Forex Trading Signal 07/24/09

Crazy Cat

Former FPA Special Consultant
Messages
753
Hey folks,

The break higher from 956 to new highs got a lot of follow-through, and pretty much anything can happen from here on stocks. Repeated and consistently better than expected earnings results has extended and pushed this recent rally much further than pretty much anyone expected. Right now over 74% of S&P 500 companies that have reported have beat earnings expectations which is the highest amount on record in the last 16 years. Finally though, we had several key companies report disappointing earnings after the close today (Microsoft, Amazon, & American Express most notably) causing today's huge rally to lose about half of it's gains post-market. I continue to think this stock rally is overextended and the volume just hasn't been there enough on the way up to legitimize it rising continuously without retracement; however, one has to respect this recent strength and resistance break, so anything can really happen from here. It's possible this group of bad earnings will help the markets finally start a reversal, and it's also quite possible the market will shrug it off and gun higher over the next day or two. I hate to be ambiguous and feed you guys the "it could go up, or it could go down" piece of garbage, but aside from a slight bias/hope for some selling to come in, that's where we stand. We'll see if things clear up in the coming days.

The fact that EU and GU were only able to peek to slight new highs and reverse lower (most notably on the EUR/USD) lends some legitimacy to the case for a possible reversal. On EU and GU, the plan is still to look for a position long on a further dip as discussed in prior signals, but any shorter term play I'm not terribly sure on and will be following the charts as they develop. In news Thursday, we saw UK Retail Sales surprise to the upside better than expected, but since a decent rally had already worked higher into resistance for the session, the gains were limited to about 30 pips and subsequent consolidation. US Existing Home sales came out slightly better than expected, but not enough to really move currencies or to hit our buy trigger. In Friday's news:

0400 German IFO Business Climate (86.5 expected) - I don't like this trade with a smaller deviation as it will be more of a coin flip as to whether the market will care much. I'm only willing to trade a deviation of 1 or greater.
If it comes out at 87.5 or higher, EUR/USD should rally 35 pips.
If it comes out at 85.5 or lower, EUR/USD should sell off 35 pips.

0430 UK GDP 2Q Advance (-0.3% expected) - I'd say our typical 0.2 trigger should work here. Watch out for rumor based trading or leaks or whatnot heading into the news. Chances are any of that will be rubbish, but it can create some strong price moves.
If it comes out at -0.5% or lower, GBP/USD should sell off 40-50 pips.
If it comes out at -0.1% or higher, GBP/USD should rally 40-50 pips.

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icash55

Recruit
Messages
7
0400 German IFO Business Climate (86.5 expected) - I don't like this trade with a smaller deviation as it will be more of a coin flip as to whether the market will care much. I'm only willing to trade a deviation of 1 or greater.
Considering the disappointing reaction last month with +0.9 deviation, I think +1.0 deviation is not enough. I would trade at least +1.5 positive deviation and -1.0 negative.
 

icash55

Recruit
Messages
7
Result: +0.8 deviation and very little initial reaction. I doubt +1.0 would make much difference.

Moral: do your own research.
 
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