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Two currencies come to mind as fitting nicely into the former dynamic — dragged higher despite poor fundamentals. The rand. We have maintained a negative view on the South African rand for the last couple months — since May actually. For most of that time, the rand has thrown it in our faces, extending its rally versus the U.
For starters, South Africa remains in recession. Consumer spending has fallen for five straight quarters, and consequently production is slowing dramatically. While improvement is showing up in various period-over-period numbers, it is far from the type of growth needed to sustain the South African economy.
Specifically, stabilizing the job market is a top priority for the fairly new administration headed by Jacob Zuma. There have already been some shifts in the top economic officials. Speculation seems to say Zuma is aligning his new officials on the side of the ANC and labor unions. There have also been instances of Zuma abusing power. The President has become a smooth-talker full of promises. The problem is — they are empty promises without sound, sensible follow-through.
Empty promises cannot save an economy no matter how hard you work to bolster confidence among citizens. And it is particularly unsettling when you start promising jobs but there are none to go around. The result of this notion that the government can create jobs and keep its citizens happy has been, ironically, angry citizens with high expectations but without any jobs.
That is part of the reason for another problem — crime. As this article reveals, crime could be part of an incurable social destruction, taking place in South Africa. Sooner or later, think the brain-drain in South Africa and the desperate crime will eventually lead down the road to Zimbabwe for the country.
It is bad news for the currency to say the least. We have seen a test of the low red line and weekly MACD yellow circle has given a buy signal. The simple approach to analysis is often all that is needed to uncover excellent trades. Steve Griffiths outlines how to identify and use the ABC correction to the first move off of an important high or low.
One lesson learned over years of trading is that the simple approach to analysis is often all that is needed to uncover excellent trades. Arguably, one of the clearest trade set-ups for a professional trader should be the simple ABC correction. I have outlined not only how this clean ABC correction can yield profitable trade opportunities, but how simple and easy-to-recognise it can be.
Taking this a step further, when the basic ABC correction occurs at a certain juncture in a market, it can produce one of the most profitable trades available. This happens when the simple ABC correction develops as part of the first correction to the first move off of an important high or low.
In Elliott wave terms, this is the Wave 2 correction. The most important point is that this ABC correction unfolded as part of the first correction to the initial swing off of an important low: See Chart 2, left.
When this correction is complete, it can lead into a Wave 3 type move, which is usually the strongest and longest swing in a typical 5-wave sequence. This swing has the largest profit potential in any Elliott wave pattern, so being able to trade it can be highly profitable. Chart 1 shows an example top right. So, why is this set-up so important? Often, this initial correction is the springboard for an extremely strong move.
Clearly, identifying these set-ups can result in enormously profitable trades. More importantly, this setup is straightforward to identify with its mathematical simplicity — a simple ABC correction that unfolds as part of the first correction to the first move off of an important high or low. The MTPredictor software program can scan for, automatically identify and assess this set-up in markets.
This has the major advantage of reducing the initial money risk on the trade, particularly compared with the potential profit from these Type 1 set-ups. Anticipating that the market was reversing at this zone enabled the trader to enter the market with a very small initial money risk.
This means being long from 1. This particular trade setup can unfold in any market and on any timeframe from weekly charts down to 3-minute charts. Whether you trade UK equities, U. The simple ABC correction is one of the most overlooked set-ups among the arsenal of techniques that are available today. The Type 1 trade set-up as labelled by MTPredictor software , where the correction develops as part of the first correction to the first move off an important high or low could be as close as possible to the Holy Grail of trade set-ups.
Steve Griffiths is the managing director of MTPredictor Ltd and the developer of the MTPredictor software program, designed exclusively to scan for, identify and risk-evaluate ABC corrections, as well as all of the Elliott wave sequences. For more information, please visit the MTPredictor web site at www. Swing Trading Techniques: The release of certain economic data often produces extreme market movement. The debate as to which trading methodology to use has been raging for decades.
The pure fundamental trader examines economic data, balance sheets, intermarket correlations and political developments with a view to determining whether a market is correctly priced. After making a value judgement as to where a market should be, the trader aims to take advantage of any discrepancies between the current price and what is deemed to be fair value.
Fundamental traders are deeply concerned with why a market is moving in a given direction. The pure technical trader is not as concerned with the underlying fundamentals driving a market, preferring to limit the inputs they look at to data derived mainly from the market price.
The pure technician believes that market psychology is the key factor, and that markets trend and reverse in a predictable manner producing patterns on the charts, which can be exploited. Consider a day trader who trades from intraday charts. Imagine that it is approaching 8. Non-Farm Payroll report is released. This piece of economic data often produces extreme market movement as traders who are typically lightly positioned or flat going into the data release put on new positions based on the report number.
If a technical trader gets a buy or sell signal just before the number is released, does he or she take the trade and hold the position through the release? It would be foolish to do so as a number or a revision of a previous number that is far from consensus market expectations often causes the market to move sharply from the pre-release price to another level without trading at prices in between. Surely, the best strategy in this case would be to wait until after the data release before making a trade?
