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Sir Pipsalot's Daily Market Update 12-04-2009

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Dec 4, 2009.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    Well, today the White House let the cat out of the bag saying there were "signs the unemployment rate tomorrow may tick upward" which is a strong indicator they've seen the number in advance, but later it was retracted saying they did not see the number in advance, so who knows. The end result was a nervous selloff today in equities helped out by a quite low ISM non-manufacturing number.

    I think the best way to play anticipation of a bad NFP number is to get short on the USD/JPY. Right now at 88.15 with a 40 pip SL we can get in on some possible nervous long covering on USD/JPY ahead of the jobs numbers. I will likely close it or if in profit, tighten up the SL a bunch shortly before the news. A break of 88.00 could see as low as 87.10 if some momentum develops.

    As far as the overall trend is concerned, I'm just going to sit neutral for the short to medium term stuff until we get through NFP as things tend to set up well during and after that report in both currencies and equities.

    In news Thursday, UK Services PMI came out a bit low (not low enough to sell) but still saw decent downside for awhile. ECB Interest Rates went unchanged as expected, and US ISM Manufacturing came out with a very large negative deviation. While stocks sold off decently after the report (more due to the NFP rumor), the effect on currencies was minimal and it continues to prove untradable. In news Friday:

    0700 CAD Employment Change (15K expected) - Look out for leaky price action on this one. Last month's huge -50K+ deviation had a relativey muted move after the release because it seems the report was leaked at some point earlier (minutes, hours, hard to tell). Look out for strong momentum heading into the report as a sign of a rumor or leak that will make you want to either chase it for a quick small trade, or stay out completely. Otherwise, we'll take a more standard approach with our triggers below.
    If it comes out at 35K or higher, USD/CAD should fall 50 pips.
    If it comes out at -5K or lower, USD/CAD should rally 50 pips.

    0830 NonFarm Payrolls and Unemployment Rate (-125K and 10.2% expected) - The analysis put forth last month worked very well in forecasting the moves after the NFP/UR release last month, and in fact... this type of outlook has worked for 4-6 months straight now. This month is a bit different with the White House rumor, but with it retracted, I don't want to complicate things too much by factoring that into the mix. Anyways, here's the breakdown:

    FYI, watch out for revisions to prior months and pay attention to Unemployment Rate (10.2% expected) and make sure it agrees in order for the move to behave as I'm describing. What you should trade on this depends on how you want to trade the report. The last several months I've identified a tendency that has paid off consistently on NFP so far. Here's the low-down:
    1) EUR/JPY (and similar yen crosses) will likely have the sharpest initial reaction as EU and UJ spike in the same direction. The triggers I provide will focus on EUR/JPY.
    2) USD/JPY will likely have the most sustained move, so this is the best pair for Felix-style retracement opportunities or chasing momentum if necessary. Typically the move will hold up for over an hour.
    3) EUR/USD (and other USD majors) will usually stage a whipsaw which can set up for an excellent reversal trade. Sometimes it's fast within 1 minute or two, and sometimes it can take 5-10 minutes to reverse. Usually though the initial risk based move turns into a USD affair with EU & GU turning around and heading the other way, sometimes very dramatically. In other words, good news will spike up EUR/USD but it will likely turn around and sell off harder fairly quickly. Bad news will do the opposite. Look at charts over the last several months here at the FPA for more info:
    Forex News Trading | Details and History for USD Nonfarm Employment Change

    Suggested Triggers:
    A) (Good NFP/Norm to Good UR) If it comes out at -50K or higher with no major back month downwards revisions and unemployment rate at 10.2% or lower, EUR/JPY should rally sharply by 80-100 pips.
    B) (Bad NFP/Norm to Bad UR) If it comes out at -200K or lower with no major back month upwards revisions and unemployment rate at 10.2% or higher, EUR/JPY should fall sharply by 80-100 pips.
    C) (Norm to Good NFP/Good UR) If it comes out between -150K and -50K with no major back month downwards revisions and unemployment rate at 10.0% or lower, EUR/JPY should rise by 40-70 pips.
    D) (Norm to Bad NFP/ BAD UR) If it comes out between -200K and -100K with no major back month upwards revisions and unemployment at 10.4% or higher, EUR/JPY should sell off by 60-100 pips.
    E) (Strong revision conflicts) If there are major back month revisions that conflict with the surprise on the current month, I would stay out of the mess and just look to scalp the volatility with your technical tools.


