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Sir Pipsalot's Friday Market Update 07-30-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Jul 29, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    EUR/USD has managed to concretely break out higher and even managed to pull back within 10 pips of the breakout level for a potential scalp/swing long. Now that the hat is tipped towards a long, a buy on a dip to the 1.3045-1.3065 area makes sense with a SL somewhere between 1.2990 and 1.3020 depending on whether you're looking for higher targets (use lower SL) or quicker TP's (use higher SL). Potental TP's to consider are 1.3090, 1.3120, 1.3250. Personally, I'm not sure on how much more rally potential is left on the EUR/USD, so I'd prefer a tighter trade with a smaller TP/SL.

    Yesterday I reluctantly mentioned reentry on USD/JPY long, but that didn't work out as I had feared. The big break higher on EUR/USD put enough negative pressure on USD that USD/JPY continued to work lower throughout the day. I think USD/JPY will be a solid short if we break the 86.26 lows, but for now we're stuck in no man's land near support, but with bearish technicals, so I'm in wait-and-see mode here.

    Stocks continue to consolidate as expected in a pretty funny manner. My expectations remain steadfast that we should top out around 1130 or below most likely around next Friday (August 6th). With that stance in mind, I'm short term long on the recent dip to 1100 looking to score 15-25 points on the next rally. Assuming stocks top out over the next week or so as expected though, we should have a great opportunity for a medium to long term short that should push 100's of points lower on the S&P 500 (My target is still about 890 at this point).

    It can be tricky to ascertain at times whether the market has begun a new bull market phase, or whether this is just a retracement amidst a larger downtrend. Sometimes we get reassurance from the market in funny ways. As I was talking about with Cactus Jack today (another of the head traders in the Profit Mongers room), the stock rallies we've seen lately have been on low volume while the selloffs have had noticably higher volume. This is a classic indication that the current rally is a countertrend move. But we also had a pretty hilarious trading day today that helps give insight into the broader stance fo the market. A few major companies like Exxon-Mobil posted great earnings results, but we got very little bullish price action. Shortly thereafter, Colgate-Palmolive posted somewhat disappointing results citing a reduction in global toothpaste consumption, and the overall market sold off over 1%. Toothpaste?!?! Really?!? Sell Mortimer, Sell everything! Toothpaste is down, run for the hills! LOL... Imagine what will happen if/when we get some legitimately bad news over the next week. That being said, we can't necessarily expect the market to plummet with the next bad piece of news, but there are definite signs out there that there's a significant decline just around the corner.

    In news Friday, there's two reports I'd like to discuss:

    0830 US GDP Annualized (2.5% expected) - This report often deviates pretty strongly and gets great price action just as often. I'd expect a 25-50 pip move initially if a trigger is hit, with follow-through potential to reach further over the course of 40 minutes to 2 hours or so. Remember, this is an annualized figure, so 0.1% for the quarter actually is multiplied by 4 and equates to 0.4% annualized... so we need a bigger deviation here to really mean something than a typical q/q type figure.
    If it comes out at 3.0% or higher, USD/JPY should rally over 30 pips.
    If it comes out at 2.0% or lower, USD/JPY should fall more than 30 pips.

    0945 US Chicago PMI (56.0 expected) - I don't really trade this any more, but I thought I'd bring it up in case some of you do since there's an interesting twist on this one. The report is actually released at 09:42 EST to certain outlets, so the real move from this comes 3 minutes early at 09:42. If you can find a way to get access to this number early (Trade The News usually announces it verbally early) sometimes it sets up for an ok trade for 20-25 pips. Mainly I'm bringing this up though to highlight that you should definitely not consider it to be fresh news when the number officially hits at 09:45 EST.

    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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