The problem with this approach is that it is possible to miss most of the move, buying into a trend when many of the early buyers are selling out. It would be shame to miss out on what could be one of the best trading opportunities of the month. What should the trader do? An example would be a bear market in stocks that sees prices becoming cheaper and cheaper. Similarly, technical traders should maintain a healthy respect for the fundamentals, particularly those trading over a short timeframe with a correspondingly close stop loss levels.
The need for mutual respect on both. In my opinion, many of the best trading opportunities arise as a result of a false breakout of some kind. Most of the time for example, this theory applies to the technical approach where the breach of a support level fails to see follow through selling and a powerful move unfolds in the opposite direction.
Assume that the Non-Farm Payroll number comes out so far from market expectations that it is implicitly bearish for a particular market and generates heavy selling pressure just after the release. It often happens that once the data is released, markets see a knee-jerk reaction as fundamentally driven traders take a position, particularly if the number is significantly stronger or weaker than the market consensus expectations.
However, perverse as it may seem, the markets have a habit of seeing a very powerful movement in the OPPOSITE direction to the initial post-release movement, much to the frustration of those who take a position based on the data. To take advantage of just such a move, I like to follow this three-step process. A trade target naturally depends on timeframe.
I would stress that a move of this nature is often good for a 2 to 1 or 3 to 1 reward-to-risk ratio, if not by the close of the session then certainly over subsequent days. I hold the trade until the stop level is hit, all of the profit objectives are met, or at If the trade is triggered on a Friday, I will exit on around the U. THE U. Non-Farm Payroll report in October The number came out much worse than market expectations , versus a market expectation of , , resulting in a violent knee-jerk sell off that saw a test of the buy set-up level at 1.
Figure 1. Figure 2. The next time a significant data release such as U. NonFarm Payrolls occurs, look to join a post-release reversal that could last for several days! I wish you the best in your trading. He has worked as trader and market analyst for over 20 years and has developed proprietary trading methods to time the markets. Howard can be reached at h. After hitting the buy set-up level at 1. Within a few hours, the first take profit.
Todd Krueger leads a discussion of this year old trading method and its benefits. For most of them, this unfortunately will never happen. Although each individual trader has their own weaknesses to overcome, I have found that the collective problems of losing traders can primarily be grouped into trading psychology, mental discipline, trading expectations and trading plans. It is within these areas that most unsuccessful traders have issues that they need to learn to overcome.
The typical Forex traders I come into contact with have very little trading experience. Many of them have very small trading accounts, unrealistic expectations and no disciplined trading plan to follow. In this article, I will illustrate a trading methodology that is over years old that has withstood the test of time.
Wyckoff during his prolific trading career in the early s. In a typical Forex cross-rate, it is not uncommon to have over pips of market noise, which is a major cause of stops being hit when they are too close to the current market price. We are talking about trends lasting from several months to several years with moves greater than pips being very, very common. These are the same areas that most losing traders have problems with and do not know how to overcome.
In my communications with Forex traders, I have found that the vast majority of traders are using very short-term charts and they are trading an indicator-based approach like MACD, CCI or Stochastics. To make matters worse, they are trying to gain 20 pips to 50 pips in profit with their approach.
This is extremely difficult to achieve on a consistent basis because the random market noise is greater than the profit target. The probabilities are very high that the market noise will hit their stop and take them out of the trade before their profit goal is achieved. Reversal size is also a determining factor how sensitive the chart is to price reversals. Chart 1 has a box size of pips and a reversal size of 3 boxes. So on Chart 1, we will add an X to the X column every time the price moves pips higher.
Can you see how this method puts an asymmetrical trend filter on the chart? It only takes 1 box size to advance the chart in the direction of the current trend. Each X and O is assigned a point pip value as part of the chart set up, this is called the 'box size' and it determines how sensitive the chart is to price movement.
During the chart set up, we also have to determine the reversal size. This is the number of boxes required. It is this trend filter that will allow us to stay in trend trades much longer than any other charting method. See Chart 2, next page, top For this article, I want to show a very powerful buy set up called the 'triple top buy. We do not have a buy set up until the chart formation objectively appears on the chart.
This is a great aid to the struggling trader that is trading without a trading plan and is losing because of it! Because the market is exceeding an important level on the chart where the bears successfully took control from the bulls on 2 separate attempts to move price higher.
Once this level is breached, demand objectively exceeds supply and since the bears could not prevent price from advancing, they have to buy to cover their short positions, which will fuel the price to move higher. See Chart 3, next page, top There are several other chart conditions that contribute to making this a much stronger buy set up than the standard triple top buy.
The first area that I would like you to look at is where the down sloping trend line is broken by the long X column. This trend line had contained price action as the bulls repeatedly tried to push price higher but the trend line provided resistance to each failed rally. Without the overhead supply in the market from these aggressive sellers, the demand exceeds the supply and the price will move higher.
When price breaks above this resistance line, it provides a clue that the market dynamics are beginning to change and the bears are losing control. To provide further proof that the bears are losing control, please look at the up sloping support line that is drawn on the chart supporting prices at consistently higher lows.
This shows that the bulls are taking control at higher prices after the bears have attempted to drive the price down with less effect each time. When the buy signal occurs on this chart, we can objectively see that the bears are out of ammunition to successfully drive price down again. The resulting up move has provided a monster gain that is still going as of this writing. The entry on this trade was just over 1.
