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Archive for the ‘Commodities’ Category

Monday 04/14/08

  • Currency trading end of last week into this week is like the Abbet and Costello “Who is on first and what’s on second” bit, confusing and violent.
  • G7 Language was purposefully vague not referencing China’s currency but general currency fluctuations- market tried to anticipate intervention action which caused more violent price action overnight and through today’s trading sessions.
  • Sunday Asian and European markets took the time to reduce risk led by Fridays’ GE news and US equities had potential and going into today to sell off dramatically – WAMU posts poor earnings prompting dollar selling and JPY holding steady while SKF rises. While US markets holding up steady as well – By commodity stocks and a weak dollar
  • Commodities rally while the currencies struggle??? Re-iterate the strong correlation between $ and Commodities. Highlighted by NY trading session.
  • Promptly discount US retail sales – housing later on this week could be a catalyst
  • UK housing tonight watch for a drag on the good news overnight of PPI input
  • NZD might be showing some weakness on Retail overnight and then CPI tonight may put a drag on the bear flag on the AUD/USD 4 hr chart
  • What are pro CTA’s doing YTD: 2.5% to crack top 10, 27% to be par with #1 ytd leaders managing over a mil and under 10 mil

Audio Commentary Link

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A slew of information and action happening this week and last, the boys give a good run-down of the action in there Commentaries.

  • Don’t Be fooled by the Commodity Rally….. Watch the price action to confirm a breakout. Is it possible to see the dollar and ‘Stuff’ go up long term?
  • Uptick in Jobles Claims – what is up with that bro?
  • ISM is better than expected but still below 50 – which is bearish
  • Commdity Bull very, very Short term – cautious because $CRX.X, no GLD or SLV or KIWI buyers stepping in because of non-farms
  • Equities Trader are no dummies – Buying commodity stocks as a hedg for tomorrow
  • Timing of trades today seems curious
  • The TAX payer is going to be left holding the bag through inflation – Jimmie what did Countrywide tell you
  • Sara – Get back to SnR – is what you are doing repeatable, maybe it is analysis of entry setup, reuce the pip count and keep practicing, focus on few pairs.
  • George – We didn’t know – near term downtrend, RBA looking to lower rates and commodities cooling off

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293homealone121107.jpgWell, maybe while you were getting ready for bed. The Federal Reserve Bank decided to make an emergency move this evening and cut the bank lending rate to 3.25 percent from the 3.50 percent it was at earlier. This move made by the Fed was meant to “try” and create some stability in the financial markets. Also, at the same time, Bear Stearns (BSC) is being bought out by JP Morgan (JPM) at a steal of a price. This last minute buyout and the move by the Fed (who also approved this buy out by guaranteeing the deal with $30 billion) had an immediate effect on the overseas market and crushed the dollar. The EUR/USD hit a high of 1.5905 and the YEN hit 12 year low against the dollar at 95.74. Gold also was trading (at time of posting) around 1,026 an ounce. (I guess there goes the gold teeth I was considering!)

One way to help you against the falling value of your dollar is to hedge against it with the other currencies like going long the Euro or even long the Yen. Any trading against the dollar seems to be the most logical move. When asked what should be done about the financial crisis in the US, Federal Reserve chairman Ben Bernanke said “I don’t know!” No wonder the dollar is crashing and the basic carry trade is dead.

Well, hedge your bet for now or wait and see if the fed moves some more on Tuesday with another cut of 75 basis point. Bernankes strategy seems to be trying to keep the economy supported and worry about inflation later. We may see on the EUR/USD 1.6000 before Tuesday if the market sees even more weakness. Also, the USD/JPY may see an even lower level below 95.00 as weakness in the dollar continues. Tomorrow is a new day.

~ G

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head_and_shoulders_classic_clean_dandruff_shampoo-resized200.jpg Heads up (haha) –  commodities ($CRX) could be forming a head and shoulders, which is a major reversal pattern – by the way, I plan on updating the Price Pattern section very soon, so more discussion on Heads and Shoulders there stay tuned. See how I am looking at it in the chart. I try and look at a variety of markets, but when starting out I recommend remaining focused on the pairs you’re monitoring. That said, here’s some thoughts to consider:

 

commodities.jpg If commodities make a run lower, what does that mean for currencies – specifically, pairs that have been on a good run?

What pairs are especially affected by commodities?

How do commodities fit into the grand scheme of things? (think: global economy)

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yearendcomp.jpg Here is the year in review as a comparison chart (left, click to enlarge) comparing the major currencies, in this case versus the euro. The worst performing currencies, the USD and GBP, were down about 9% vs. the euro. The best, the loonie, was up about 9%%.

What happened this year?

The year had a lot of positives for most currencies: the global economy was booming, and so commodity currencies economies sold lots of stuff!

But this always only goes so far. Inflation ramped up, and central banks began lowering interest rates.

Then came the U.S. real estate mess.  Interest rates were higher than they were a few years ago, and lots of folks got hit hard as their short-term get-me-in mortgages forced them to refi at a higher rate. Many defaulted. Supply started flooding thet market and things slowed way, way down in real estate, didn’t they?

Not only that but bond portfolios related to all of this started going bad. Lots of funds with exposure to real estate and mortgages got hit hard. Banks started trusting each other less, making it harder yet to access cheap loans. Fear entered the market and the Fed lowered rates more, the dollar tanked, governments started diversifying out of dollars and into things like euros, economies started showing signs of flagging … ah, ’07!

180px-john_william_waterhouse_-_the_crystal_ball.jpg Looking forward:

Commodities still look strong. The dollar still looks weak, the euro strong. The carry trade – shorting low interest paying currencies such as the JPY and CHF – may only be just getting started in its unwind. As economies around he world slow, people start peeling their bets back, and many of the bets were paid in yen or francs, so that increases their value as they are bought back up. A little bit of discussion regarding the fundamentals can sure help shed some light on interpreting this comp chart. Remember, though, at the end of the day it simply comes down to following a good trend (ahem, looking for opportunities to buy euros) and using a simple method to time your entry into that.

 ( “The Crystal Ball” by John William Waterhouse: scrying in crystal)

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Jim Rogers is a bit odd (sorry Jim) in some ways, but a pretty sharp crayon when it comes to the markets. First off, I apologize about the crappy quality of this video, I think someone filmed their TV, yuck. But, it is timely since it is from yesterday, and he has some pretty interesting things to say about the markets. He also admits he is “horrible” at market timing, so fear not if you have some trades that have gone bad and think you’ll “never make it”!

This discussion started when some of us coaches emailed about Jim. A month ago Jim said he was selling USD, but with this caveat toward the end of an interview:

If anything, if I were a good trader, I would probably buy the dollar, because it’s probably going to have a rally. But when it rallies, I would suggest you get out of dollars.

And sure enough, Edward Goettig (one of the coaches) said Jim said yesterday that he is buying dollars, until the dollar stops rallying whereupon he’ll sell them again. I totally agree with his posture and have been thinking the same thing. Anyway, the interview:

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