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Forex Trading Signal 08/26/09

Discussion in 'Current Forex Trading Signals' started by Crazy Cat, Aug 26, 2009.

  1. Crazy Cat

    Crazy Cat Former FPA Special Consultant

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    Hey folks,

    As I've talked about so far this week, we've been pretty much expecting some 2-way action and consolidation from the EU and GU and that's pretty much what we've gotten. While I'm still not entirely sold on which way the next break will be, it seems a bit more likely that the next break will be lower, so watch 1.6274 on the GBP/USD and 1.4180 on the EUR/USD for confirmation of a clear turn lower that should continue over the coming days/weeks. A break of early August's highs around 1.4448 on the EU would negate that forecast.

    In stocks, we're still likely in the final rally phase before the major turn lower, and this phase could last days or weeks. For shorter term plays, I would see any decent pullbacks or range-based consolidations as opportunities to go long on dips. If you do so though, keep a tight leash because if/when we start to near 1050 I'm going to look to start building a position trade short on equities if the setup looks right.

    The metals look naturally unclear with the prospect of a stronger dollar and higher stocks pulling them in both directions at the same time. My recommendation is to hold a position trade short through the volatility because once things clear up, we'll be much lower than we are now and well underway in the ensuing decline. $991 and $15.20 in Gold and Silver are the spots if exceeded where I'll have to strongly reconsider that view, but as long as they hold... game on.

    In news Tuesday, we had Consumer Confidence come in much better than expected, but the fact that it was coming in high was leaked ahead of time indirectly through an Obama announcement earlier, so much of the run up was unfortunately before the news, and the release itself was just a short spike and a reversal. That's usually what happens when such a report is leaked or there is a strong rumor that proves correct. In news Wednesday:

    0400 German IFO Business Climate (89 expected) - This indicator has had only very small gains recently on less than 1.0 deviations, but the last 1.0+ surprise generated a pretty nice move, so I think that's a pretty good threshold to look for.
    If it comes out at 90 or higher, EUR/USD should rally 40 pips.
    If it comes out at 88 or lower, EUR/USD should sell off 30-40 pips.
    If it comes out at 87 or lower, EUR/USD should sell off 40-50+ pips.

    0830 US Core Durable Goods (0.9% expected) - This indicator has only been making minor price moves lately (20 pips or so) even on big triggers, so I plan on just skipping it until it does better for awhile.

    1000 US New Home Sales (390K expected) - This report could see a good reaction with a smaller 10-30K surprise, but when that happens it's often hit or miss and even when it gets a good reaction, it can reverse after only a few minutes. I recommend just trading this one on a bigger trigger and staying out or focusing on technical trades if it comes in too close to expectations.
    If it comes out at 425K or higher, EUR/JPY should rally 50 pips.
    If it comes out at 355 or lower, EUR/JPY should sell off 50 pips.

    TRADE LIVE WITH SIR PIPS FOR $39.00 FOR 2 WEEKS
    Sir Pipsalot has a live trading room, in which he trades these news reports. There, he shares his trades in real time, including exact entries and exits, and detailed explanation for every entry and exit. The service costs $299 per month, but we have a 14-days $39.00 trial. Go to Forex Diamonds and take advantage of this offer. This offer is for NEW customers only.

    To our success,
    Sir Pipsalot
     
    #1 Crazy Cat, Aug 26, 2009
    Last edited: Aug 26, 2009
  2. barry101

    barry101 Private

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    S&P to 400 level???

    Sir Pipsalot,
    On Aug 24th you suggested that the S&P might head for the 400 level. A couple of us expressed surprise/shock/horror, but you haven't responded, so we don't know if that was a typo, or a real statement, and on what it is based. Please respond, thanks.
     
  3. Vladon

    Vladon Private, 1st Class

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    Well, another "leak", I guess.
     
  4. mechtech63

    mechtech63 Corporal

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    Time verification

    Are the times that financials are released quoted as they are represented on the Metatrader? Want to make sure since we are all in different parts of the world.
     
