Sir Pipsalot's Daily Market Update 12-17-2009

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

The EUR/USD downmove continues to be relentless, however, it's probably best not to be seduced by it just yet from a long term standpoint. Eventually (possibly soon) it will hit a wall and come back up a good amount and that's the best time for entry. We've been quite bearish on the EUR/USD since 1.4900, so if you're short and are in good profits, here in the 1.4400's is an ideal spot to take some off the table and see if we can make even more of a push lower. The strong pull of primary wave 3 down is very apparent from this and makes it quite likely we'll see prices well below 1.2500 on the Euro over the next year or so before all is said and done. The next prudent entry opportunity though will be after a more substantial countertrend rally looks to be ending.

Stocks did move higher early hitting an 8 point TP for my long on ES futures, but the FOMC statement seemed to inspire some risk aversion, so most of the gains were pared and stocks closed relatively unchanged. As I type, we're just breaking through minor support at 1100 on the futures. As 1100 is brekaing now, today's highs at 1112 should hold for at least several days (meaning we should short this break or short into a modest rally). A break below 1084 would signal a more substantial multi-week+ move down has begun. Keep in mind that the EUR/USD often leads stocks, so we may see a very strong down move similar to what we've seen on EUR/USD, but with a delayed start. I strongly advocate shorts on all timeframes.

In news Wednesday, we saw UK Claimant Count Change come in much better than expected and led to ample GBP/USD strength over time. US CPI came out barely hitting our triggers, and we got a small reaction on USD/JPY, but it was very muted. The US FOMC Interest Rate statement really focused hard on deadlines and a more aggressive agenda for the removal of liquidity and special programs, so that has been quite USD strengthening and may extend EUR/USD and GBP/USD downmoves even further than they've come already. After an intial whipsaw, EU and GU headed down readily. In news Thursday:

0430 UK Retail Sales m/m (0.5% expected) - Pretty solid opprortunity for a good news trade here. My recommendation though is not to hold on for more than 30-60 minutes max (usually about 40 minutes) as the thrust from the news usually dies out around that time period for traditional UK news like this one.
If it comes out at 1.0% or higher, GBP/USD should rally 40+ pips.
If it comes out at 0.0% or lower, GBP/USD should fall 40+ 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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