You do not get out until the chart objectively tells you to. As with any true trading methodology, there are rules and patterns that need to be learned before it can be used effectively. There are also nuances that you will learn that will make your results more effective but can only be learned by actively trading the methodology. There is not room in this article to cover every rule and nuance, but my hope is that this article has ignited a creative spark that will allow you to see the power of a century old trading methodology that can unlock the profit potential in your Forex trading.
But it is even more important to determine when the market has been rejected from support and resistance levels, or better yet, how to spot false breakouts so we do not get trapped by them. First things first, we need to make sure we are using the right methodology to determine important support and resistance levels.
By definition; Supports are levels or zones where the market has been rejected more than once, preventing it from falling below that zone or level. The more times the market has been rejected from such a zone, the more important the support level becomes. Resistances are levels or zones where the market has been rejected more than once, preventing the market from trading above that zone or level.
The more times the market has been rejected from such a zone, the more important the resistance level becomes. Under these circumstances, the balance of support and demand changes. Why are these support and resistance levels so important? Because at those levels the market is likely to be rejected: When Long — If a long position is entered near an important support level, the likelihood of our trade increases in our favor since the market was previously rejected around this zone or level — bulls outnumber bears.
Okay, we know what is likely to happen when the market approaches to an important long-term support or resistance level, now we need to know when to take proper action. A key to spotting false breakouts is that important long-term support and resistance levels are not levels, but ranges or zone. You might want to test this. Pull up any daily chart and you will see that important support and resistance levels are okay even if you move them a few pips up or down.
The best way to define the range or zone in which each long-term support or resistance is valid, is by looking at the short-term charts. We know the market is trading in. In order to have a valid breakout or rejection, the market needs to break the short-term support level breakout or the short-term resistance level rejection.
This way a map can be created. We could avoid trading during false breakouts or rejections where most traders get caught. Once we have determined the short-term range or zone, we need to wait for the market to break the short-term level before looking for a trade opportunity.
Having a trading plan of what the market needs to do before starting to look for a trade opportunity will help with your discipline, and will help you become more a more consistent trader. Going back to the daily chart, judging by where the market was trading at that moment, we know that even though the market is trading below the long-term support level, it is a false breakout, because the market is still trading above the short-term support level.
By the same token, if it were trading above the long-term support level, but below the short-term resistance level, it would be a false rejection. He is a full-time Forex trader and also trains traders around the world to help them achieve their goals. Raul is also an economist and got interested in the Forex market back in his college days. He got involved in several companies related to the foreign exchange market.
He has always liked to do things different, this attribute made him try different ways to profit from the Forex market. Raul can be reached at www. The basis of using any trading strategy must be determining the market direction, which can also be referred to as market phases or cycles. I was first introduced to market cycles as I was reading about Dow theory. A basic tenet of Dow theory was that market trends have three specific phases.
Remember that while the psychology of market phases can be applied to any market, the bias of the stock market is bullish. Since Charles Dow wrote about the equities market in the earlys, much of his writings reflect this bullish directional bias. In other words, most equities traders and investors look for a stock to go up. As Forex traders though, we are equally ready to go long or go short. Please keep this in mind as I go through the phases.
This was done posthumously. However, traders in every market knowingly or unknowingly are affected by the ideas in his editorials even today — regardless of the market they trade. The first market phase of a trend is accumulation. Accumulation phases visu-. Charles Dow wrote his editorials about the equities market in the earlys and his ideas affect traders even today — regardless of the market they trade.
It is for this reason that accumulation usually goes unnoticed. However, I want to keep with the idea that as Forex traders, we can benefit from Dow theory as long as we remember that in the currency market accumulation can also be followed by a downtrend. The trend, as I will refer to it for this phase or cycle, is when price typically trades above the resistance or below the support of the accumulation range. News, data or even volume could be the catalyst for the breakout.
Regardless of how the trend began, as it persists, more and more participants notice the move and want to get on board. The only reason an uptrend can continue is that more participant are willing to buy the market at a higher and higher price. It should also be added that these same participants are willing to buy corrections and it is these corrections or lows in the uptrend that become the backbone or trendline of the move.
So having this understanding of market trends, thus began my pursuit of determining what type and how many entry strategies I would need to employ to trade the different psychologies of the market. Based upon Dow theory, there are essentially three phases and therefore three strategies I would need. This was solved with a tool that I had been using to identify support and resistance within a trend — my 34 period exponential moving average Wave 34ema Wave.
The indicator was an elegantly simple trio of exponential moving averages set on the Fibonacci level of The three moving averages are:. The final market stage is distribution. Now again I must add that these phases do not always occur one after another as described here. Phases can be skipped; phases can transition from one type of sideways market to another and then can also transition from uptrend to downtrend.
The distribution phase is volatile, wide ranging and reflects the psychology of confusion and panic. The market, in the distribution phase, represents those speculative latecomers. At the top and bottom of strong trends, the speculative frenzy can be seen as holdings change hands and one group realizes profits at the expense of the other.
