it gets better. That being said, does that mean the E$ is going lower from here? Question remains on how much of these negatives have already been factored into current level. Only the technicals will shed some light ......

Order book appears to be quite packed, with stop loss orders at 1.2780/90, 1.2890, 1.2990/00, 1.3010/20 & 1.3050. Noteworthy limit orders at 1.2800/20, 1.2845/55, 1.2990/00 & 1.3050.

Technically, intraday indicator is close to o/b zone following yesterday's rally, though there is still room to push higher. Momentum is pretty flat across the range with indication of further consolidation. With the daily close forming a 'doji' yesterday, there may be some spillover momentum to take E$ slightly higher today. Top trend line of the wedge stands at 1.3020 today.
To summarize, I expect trading range to confine between 1.2880/900 to 1.3020/50 on first test. From here, I prefer to sell into rally. However, one has to be very careful as price action tapers to the apex. Stay disciplined, stay nimble.

All the best!
E$ Daily chart - Consolidation to continue

Monday, 15 October 2012

My observations....

Good Monday afternoon, folks. Apologies, I was so tired, I only woke up at almost 1pm!

Indeed E$ continues to consolidate during the period I was away and it does look like its not about to break-out anytime soon. Despite the negative fundamentals last week, E$ still managed to hold the 1.2800/20 support line and we are probably going to stay within the wedge (see graph) until nearer the trend line (darker line).

I spent last week in Italy visiting Florence, Bologna, Venice, Padua, Brescia, Varese and Milan. And here are my observations:
1. The group of Chinese who used to spend (like there is no tomorrow) in high end boutiques has vanished almost totally.
2. Though the main bulk of tourists are still the Chinese, the number has definitely dropped drastically. This group's agenda seems to be more on sightseeing than to swarm boutiques.
3. Notably an increase in American tourists. Age group mainly from 40s to retirees. Not interested in branded goods but will indulge in fine Italian food.
4. Another group that caught my attention is the Japanese. Mainly in tour groups - young couples to the older folks. Not into big time shopping.
5. High end brand boutiques are generally less busy as compared to 1 year ago. Even factory outlets are not as packed. This observation is further confirmed at the custom department in the airport where the line used to be so long and each individual with a thick stack of tax rebate forms. Though the Italian authority has improved the process but the spending power of the tourists has dropped significantly and one can get the custom stamp and your cash tax rebate in a much shorter time now. You can hardly see people carrying those big orange or dark brown carriers at the airport.
6. Restaurants were no longer as packed in the piazzas. In Milan, I was able to walk into a famous restaurant around 7.30pm without a reservation and was shown to a pretty good table though I was asked at the entrance... "With or without reservation?", for one moment I thought I was about to be turned away.
7. There seemed to be discrimination against Asians in some boutiques. One even refused to give me tax rebate to discourage me from buying. The lady offered a lame excuse that it was instruction from their HQ in Paris, though clearly I was in Italy and tax rebate is obviously under the jurisdiction of the Italian government.
8. Whether the Chinese has stopped buying luxury goods as a result of this discrimination or they simply just evaporated because of the weak economic conditions back home, one thing is for sure, the retail business in Italy is falling off the cliff. This is a very stark contrast to about a year back and to imagine that Europe is going through a down cycle, the last thing they wish for is a drop in tourist spendings especially in a country like Italy where it contributes to more than half of their GDP.

On the CFTC speculative account, E$ net short increase to -72,570 vs -50,265 in the week before.

On the orders, stop loss orders can be found at 1.2780/90, 1.2890, 1.2990/00, 1.3010/20 and 1.3070/85. Noteworthy limit orders can be found at 1.2800/20, 1.2845/55, 1.2990/00 and 1.3070/85.

I shall not present any technical views today as I will need sometime to get my market rhythm back.
But at a glance, it should still be 1.2850 to 1.3000 range for now.
All the best and tomorrow's update will be in the afternoon.
E$ Daily - Still trapped within the wedge

Thursday, 4 October 2012

One trading day lost.....

Good morning, folks!!

Boy, I wish this week had been a more action packed one than the next.

At least for now, it seems apparent the market prefers to stay neutral and mark time into Friday's US employment numbers. E$ has been flirting around the DMA21 for the past 4 days and refusing to show side. But at 1.2920, we are way above the pivot of 1.2800/20 and staying above the top trend line (see chart) maintaining a healthy gradient. Taking all available signals, the bulls have a slight edge for now.
Having said that, on a bigger picture like in the next couple of weeks, technical signals are indicating consolidation and probably within the range of 1.2750/60 to 1.3100/10.

Noteworthy limit orders can be found at 1.2800, 1.2878 and 1.2970/80 and only stop loss orders at 1.2940/50.

Technically, intraday indicator is in neutral zone and momentum has turned flat to consolidation. My defined range still stand at 1.2810/30 to 1.2960/70. Though one may still take a chance by trading the range with tight stop on either side. I have to admit that the % call is declining and hate to say that its getting closer to throwing a die. Scalpers' day, stay nimble and disciplined.