    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
     
    #1 Sir Pipsalot, Dec 4, 2009
    Lasted edited by : Sep 8, 2016
  2. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Well, the White House really didn't know what they were talking about, as all the numbers came out very good. The market didn't anticipate a weak number, so the USD/JPY swing trade didn't work out, but all 3 pair predictions worked out perfectly on the EUR/USD, USD/JPY and EUR/JPY.

    The Unemployment Rate and NFP and revision numbers all came out better than expected, so it matched both scenarios A and C. As a result, the EUR/JPY spiked higher by over 100 pips. Also, the USD/JPY maintained it's momentum for a full hour with a more gradual move (as predicted), and perhaps most profitably, the EUR/USD spiked higher intially and reversed HARD lower giving plenty of opportunity to short in the first few minutes and make 100+ pips to the downside. In the Profit Mongers room today, we took 4 trades after the release and made good money on all 4, so it was an excellent day.
     
  3. mechtech63

    mechtech63 Corporal

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    Sir Pips.

    AS always, good info.

    My bad experence today was when I placed a pending order on the EUR/JPY pair prior to the non-fram. The pair showed current price of 133.15, so i place an order to trigger at 133.35 and TP at 133.95. 60 quick pips.

    However, because of liquidity, FXDD opened my trade at 134.06 and closed it at 133.95, costing me 11 pips. This happened so fast, I just saw my pending order dissappear.

    They explain that their feeds did not have a price until 134.06...that's for over 93 pips they did not receive any info. I cannot believe that a broker runs this way. I did all my homework and placed an order betting that the trend would go up....it did, however they don't pay attention to numbers between 133.35 and 133.95. Sound screwy.

    Do you know of a better broker, that does not suffer "supposed" liquidity problems?

    If you want to email me direct: mechtech63@comcast.net
     
    #3 mechtech63, Dec 4, 2009
    Last edited: Dec 4, 2009
  4. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey mechtech,

    If your broker doesn't work well with those quick spike type trades (most don't), look to take advantage of the post-spike action like I talked about with the EUR/USD and USD/JPY. Those trades could have easily been entered minutes after the initial surge. In fact, in the Profit Mongers room, to make sure everyone can get the same price, almost all of our news trades are done anywhere from 30 seconds to 20 minutes after the immediate news surge on the release.
     
  5. mechtech63

    mechtech63 Corporal

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    Thanks Sir Pips,

    I have never seen it spike so hard that there was such as large price jump. However it is December and most are trying to close their books for the year with the non-farm being the last of it....hence the extra liquidity.

    I'm going to study the after-spike you mention. Really considering becoming a Profit-monger.;)

    Also, closing my FXDD account and moving to Forex.com UK. I'm hoping their feeds are better.
     
  6. BenCA

    BenCA Recruit

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    Trading Long on XAU, XAG

    Sir Pips, any suggestion on trading Gold and Silver. Do you think they are set to take off; leaving a good chance to trade long?
     
  7. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Much like stocks and the EUR/USD, Gold and Silver have been overextending gains and are ripe for a very large selloff. The thing is, they have been in this condition for months. One thing a wise mentor of mine once taught me, is that an overbought market can and often will get even more overbought. It's just a question of when and how these metals thing will turn around and have a 40-70% selloff. So, given that context, I do not like the idea of buying a dip on either anytime soon, especially Silver. 6-12 months into their decline however, there could be some great opportunities to buy them cheap at half their peak price or less.
     

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