This is the way the market works. Regardless, the downtrend phase is akin to the trend phase discussed earlier. Any trend is really the result of imbalance. In a sideways market, like accumulation, there is a certain balance between supply and demand. The wider the range — as in distribution — the less balance there is in the market. But complete imbalance comes during a trend where either the amount of demand exceeds supply uptrend or supply exceeds demand downtrend ,.
Now while I may not use a strict interpretation of the phases of market trends, Dow theory has had a significant impact on my own trading. It led me to pursue how I could identify the market phases I refer to them as cycles with a more real time, objective indicator. The fact is that trendlines are powerful but terribly lagging tools for trend identification.
Discretionary analysis is effected on a number of things. Two of the main issues are experience and more so in my opinion, the actual view of the data on the chart. I realized that there was not a set amount of data that traders included on their charts. The choice to include data was random and based upon visual comfort and not the relevance of the amount of data. A market memory basically set forth a guideline for the view of the chart I was viewing regardless of the size of the chart or my screen which are both random factors when you consider all the different platforms and charting set ups that all traders use.
Each timeframe has a market memory. There is a relevant amount of price action that is ideal to analyze trends, highs, low, last major moves, draw trendlines, etc. Too much data and there is a chance that less relevant data could effect the final trading decision because of the lines and levels it will yield on the chart. Too little data and important lines and levels can be missed. The market memory or lookback settings I use are as follows: minute chart, three to five days minute chart, one to two weeks minute chart, two weeks minute chart, four to six weeks Daily chart, one year 5-minute chart, two days.
Notice that these market memory settings are not fixed — they are guidelines. Most charting platforms will not scroll to exactly these settings, so the idea is to work as closely to these lookbacks as possible. I would rather err on the side of slightly too much data than too little.
Having your chart view within the market memory appropriate for each timeframe does two very important things. First, it makes your analysis more objective since the amount of data is fixed and within the market memory of that timeframe. What I mean by this is that short-term timeframes usually have. For example, a high on a minute chart may not be significant within the psychology of a minute chart.
These two timeframes represent two different looks at intraday price action. The second thing that market memory does is put the angle of the 34ema Wave lines in the consistently and accurate clock angle. The angle that the moving average travels will signal the market phase that a timeframe is currently in. Too little data will artificially flatten the moving averages while too much data can steepen the lines too much. It is consistency and accuracy we are looking for. For the purposes of this article, the mark up and mark down cycles will be discussed here for trend following trades known as swing trading.
Swing trading itself it a relatively simple entry and like all entries there is a time and place for it. Swing trades allow a trader to capitalize on a correction of the trend and buy into near term weakness in an overall uptrend or sell into near term strength in an overall downtrend. The key here is the overall trend — as indicated by the 34ema Wave — and the amount of the correction.
The first issue to tackle is — How to define a trend? In this uptrend, swing trades long can be set up in corrections to Fibonacci retracement levels of Using the top line of the Wave in this instance would be taking advantage of the support the trio of Fibonacci-base moving averages offers.
That level is currently Now remember that moving averages are dynamic levels that will adjust according to price action. Fibonacci retracement levels and psychological levels are static. If prices transition the Wave to a more sideways angle, the swing entry is no longer valid.
If prices break down through the support of the period exponential moving average low, the swing entry is no longer valid. In fact, if prices break down through the Wave, it is an early indication of a trend reversal on this timeframe. Remember that all analysis is timeframe specific. Remember each market phase or cycle has a strategy that is appropriate for the underlying price movement and psychology. Consider this next time you add a new strategy to your approach and also when you choose to apply it to the market.
Her commentary and analysis is seen daily by thousands of traders at her personal blog ragheehorner. Raghee trades from her home in Coral Springs, Florida where she lives with her husband, Herb, and their two dogs. She can be reached at ragheehorner yahoo.
This means that out of every 10 trades taken, a trader would get 6 winning trades and 4 losing trades. The only way to achieve gains in the account is by maintaining the required RR ratio. If we divide a trading plan on a scale of 10, then:. It is probably the most critical aspect of trading and the most overlooked.
A sound money management policy becomes an absolute must in the Forex markets, due to the use of high leverage. If a trader is keeping a stop loss level of 50 pips, then the expected profits from the trade must be at least pips. Trading is a business of probabilities and you are in control only until the moment of the entry. Afterward, the market dictates where the price will go.
You cannot control. Management, would take up 5 parts. Mind — which is the discipline and patience of a trader to follow a plan, would take up 3 parts. Method - which is the technical analysis, would take up only 2 parts. Unfortunately since trading plans are prepared entirely from the charts, we tend to concentrate only on the Method part, ignoring the Money and Mind.
Without it, one cannot trade, so preserving it becomes a matter of utmost importance. It is only natural that when we take a trade, we tend to focus on potential profits rather than dwell on possible losses. We are usually so convinced that the trade will be profitable that we tend to ignore the possible losses that would occur should the trade go wrong. One must accept that losses in trading are inevitable, but a successful trader is one who manages and controls these losses.
Therefore a trader must have a money management policy, which is nothing but a set of techniques that help minimize the. But what you can control is minimizing losses and protecting gains through a welldefined money management strategy. Risk-to-Reward ratio — One must always keep the Risk- to-Reward ratio at a minimum of 1 to 2 and above. First and foremost, one must accept that losses are a part of trading and one will have losing trades.
