Forex Market Commentary
The only new news we wanted to hear was China
China is getting back into shape with a recent spate of improving economic data. In August 2015 the China crisis came to a head and the Dow plunged in moments from the mid 17000 level to the 15000 level. Should China go into turmoil who would buy new issue US Treasuries at public auction? That news accounted for was soon followed by a dramatic rise up to 17500 level last October. Then of course came the final reality of the rate hike and the suicide pathos as Wall Street chieftains saw the end of the world coming and the Dow once again plunged to 15,500 in January 2016 to complete a double bottom on a yearly chart. China crisis over, interest rate traumas done, what could now possibly hold back the US economic engine? A slow-down was also accounted for since the US has to carry a sick China, Japan and Europe for the last 1 year it is an incredible feat indeed. But now just take a look at bond yields across the globe. Japan is in negative territory, Europe is fast descending into the possibility of deflation. Where on earth can anyone make some positive money?
Answer = The USA.
1. US bonds - Positive bond yields: with 10 and 30 year being the most lucrative for a buy and hold where else would investors park their money?
2. US equities - Dividends allure: notice how before every earnings season international funds pile into US stocks to earn dividends and the yo-yo of the US Dollar between quarterly earnings reports and dividend payment.
and you need US Dollars to pay for US bonds and equities.
If you were to place your money on deposit for 1 year would you like to earn negative yields in Europe and Japan?
Think logically and apply the global macro-economic analysis to form the background of your trading knowledge of currencies. Compare the economic data of USA vs Europe, UK and Japan and understand the driving force behind the demand for a currency.
That is the global macro-economic analysis I maintain and to confirm all this watch the S & P and the VIX to observe growing consolidation and increasing volatility. Two things are going to happen in the S & P. Either its going to continue a wild zig and zag at the 2000 level before a massive summer 2016 push to break above the 2100, or it's going to drop like a stone for a week to clear out the weaker longs before a push over the 2100 in the summer again, yet such a fast drop is becoming more unlikely. So don't go and bet against a market that has continuously shown higher highs and higher lows. there is a
huge pregnant pause in options volatility with the VIX now at a very low 14.75%. This can only point to a coming explosion in US equities. Equity option deltas are not moving. Something has got to give very soon. Either way, international funds are going to continue to invest in the USA and bid the USD up. Yield divergence on the main pairs EUR/ GBP/Yen will continue through 2016 and every smart hedge fund trader knows this and would buy US equities on the drop. US equities, poised to defy all the doom-mongering, does not help the glamorous claims doing the rounds on gold bullion for the moment. Once again gold is zigging around the 1230 region but traders are failing to understand the physical reality o gold production and uses and sales if they keep thinking gold has this huge potential to run up to the dizzying heights like before. Gold shot up when the US was in trouble and implementing Q.E. Once in a while some news may inspire gold like the potential Brexit. But for the moment the bulls who pile in are more likely to get hurt. The same with crude oil doing nicely at 42 dollars region. Whilst I can see crude oil closing the end of this year in the high 40's, there is still the Iran factor to come into the physical market unaccounted for and Russia and Saudi may hold their production but the pace of production is still at record highs
In my global macro analysis the major barometers I am look at for 2016 are as follows:
US Dollar - 94.703 -0.241 -0.31% - the global base currency (hedge funds are buying at every dip)
Answer = The USA.
1. US bonds - Positive bond yields: with 10 and 30 year being the most lucrative for a buy and hold where else would investors park their money?
2. US equities - Dividends allure: notice how before every earnings season international funds pile into US stocks to earn dividends and the yo-yo of the US Dollar between quarterly earnings reports and dividend payment.
and you need US Dollars to pay for US bonds and equities.
If you were to place your money on deposit for 1 year would you like to earn negative yields in Europe and Japan?
Think logically and apply the global macro-economic analysis to form the background of your trading knowledge of currencies. Compare the economic data of USA vs Europe, UK and Japan and understand the driving force behind the demand for a currency.