All the best!
E$ Daily chart - Gradient still healthy

Wednesday, 3 October 2012

Sell high, buy low....

Good morning, folks!!

True enough, E$ broke higher during the NY session from the spillover momentum from Monday albeit in a very choppy fashion but capped below 1.2980/90 (Golden Cross... lagging? 2 Oct Tue). That was how the market tested the psychological aspect of one's trading by moving against the grain of the fundamentals.

The last effort spike (from 1.2930 to 1.2968) to flush stops at 1.2940-50 does look exhaustive as price started to drift lower subsequently. Bearish divergence emerged as E$ was rejected, increasing the probability that a very short term top could be in place for this round.

Stop loss orders seem to have dried up after last night and last heard was the only noteworthy large limit order at 1.2800.

Technically, shorter term intraday indicator is at o/s level and that should provide support for a counter direction move higher. However, momentum continue to point to further consolidation which implies that E$'s upside should still be limited. Current defined range is 1.2810/30 to 1.2960/70. Very strong support can be found at 1.2740/50 (see chart) but E$ must bounce off if tested and close back above the pivot of 1.2800/20 to sustain the bullish tone.
For today, there are 2 ways opportunity but if my forecast comes true, we should be first selling into the retest of yesterday's high and then look to buy around the lower band either during NY session or tomorrow. Price action will continue to be choppy, therefore stay nimble and don't forget your trailing stop.

All the best and have a great Wednesday!!
E$ Weekly chart - Strong support around 1.2740/50

Tuesday, 2 October 2012

Golden cross... lagging?

Good afternoon, folks!!

Hopefully, someone benefitted from shorting E$ overnight as 1.2940/50 held  :)
Fundamentals are definitely not supporting the E$ and it will take guts and belief to trust the technical signals if it ever points up. Market focus for now is on Spain's impending request for a big time bail-out but Angela Merkel is going to tell them to hold their horses. Probably by late Thursday to Friday, attention will then turn to US's employment data. But from now till pre-US employment numbers, we have to see how long we are going to be stuck between 1.2800/20 to 1.2940/50. During this period, stop loss orders should accumulate even more just outside these boundaries.

Currently, the stop loss orders are residing at 1.2760-80, 1.2800, 1.2820 and 1.2940-50*. Large limit order at 1.2740*. A couple of levels (*) are pretty strategic from a technical point of view.

Technically, intraday indicator is at relatively neutral level. Momentum is suggesting consolidation to down from current level. But also note that there is sign of bullish divergence in the intraday momentum. The DMA21 (red) has been traded through either way for the past 3 days, so it seemed to have lost its significance for now. Yesterday's close has actually formed a bullish piercing pattern and that has increased the probability of E$ retesting 1.2938 high. A pretty mixed bag of signals, confused?

In summary, I expect choppy price action to prevail today with trading range of 1.2800/20 to 1.2940/50 but with a higher probability of the upside being broken but capped below 1.2980/90. I prefer to buy dips with risk to 1.2740.

All the best and a heads up that there will be no updates from 8-12 Oct as I will be away.
E$ Daily chart - Golden cross a lagging indicator?

Monday, 1 October 2012

Its not over till its over.....

Goood Monday morning, folks!!! Apologies for the late update, was unexpectedly delayed.

In hindsight, taking profit at 1.293ish on Friday seemed like a great trade now. I am so glad that I stuck to my basic guidelines to enforce discipline in profit taking and instituting trailing stop. Just like the  shocking result of the Ryder Cup this morning where the European came from behind to defeat Team USA...  "Its not over till its over" said Jose Maria Olazabal, Captain of the European team 2012, on Saturday evening when they were trailing 6-10. Lesson here for trading is, we can never be too sure of an outcome despite all the supporting technical signals.

I have to admit that I have left one element out in my overall consideration of Friday's market. That was the potential influence of the full moon and the quarter end closing. I believe it does have some bearing.
By the way, the full moon effect can still last till Tuesday.

E$ got hit real bad on the back of rumour that Moody's will be downgrading Spain's status to 'junk' today, sending the european currency down to flush sell stops at 1.2825 this morning. Last heard on Friday was that the remaining sell stops are residing at 1.2800 and 1.2780. Asian hours liquidity will suffer as the Chinese will be out for the whole of this week.

CFTC speculators account revealed that net euro short position fell to -50,238 (25 Sep) vs -73,482 a week ago.

Technically, intraday indicator is at o/s level but momentum continues to point firmly lower with an early bullish divergence signal emerging. Though market has rebounded off low of 1.2804, E$ still looks heavy below the daily MA21 (see chart). As I have mentioned in 'Caught in between...', 26 Sep Wed, the 1.2800/20 is a crucial and if we close below this pivot level, E$ is vulnerable to fall further towards 1.2550. Though at current level, E$ is susceptible to a short squeeze, I am not keen to buy into this move but instead would await to sell into rally at around 1.2940/50. This is at the moment a low percentage call and would to prefer to react when market unfold further. For day scalper, 1.2760/70 may offer some support and 1.2870 resistance on first test.

All the best and update tomorrow will be delayed.
E$ Daily chart - DMA21 and trend lines