Conclusion — a trader can achieve gains in the account, even after getting 4 losing trades out of Now, try changing the RR ratio to 1 to 1, and look at the results. This drastically reduces the gains in the account. And if we reduce the RR ratio to less than 1 to 1, then we get negative results.
At the end of 10 trades, if I do not get sizable gains in my account, I would be simply wasting my time. To achieve a worthwhile increase in the capital after spending the time and effort one must maintain the correct RR ratio. Unfortunately, most traders ignore this simple fact. Very few traders and investors realize the importance of balanced position sizing.
Traders often make the mistake of ignoring the size of their trading account when taking on new positions. As a result, many unknowingly join the ranks of high-risk over-traders, and soon find themselves in big trouble. Position sizing protects you by limiting the amount of capital, when you are the most vulnerable. This reduces the total amount of loss.
Position Size Formula. Where E is the account equity. The position size is entirely dependent on the account equity, thus underlying the importance of an account being well capitalized. This is not a business for those who are not. The only way to win at trading is to have larger and more positions when you are right and less positions when you are wrong. Let us have a look at a trade example, which was taken and managed by incorporating these aspects.
The chart pattern is one of the most effective and simple trading patterns. It is the nature of price to move in waves, forming this pattern on a pullback. This pattern is also a very strong indication of a change of trend. The advantage of this pattern is that we can define the entry,. First, define the entry, stop and exit levels of this expected trade, so we can define our money management rules. We use this Fibonacci ratio to determine the entry, exit and stop levels.
Entry at 1. The Risk-to-Reward ratio for this trade works out to 1 to 3 This is acceptable and we can take this trade. If we do not get a RR ratio of 1 to 2 , we simply do not take the trade. Assume that we are trading a mini account with a capital of USD Once again, this puts us at a disadvantage, since we cannot manage our trades efficiently with only one lot.
Now that we have precisely defined the trade levels, let's check if this trade fits into the principles of money management. I have put this formula in an Excel sheet where it automatically calculates the correct position size when the capital amount is entered, making it easier to calculate.
Trading with 9 mini lots at a stop loss level of 80 pips puts our entire risk at pips. On a mini account, this equates to USD This is outside the money management rules and is not acceptable. Ideally, one should trade with multiple lots to take profits from the trade and use trailing stops to remain in the trade should price go further.
We can see that with trade parameters of this size, one should have a capital of at least USD 10, to allow trading with 2 lots. Now, we have our position size and money management rules precisely defined in our trading plan and manage the trade, based on the risk management principles.
One should lock in some profits when price reaches the first technical level. In this case the We use this as the profit Target. It is not a requirement to trade every set up and there will be more opportunities. It is really a question of juggling various factors to get the correct system Sunil Mangwani has been trading the Forex market since the last 9 years and specializes in using the Fibonacci ratios and Harmonic Patterns for analyzing price movement. Trading must be treated like a business.
Now, we have locked in a profit. Since we have shifted our stop to the entry level, we are at a no-risk situation. Even if price reverses for some reason, we have walked away with this profit. We close the second lot when price achieves this target. We have managed the trade as per the rules laid down in our trading plan. Only if one milks a trade of all possible profits, can one have an edge in the money management plan.
This simply means that one must have a definite plan before one enters a trade. When making a trading plan, remember to plan not only for the upside, but the downside too. The successful traders are the ones who are well prepared for all the possibilities before entering a trade. Like everything in life, you have to visualize what you want to accomplish before you can get there.
With the proper planning there are very few surprises. You will not get rich overnight, but you will be able to get there. Many have done it. One can be successful in this exciting, fulfilling and yet demanding business, if and only if, one has a definite plan on how to approach the market. He conducts special coaching for developing specific trade plans at www.
This gives you the flexibility to take profits at different stages, and thus protect your capital. Under capitalization puts you at a disadvantage and you cannot manage your trades effectively. The above-mentioned example simply shows this fact. It is. The housing slump stopped and buyers started to grab homes by taking advantage of the tax incentives combined with affordable prices. The American Non-Farm job report, released in the first week of December, indicated that November jobs fell by 11, workers.
This is less than the median forecast. The jobless rate declined and held at 10 percent. Another report showed that consumer credit declined in October by USD 3. Machinery orders declined 4. A separate report on producer prices fell for an eleventh month in November, declining 4. Consumer spending climbed 0. In our opinion, this market is very much dependent on the economic performance of Japan in the first quarter.
A weaker dollar and the global stimulus programs have created offshore demand for exports for a sixth consecutive month. Commerce Department said the trade gap shrank 7. In Japan, corporations cut spending at a record pace in the third quarter due to the continued impact of the global recession.
Capital spending excluding software purchases declined for the. On the other hand, the release of bad news from other emerging markets or market intervention by the Bank of Japan BOJ will initiate an instant flight into the dollar. From the technical outlook, we foresee a consolidation in the If the aforementioned bottom can be guarded, it is a possibility for the market to thread above In fact, we expect a retracement in the first quarter to around Abandon long positions if the market breaks below the bench-.
