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Sir Pipsalot's Daily Market Update 2-5-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Feb 5, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

    Dec 11, 2007
    Likes Received:
    Hey folks,

    As I said yesterday, there were two potential scenarios playing out on EUR/USD... both of which would likely take EUR/USD down to the 1.3800-1.3850 area, but the break of 1.3800 solidified scenario 2 as the winner. This means we are in a wave 3 of 3 lower and as I said yesterday, it "should target 1.3650 at a minimum, but more likely 1.3100 over the 2-5 weeks." Well, we've gotten as low as 1.3668 already, so it's definitely looking more like 1.3100 is a very strong possibility given how fast this move has gotten started. Wave 3 of 3 is usually the strongest phase of a decline, so even though we will find short to medium support here in the mid 1.3600's, look out below. Gold and silver should continue selling off along with USD strength and stock weakness as well.

    I had talked about initiating stock short positions for about 2 days and it looks like that initial entry ended up calling the top. Like I said yesterday, it was worth getting in short now because if the EUR/USD scenario 2 plays out, other markets (like stocks) are likely to shoot lower on smaller than usual retracements as well. This did play out and what we saw was the biggest selloff since early March of 2009. Now stocks seem to have started a similar 3 of 3 wave down that will be quite dramatic and take us below 1000 to the 950's and possibly 860's.

    Just keep in mind guys in a lot of markets and pairs here... Assuming we are in a 3 of 3 lower, things will get oversold and just keep selling off... be very careful about trying to buy potential bottoms.

    In news Thursday, the BoE was actually a bit hawkish in letting their APF pause and speaking a bit hawkishly about inflation resulting in a 65 pip rally that eventually topped out and gave way to the massive USD rally that started Wednesday. In news Friday:

    0700 CAD Employment Change (15K expected) - This trade usually creates a very strong spike that also has a bit of extra follow-through afterwards, so even a small pullback from the initial spike may be worth entry.
    If it comes out at 50K or higher, USD/CAD should fall 70 pips
    If it comes out at 30-549K, USD/CAD should fall 40-50 pips.
    If it comes out at -19 to 0K, USD/CAD should rally 40-50 pips.
    If it comes out at -20K or lower, USD/CAD should rally 70 pips.

    0830 US Nonfarm Payrolls (15K expected) - As usual, we will also have to look to any revisions to prior NFP numbers and the Unemployment rate for guidance. The markets are pretty wonky right now, so I actually think this will be the first NFP in awhile that is more difficult to make money on, so I recommend not trading it too heavily just in case. Pair selection could be tricky with both broad based risk aversion and broad based USD movement having potential. I plan to look primarily towards the USD/JPY.

    Suggested Triggers:
    A) (Good NFP/Norm to Good UR) If it comes out at 90K or higher with no major back month downwards revisions and unemployment rate at 10.0% or lower, USD/JPY should rally sharply by 50-70 pips.
    B) (Bad NFP/Norm to Bad UR) If it comes out at -60K or lower with no major back month upwards revisions and unemployment rate at 10.0% or higher, USD/JPY should fall sharply by 50-70 pips.
    C) (Norm to Good NFP/Good UR) If it comes out between -10K and +89K with no major back month downwards revisions and unemployment rate at 9.8% or lower, USD/JPY should rise by 30-50 pips.
    D) (Norm to Bad NFP/ BAD UR) If it comes out between -60K and +40K with no major back month upwards revisions and unemployment at 10.2% or higher, USD/JPY should sell off by 30-50 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. If you have any questions, you can also email me at sirpipsalot@profitmongers.com

    To our success!
    Sir Pipsalot

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