Sir Pipsalot's Daily Market Update 1-21-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

Well, that EUR/USD downtrend just keeps on truckin'; however, it may be nearing a halt, at least for awhile. EUR/USD has now traced out 5 clear waves down in Minor degree and is likely to round up for a few weeks sometime soon. EUR/USD still has strong potential to extend lower a bit more to 1.3993 or even 1.3800, but it's already pushed far enough to satisfy minimum expectations for now. Chances are what will happen is a multi-week consolidation or retracement bounce will carry us back into the 1.4250-1.4580 range (or maybe a bit higher) we were stuck in earlier. Once that pattern completes itself, we will selloff with renewed vigor and likely tank 1000-1500 pips from that point without a lot of lengthy corrections.

So for now, I'm shifting to neutral on EUR/USD for short to medium term trades until we get an idea of where EUR/USD wants to set the floor for this minor wave 5 & cycle wave 1 down. If you made some good profit on a EUR/USD short because of these signals or some other reason for entry... now's a good time to take some profits, especially on a dip. I'll be holding a position trade short I called on 1-13 through the volatility because I'm looking to capture the eventual downside resumption and I can afford to give it plenty of room and fade in and out of it here and there as we consolidate. All swing trade type shorts I have been in though I closed today to play it safe and lock in profit.

Stocks worked lower quite sharply today validating my synopsis that they may be setting up for a very good short trade. I'll reiterate that I think they are a solid short opportunity from here (1137.25 on S&P 500 futures as I type). Getting in right now risks being a bit early, but it's a great price. The trade will be much more confirmed once we break through support near the lows today in that 1125-1127 area that we couldn't quite make it through Wednesday. Once that level goes, it's likely we'll see follow-through to around 1090 over the course of 3-5 days.

In news Wednesday, we saw UK Claimant Count Change come in better than expected, but the GBP/USD reaction while positive was a bit muted as traders poured into the BoE minutes for clues that weren't really there. Also, 0830 small US data failed to move currencies (I didn't even highlight them in yesterday's signal. Lastly was Chinese GDP which came out better than expected, but there was a leak about 2 minutes ahead of time which sent pairs into some crazy price action that made the whole thing a mess with some counterintuitive whipsaws. If you got in somewhere in that madness and just held AUD/USD or AUD/JPY long for awhile, it did eventually still work out in your favor as I forecasted. There doesn't seem to be any news on Thursday that's really worth trading, so our next news item we'll preview is UK retail sales on Friday.

That's all for today's update. If you'd like to learn more about trading or trade along with myself and my collegues, come join us at Profit Mongers. Our subscription is very reasonable at $179 per month, and right now you can sign up for a 2 week trial to get started for only $29. This offer is for new customers only.

To our success!
Sir Pipsalot


Thanks Sir Pips.

I have seen some news that sellers are lining up to short at the 1.4300 in EUR/USD. I have made some nice money on the way down, so until the next down trend, I'll be playing the dips and scalping.

Have a good one. ;)

Also, have you noticed the Bolinger bands are converging (hour chart)? I have seen in the past that they indicate consolidation and eventual thrust in one direction or the other. I'm guessing after your signal, it's gonna be upward.