This could be possible if Japan continues to see red numbers and exports deteriorate in the first quarter. The overall economic strength of the nations has shown a potential recovery from the global crisis. An index for executive and consumer sentiment rose for an eighth straight month in November to London-based Markit Economics said the European manufacturing index rose to Factory orders unexpectedly fell for the first time in eight months in October, led by a decline in export demand, dropping 2.
As we expect the dollar to be window-dressed in the first quarter of the year, there is a possibility for the market to trade down to 1. The market needs to violate the strong support zone at 1. The British consumer sentiment recorded at 73, unchanged from October, and may help pull the economy recovery through the year-end.
Technically, we have abandoned the northern trend that we previously had predicted. In fact, the trend cycle halted at the recent high of 1. We foresee a continued digestion that will last for the coming few months before the bull market resumes. Released in December, approvals for housing loans reached 55, in October, the highest level since December , making an up turn amid the housing slump.
We expect the market to retrace up and. Central bank policymakers assured the continuity of the assetpurchase-program financed with billion pounds. Technically, we have also abandoned the northern trend targeting 1. From our studies, we have identified a consolidation phase that will possibly form in January at about 1. If this resistance can hold, we expect a continued decline will initiate. In the hindsight, we have projected the market to probably reach 1. Our potential exit targets are set at S1 — 1.
Dar Wong has 20 years of experience in trading global derivatives and the Forex markets. Shearson Citigroup. Currently, he is a book author and writes for The Borneo Post and financial magazines. He also functions as a hedge advisor, coach and seminar speaker and manages his own personal account. You may read his Forex weekly report by visiting www. First, there was fear of depression and deflation. Then, stock markets made a U-turn, pointing to an economic development far better than most of the prophesies.
The dollar recovered in the first quarter; later, inflation sorrows emerged again. The dollar lost considerable territory in the wake of these considerations. Then, as if the stock market would like inflation — the contrary is true — rose so much this year that there is talk of a frothy stock market, even the word "bubble" appears in outlooks.
Obviously, we cannot shake off the impressive bubbles of the past 15 years, even as each one of them burst. We are accustomed to "irrational exuberance," not only in the financial world — take a long look at professional sports. That is what the majority expects — continued forming of exaggerations in the investment world, including Forex. Since what the majority expects is later proven to be wrong, it is only prudent to consider different aspects.
What if the economy keeps growing, as the stock markets are promising and inflation stays at digestible low levels? There are examples for phases like this. Between and , England and the U. Again, the same picture after to the end of the s. Both times emerged after a big monetary and fiscal expansion, precisely at the start characterized by great unsecurity in the business and political world. These are only two examples. But they illustrate that economic growth without spiralling inflation is possible, even after the enormous global fiscal and monetary expansion seen this year.
Different developments moving in unison are necessary to ignite a secular inflation phase, like the one emerging from through For instance, the labor market is still moderate and commodities left their price hikes, a different story to the circumstances in the seventies.
These developments are being neglected right now. The only hint to inflation is the mammoth monetary expansion, but the formula for inflation is defined as "monetary supply multiplied by increased money circulation. The old rule should still apply, even though it went out of fashion for economists who state that the financial world today is different.
Much quicker money flows are seen as a reason, due in part to new technology as well as a huge derivative market. So monetary expansion or contraction is what is being observed, and by some only M1, the nearest monetary size. This is their typical behavior in bad times and has stayed the same as long as money has existed.
Why alter an old economic rule if not even those institutions who are deeply involved in the works change their stance? Deflation is not likely anymore, although some commentators have begun to anticipate it once again, comparing the U. This is a little like comparing apples with oranges.
First, Japan sports a completely different culture and always has had a knack for saving, not for spending binges. Second, the deep tandem involvement of manufacturing and the financial sector has led to an encrusted business structure, giving resilience little chance.
Finally, the banking industry is still far off the flexibility of western banks with America ranking at the top of that list. But things are about to enter a completely different scene. For instance, more calls for financial regulation. A thing the writer does not like, but probably a phenomenon of a new age without bubbles.
Believe it or not, even the U. Federal Reserve is in the crossfire of Congress. The House Financial committee has already approved historical changes towards regulation by putting a yoke on the Federal Reserve. A "yea" by Congress would mean the Fed loses one of its last pieces of political independence. Here the pendulum swings too. But again, it is probably the new age knocking on the door. John Maynard Keynes' views of the economic world, fancied in his day, out of fashion for a long time thereafter, are making their comeback, by the way, on bookshelves and in discussion forums chart 1.
True, the twin deficits or even triple if you count the Fed, sticking its neck out to help , will probably be hard to tackle in the coming years. Most of the market participants reckon with a weaker dollar for next year. But deficits do not stay forever, and chances for an overall improvement of the global economy are growing. Technically speaking, a look at Chart 1 of the tradeweighted Dollar Index above confirms the mentioned negative stance — the long-term picture shows an intact, several times confirmed, downtrend of the U.
Recoveries within this downtrend can be expected, but not above the trend line. Chart buffs used to hold tight to a trend, "which is your friend. If we have a close look at the economic development, not only in the U. Compare that to the W recovery, also possible, like to , but that occurred in another macro-economic world, nota bene.