  5. Boko Maru

    Boko Maru Sergeant

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    Although I don't really want to speak for Sir Pips, I am familiar with him and his analysis re. the S&P, and it's almost a certainty that it was NOT a typo. His analysis most likely includes Elliot Wave, which shows an upcoming down leg (big one) for the S&P.

    Of course if you're reading this SP and I'm mistaken, then please correct me and my apologies :)
     
  6. nelson perez

    nelson perez Recruit

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    ??????

    im new in this, please i need to understand,

    If it comes out at 90 or higher, EUR/USD should rally 40 pips.
     
  7. Vladon

    Vladon Private, 1st Class

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    Ups, one more "leak".
     
  8. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    I can't say for sure on any leak on this one because I was off at a trading seminar and didn't see it live. It just looks like news has been pretty treacherous this week and hasn't worked very well while the equity market consolidates.
     
  9. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Barry, like I said in the first signal this week, I've got a really busy week trying to keep up with trading, my very pregnant wife, and a big seminar I've been attending in Manhattan. I did respond to that issue though and will repaste it below:

    The impending selloff to the 400 region on the S&P is based on a convergence of technical, fundamental, sentiment, and event risk factors. I talk about this stuff a lot in the Diamonds room, but to sum up the main point for each:

    Technical - Elliott Wave has successfully predicted each of the major turns since I started following it closely over the last 2 years, and it says we're finishing off the final stages of primary wave 2 up which will have primary wave 3 to follow. By one of the most rigid rules in elliott wave, wave 3 down will be at least as large as Primary wave 1 down in percentage terms which means at least a 60-70% decline from the coming wave 2 highs over a 6 to 24 month type timeframe.

    Fundamental - P/E ratios are ridiculously high pricining in major increases in earnings that are unlikely to be realized. Trailing 12 month P/E ratios are around 68 now. Typically valuation will overshoot too far on the upside during the boom, and overshoot too far to the downside on the bust, so we're likely to see these P/E's work down to the 10-20 range which implies the fair value of the S&P is closer to 250 than 1000 from an earnings perspective. And with a deflationary outlook, you have to assume book values will decline as well.

    Sentiment - One of the key things most investors and traders don't understand is that extremes or peaks in optimism accompany extremes or peaks in price. Right now 89-90% of DSI respondants are bullish stocks which are extremes not seen since the 2007 highs. I even heard an analyst on Bloomberg radio today saying we may not even manage more than a 3% pullback in this bull market because people are buying dips so aggressively. Such myopic bullishness is what's extended this bear market rally so far, and what will ultimately cause it's doom. This situation confirms conditions are ripe for a major top reversal lower. When even the bearish analysts become bulls, ironically, it's time to get short... and that's starting to happen.

    Event risk - All of the event/news risk is to the downside. A moderate recovery is already priced in, so anything to the contrary will cause a potentially brutal downside adjustment. There are probably a dozen potential problems, any of which could create a tailspin similar to what we saw with Lehman last September, except we're in a much more fragile condition to respond to it, and the political will to continue bailing out and providing stimulus is almost out. Commercial real estate, another major bankruptcy, PPIP failure, a major geopolitical event (war), a Chinese stock bubble crash, FDIC failure (closer than you might think), deflation accellerating, etc.

    Guys, when I make clear position trade calls, I do so based on a lot of research, effort and reasoning. I explain myself from time to time, but the next day someone new comes along and wants to hear why... and then the next day the same thing and it a bit taxing. Usually with the signals I try to keep focused on the conclusions since if I explained the reason for everything like I just did above, the signals would be waaaaaaaaaay too long and would start to sound like a broken record. Also, it would be so much work, I probably couldn't keep it going for very long. But it's also nice to get my full reasoning out there every now and then... I just typically reserve that kind of depth for the subscribers.
     
  10. barry101

    barry101 Private

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    Sir P,
    Thanks so much for that detail, I do appreciate it....and I'm shocked by it!
     

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