That is the global macro-economic analysis I maintain and to confirm all this watch the S & P and the VIX to observe growing consolidation and increasing volatility. Two things are going to happen in the S & P. Either its going to continue a wild zig and zag at the 2000 level before a massive summer 2016 push to break above the 2100, or it's going to drop like a stone for a week to clear out the weaker longs before a push over the 2100 in the summer again, yet such a fast drop is becoming more unlikely. So don't go and bet against a market that has continuously shown higher highs and higher lows. there is a
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In my global macro analysis the major barometers I am look at for 2016 are as follows:
US Dollar - 94.703 -0.241 -0.31% - the global base currency (hedge funds are buying at every dip)
EUR/USD - 1.128250 +0.003195 +0.28% - the 2nd liquid currency
(hedge funds are shorting at every spike)
(hedge funds are shorting at every spike)
GBPUSD British Pound 1.4210 +0.0056 +0.40% - the 3rd liquid currency
(hedge funds are shorting at every spike)
30 DAY FED FUND May 99.635 +0.005 +0.01% the basis for US rates
(hedge funds are shorting at every spike)
DJI 17897.46 -28.97 -0.16% the body for US equities
(hedge funds are buying at every dip)
S&P 500 2080.73 -2.05 -0.10% the core engine for US equities
(hedge funds are buying at every dip)
VIX 14.75 + 0.07 - + 0.51% - the volatility of US stock options
30 DAY FED FUND May 99.635 +0.005 +0.01% the basis for US rates
(hedge funds are shorting at every spike)
DJI 17897.46 -28.97 -0.16% the body for US equities
(hedge funds are buying at every dip)
S&P 500 2080.73 -2.05 -0.10% the core engine for US equities
(hedge funds are buying at every dip)
VIX 14.75 + 0.07 - + 0.51% - the volatility of US stock options
Crude Oil WTI - 41.75 -0.92 -2.16% - a barometer of world trade
(hedge funds are shorting at every spike)
Gold - 1234.190 +8.310 +0.68% - a hedge against inflation
(hedge funds are shorting at every spike)
Summary Review for small traders -
There is nothing wrong with day trading but it has to be momentum driven and within the context of the longer term analysis above. News events creates momentum and moving in a herd is the safest thing to do for a very short trade horizon. Two most important tools for a day trader is to watch the candlesticks and the volume indicator. Successive green or red bars on the momentum usually work in groups of 5-6 bars before an opposing action takes place. Move with the trend direction. With candles a short trend takes on a personality and one can usually move with the momentum direction of the last 5 bars of 5 mins but watch for reversals like hammers, hanging man, engulfing bullish, dark-cloud cover formations etc to signal a reversal. Prices do not go up in a straight line; they zig and they zag and therein lies the opportunity for short term day and swing trading which candlestick charts serve very well to illustrate.
Pieter Bergli - Trader X16
A non-profit service for free education on in the forex markets
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers.
* European Union laws require European Union visitors to this blog to know that cookies are used by Blogger and Google, including use of Google Analytics and AdSense cookies and in reading material from this blog do consent to the use of such cookies
(hedge funds are shorting at every spike)
Gold - 1234.190 +8.310 +0.68% - a hedge against inflation
(hedge funds are shorting at every spike)
Summary Review for small traders -
There is nothing wrong with day trading but it has to be momentum driven and within the context of the longer term analysis above. News events creates momentum and moving in a herd is the safest thing to do for a very short trade horizon. Two most important tools for a day trader is to watch the candlesticks and the volume indicator. Successive green or red bars on the momentum usually work in groups of 5-6 bars before an opposing action takes place. Move with the trend direction. With candles a short trend takes on a personality and one can usually move with the momentum direction of the last 5 bars of 5 mins but watch for reversals like hammers, hanging man, engulfing bullish, dark-cloud cover formations etc to signal a reversal. Prices do not go up in a straight line; they zig and they zag and therein lies the opportunity for short term day and swing trading which candlestick charts serve very well to illustrate.
Pieter Bergli - Trader X16
A non-profit service for free education on in the forex markets
Disclaimer - U.S. Government Required Disclaimer - Commodity Futures Trading Commission
Futures and Options trading involves risks of losses. No representation is being made that any reader and account will or is likely to achieve profits or losses similar to those that are being discussed on this blog http://forexeducationperspective.blogspot.com/. The past performance of any trading system or methodology discussed is not necessarily indicative of future results.
CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.
All trades, patterns, charts, systems, etc., discussed in this blog http://forexeducationperspective.blogspot.com/ are for educative and illustrative purposes only and not to be construed as specific advisory recommendations for actual trades. Disclaimer - http://forexeducationperspective.blogspot.com/ bears no responsibility for the trading actions of its readers.
* European Union laws require European Union visitors to this blog to know that cookies are used by Blogger and Google, including use of Google Analytics and AdSense cookies and in reading material from this blog do consent to the use of such cookies