Some developments remain a mystery. For instance, commodity prices and precious metals have risen and are widely expected to rise further, giving more arguing fodder to the doomsayers of inflation. But stock markets have risen as well and keep rising in the same time, although a price-inflationary development is extremely hated by these and bond markets alike. Either the stock market is wrong and will experience some bigger down correction or the bull market in commodities including precious metals has seen its highs.
The latter is more likely. A good example that expectations here could turn sour are the headlines of newspapers and magazines. When a certain move in the financial world was impressive and making its way to the headlines, like now with gold, the main impetus of the movement is about to end. One may call that a simplistic view, but that has happened in the past over and over with all sorts of investments. Remember the nowadays shunned expression, "New World Order," of the s?
A wise man commented, "First it is not new, and second it is no order. Its worth is only industrially defined in coming times, as for other precious metals. Shortly after that, a new phrase was invented as an explanation for the price inflation losing more and more steam and the stock market remaining positive. Only a few observers saw that phase paving the way to other exaggerations, incubating an ever-increased bubble, that burst. That certainly was a near knockout, demanding huge effort to stay upright.
The facts based on technical and fundamental conclusions speak for a weaker dollar longer term, even from present low levels, a contrary development is more likely to set in during First, the technical analyst's view does not consider the long-term heavily oversold situation of the U. In other words, the market appears to soon be outbombed on the downside see Chart 1, previous page.
Second, provided that moderate economic growth can be sustained characterized by inflation under control, the negative factors around the dollar will vanish eventually, leaving room to quite a substantial recovery starting mid By then, the inverse correlation of the U. Let us peek deeper into for the major currency's development by distinguishing the market between commodity pricerelated currencies and the others. Here the euro, heavily overpriced if one considers the purchasing power parity against the U.
The correct price for the euro should be at 1. The pound is overpriced as well, but not as much as the euro, most likely losing its high volatility style next year and more or less following the U. While the Swiss franc is likely to follow its big brother, the euro.
The yen is a completely different story. A real deflation currency example. The yen also will lose territory against the dollar. Based on the outlook for commodities, which speak for prices around present levels in view of increased supply but still good demand, the related currencies are subject to slowly losing their attraction in Lower prices for the Australian dollar and New Zealand dollar against the U.
These being longer-term considerations, the ample money supply and resulting low short-term interest rates are not exactly supporting factors for the euro. Conclusion — Lower euro in against the dollar. Technical — Dominated by a several times confirmed uptrend, the conclusion seems to be simple: stick to that uptrend. But look twice — a massive overhead supply will limit further upmoves, taking the steam off the upswing.
Then observe the clearly long-term overbought situation, i. Conclusion — A trend change is in the cards. Conclusion — A lower trading bandwidth against the U. Technical — The long-term sideways trend, well-established. Conclusion — Wider trading range between 1. No wonder, being its major trading partner and with the Swiss National Bank very keen to mimic the Eurozone's monetary policy — under no circumstances do the Swiss want to repeat former experiences with an overvalued currency, hurting industry badly.
Technical — The prolonged downtrend in the pair shows an early bottoming process, scratching the upside of the downtrend line. Heavily oversold now, the market is "bombed out" at the downside. Although there is much overhead supply to be overwhelmed first, stronger action have to be taken into account. Conclusion — Upmoves for , followed by a longer consolidation between 1. A recovering economy should finally do the trick to remove the yoke of deflation.
The Bank of Japan is taking definite steps by increasing all means of quantitative methods to reinflate the economy. Not enough, say. This combined with the heavily oversold situation make room for recovery moves toward the 1. Conclusion — A new trading range for between 1. Later in the year, even the 1. It might be modest though, since the other part of the economy depends on the still somewhat depressed service industry.
The central bank is keeping interest rates low, following an expanding monetary policy. The currency's relation with commodity prices, a boon so far, will continue. There are probably no more further rises in raw materials to set in, with demand to remain but increasing supply. Technical — The downtrend broke its line to the upside now, still losing selling momentum. This and the fact of an oversold market on support levels should lead to a higher-priced market in , heading towards 1.
Nourishing a tight trade relationship with China, Australia's economy is well on track, with rising inflation expectations, too. Real interest rates would not sup-. Conclusion — A lower Australian dollar against the dollar for Technical — Reaching its limits at the 0. Beyond that the market is long-term outright oversold, rife for a downmove. Conclusion — Support testing at lower levels will be the theme for , first around 0. The outlook for the New Zealand dollar is more or less characterized by the same facts as valid for Australia, with the exception of overall agriculture prices, which halted their rise earlier than other raw material markets.
Conclusion — A declining New Zealand dollar against the Australian dollar, too for Technical — The New Zealand dollar already broke its upward trend against the U. Conclusion — Levels around 0. There are reasons why the dollar can finish the year lower or finish the year higher and may offer many seesaw opportunities.
Ian Naismith discusses developing market models that incorporated various indicators or use single indicators that provide consistent positive results most of the time. The important element to remember is that the likelihood of increased volatility compared to most years, including will present technical trading opportunities that could give positive results regardless of how the U.
