Sir Pipsalot's Daily Market Update 11-05-2009

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

Outlook Summary:
Roughly the same for EUR/USD, GBP/USD, Gold, Silver & Stocks:
Longer term: SHORT with entry opportunities now.
Shorter term: SHORT with entry opportunities now for swings and selling rallies for scalps.

Yesterday we got exactly what we were looking for. If you look back, I said we may get a rally over 1.4800 and 1.6550 on the EU and GU and after that, it would set up nicely for a major short. Well, that's exactly what we got, and the post FOMC volatility helped things top out. Here's a quote from a reply I put in yesterday's signal:
I decided to get into some swing trades short on EU, GU, AU around 1.4885, 1.6584, and 0.9134 with fairly tight 15-30 pip SL's above the near 1500 EST highs. Looking for 30-50 pips initially and 100-250 ultimately on each.
Those trades are still active and it looks like the initial targets are already hit and I picked a pretty good top. It's still worth getting in short for a swing trade now above 1.4800 and above 1.6500 but you've got to eyeball your own SL there. I believe the USD is going to make a more major turn towards strength, and that either started off yesterday's USD lows, or if this one isn't it, it will get going after another EU and GU high in the next 1-3 days.

Silver seems to be a great short right now as well. I have just entered short near current prices at $17.35 with a $17.70 SL. We saw it bounce handily down from the 78% retracement and through the 68%, and that's usually a nice technical sell confirmation. It's also in line with the USD bullish and stock bearish bias.

Stocks also rallied perfectly into the sell region I identified yesterday. I said stocks may be a great sell in the 1050 to 1065 range with a fairly tight SL. Well, stocks rallied up to 1060 where they double topped and turned decisively lower. From a position trading/long-term perspective, even shorting now in the 1040's is worthwhile, but for short to medium term trades, I would look to short any 8-15 point rallies on the S&P. My best guess is we'll see the 1020 October lows give way and test something near 990 over the next week or two. I'm looking for something below 1000 before I take any profits on the long term trade, but anything short to medium term you need to take quicker profits.

In news Wednesday, we had UK services PMI make a pretty steady 45 pip move on better numbers, and the ADP and ISM were fairly skippable but did have some knee jerks. The FOMC decision came out with 2 angles. The dovish angle was that they kept their statement in wanting to keep rates low "for an extended period." Even though they didn't talk about exit strategies, they actually enacted another step in their exit strategy by reducing some of their agency debt from 200B to 175B which was hawkish. It seems their method is to just move forward piece by piece with exit strategies without talking about them since the talk just seems to worry the markets. They were also understandably a bit more upbeat about the economy. The net effect was a tough whipsaw (I lost some scalping) that eventually lead towards USD strength which I was able to capitialize on eventually. In news Thursday:

0430 UK Industrial Production m/m (1.2% expected) - UK news has been doing pretty well, so I expect a 40 pip move here.
If it comes out at 2.0% or higher, GBP/USD should rally by 40 pips.
If it comes out at 0.5% or lower, GBP/USD should fall 40 pips.

0700 BoE Interest Rate Decision (no change at 0.5% unanimously expected) - The real key here is their quantitative easing program. If they expand it by another 50 billion GBP to 225B as Blanchflower suggested, GBP/USD will sell off substantially. If they leave it unchanged and let it end at 175B, GBP will rally hard. Something in between like a 25B increase could get messy.

0745 ECB Interest Rate Decision (no change at 1.00% unanimously expected) - Nothing really to trade here unless they shockingly move rates.
If they hike at all, EUR/USD should rally 70-100 pips.
If they cut at all, EUR/USD should fall 70-100 pips.

1000 CAD Ivey PMI (58.0 expected) - The consensus has shifted lower from 60 to 58 on this as some new economists put in their estimates. Typically a 4-5 deviation on this is good for a steady 40-50 pips.
If it comes out at 63 or higher, USD/CAD should drop 40-50 pips.
If it comes out at 54 or lower, USD/CAD should rally 40-50 pips.

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
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Pending orders and Stops

Hi Sir Pipsalot
I when I do a pending order as i did on the GBP/USD I had a buy and a sale on either side of this pair ten min before the Bank of England made there announcments, to cover these orders I had a 20 pip SL as the time came nearer there was some movement and i got taken out on both sides, can you advise me please as what SL I should use.
Kind Regards


Glen, that strategy is pretty risky to use on this type of news event, there is frequent turbulance beforehand that will take out your stops and leave you on the sidelines as a spectator. NFP is the same, it's the big one.

It can be used on other types of news though that don't attract so much huffing and puffing in the run up, but it still remains risky.

Have a look here for other methods that work, in my opinion, much better.

Also before choosing what news to trade, have a look back at it's recent history and see how it's been reacting, news events change over time.


Direction of GBPUSD and EURUSD

Sir Pips can you enlighten us on which direction you think the GBPUSD and EURUSD are headed from here?? 1.4772 and 1.6580 present price at 20:37GMT.