We concentrate on capturing ranges of cycles and limiting drawdown through hedging techniques. However, the banks did not lend the money — they just bought more Treasuries, which prettied their balance sheets. The result of all this money shifting around is the Treasury incurred about a trillion dollars more in debt in about 3-months, the Federal Reserve absorbed the toxic assets and the banks won. When coupled with more expensive future questionable changes, it challenges a sustained recovery in the economy that may require holding the lid down on low interest rates and more printing of the greenback.
The fiscal policy changes that were enacted in to prevent financial system devastation, or what many considered an impending depression have led to financial projections into the future from the Federal Open Market Committee that will challenge the value of the dollar through and beyond. A major factor of the decline of the Dollar Index is the ascension of the euro relative to the U.
Going into , there is a stew of broadly conflicting trends that are colliding due to the uncharted waters that can either continue the dollar decline or its rise — it will be a real tug-of-war. It could run out of steam because the original reason for the stimulus seems to be compromised. In a nutshell, the Treasury borrowed U. Then, the Fed used the money to help the banks reduce toxic liabilities.
Despite the fact that the dollar has been waving red flags warning us of the out of control United States debt, continued buying of foreign currencies and commodities, and widening trade deficits, the dollar has a few arrows left in its quiver before the red flags are replaced with a white flag. The Lions showed the national audience just how low Matt Patricia's coaching can sink them. To a soundtrack of an interview conducted when he was at the peak of his powers in Napoli, when he talks of the football pitch being a refuge, a sanctuary, a place of freedom where he could express himself without fear, we see Maradona in his late fifties attempting to play five-a-side with his friends.
The juxtaposition of the glorious athlete of our collective memory and the hobbling, pot-bellied, arthritic shadow he became is a telling reflection of his decline. So precipitous was his fall, it almost appeared to be the consequence of a Faustian pact, an agreement to become the most influential footballer in the world in exchange for a sporting afterlife of misery and self-loathing.
The sadness is that any evaluation of his genius cannot but take account of what happened next. It had been long coming, but we were given first indication of his unravelling at the World Cup. The man who had dragged his country to victory in , then almost repeated the trick in , was by now a drug-addled parody of his glory days. His goggle-eyed celebration when he scored his last ever goal for his country in the game against Greece was a symptom of his personal nightmare: the man was wired beyond repair.
Banned, traduced and shamed, his playing career was over. But back in his homeland he was still revered. And no wonder, given what he had delivered. He parlayed his celebrity into a lucrative turn as a chat show host, before his inability to control his appetites compromised his facility to frame a question. In a stadium that, 25 years after he last kicked a ball there, remains a shrine to his brilliance, his very presence was an inspiration; Boca won four trophies in two seasons with him watching enthusiastically from his private box.
In a manner that was to become a pattern, though, it did not last. He fell out with the club president and was gone. The Texans may find themselves in hot water with the league after they engaged in some poor sportsmanship to get themselves a free timeout in their Thanksgiving win over the Lions.
With eight minutes left in the fourth quarter, the Texans realized they had 12 players on the field on defense. Two players, A. Moore [more]. Washington easily put together its best performance of the year, and it leaves us with a number of takeaways that have us feeling a semblance of hope for the future. Gordon Hayward reportedly wanted to join the Pacers. The draft bust admitted he wasted two years of Browns great Joe Thomas' career. FiveThirtyEight has the Chiefs and Saints and the clear favorites to meet in the Super Bowl, but 11 other teams still have a shot at the title.
David Fairley, 83, estimates that he has shot his age or better more than times. This is a significant development in understanding Gallinari's deal. The jockeying for position begins in earnest now that the first College Football Playoff rankings are out. Among the four teams at the top, only Notre Dame No.
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Attention Twitter fans! After a long hiatus, our Twitter account is back online! The Swiss franc is a currency that is always in the hurricane of the Forex because on several occasions the Swiss National Bank has intervened to prevent a continued appreciation of the currency against the dollar.
The last time we saw a clear consequence for USDCHF intervention was in early when the pair lost 31 cents in a few minutes. However, these interventions in the USDCHF have not been able to stop the natural cause of the pair, the bearish trend.
As we see in the historical chart , the franc has been appreciating against the dollar for 50 years and it is not unreasonable to infer that it will continue with the same trend. If we look at the structure of the pair, we can count 5 swings down from the year , so we would need at least 2 more swings to complete a great cycle that could last more than 60 years in total.
We are currently in swing number 6 which it is very likely that has not finished yet, this is because a correction of this type should look at least a In the monthly chart of USDCHF that we see below, we have a probable developing structure of Elliott waves to complete swing 6 that we discussed earlier.
The structure we see is a double correction WXY. For more information on Elliott structure visit this link: Elliott Waves Theory. The first part is an ABC correction that we call W that ended at the beginning of Then we have a correction of all that movement, which we call X, precisely the result of the intervention of the Swiss Bank. Then we started a new corrective structure in 3 ABC waves which we will call Y.
We are currently in B which should typically be looking for the 0. The difference here is that the W wave is longer in time. This means that we are recently running the connector X which should reach, like the previous case, to the 0.
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