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Sir Pipsalot's Tuesday Market Update 08-17-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Aug 16, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    EUR/USD appears to be consolidating a bit after last weeks rampant downside. Again, I am holding the remainder of a position short waiting to take profits in the 1.2420-1.2610 range, and I prefer to sell into rallies for the time being. Personally I've targetted the area around 1.2900 with another short, but have mentioned at least a couple of times that any 100+ pip rally off of lows is worth considering a short for now. Sunday night bottomed out at 1.2734, and rallied to a top at 1.2871, and shorting it anywhere in the 1.2734-1.2871 range was a decent trade worth 30-60 pips and maybe more as the move develops. Looking ahead to Tuesday, we're in the middle of the recent consolidation range right now (1.2811 as I type), but I still think the sell side has more odds of working out short term. If I'm wrong and we see 1.2900 Tuesday, I'll gladly add to my short.

    Stocks squeaked out to slight lower lows briefly Monday around the open hitting 1066.25 on futures, and while it's possible that may be it for the selloff, the pattern doesn't look quite complete to me. Shorting in the 1080-1090 range provided 2 profitable trade opportunities today with 2 separate price peaks on futures at 1081.75 and 1080.75 followed by an 8-15 point selloff. As with the Euro, short term I'm leaning towards more downside towards my 1055-1065 TP tomorrow, but if I'm wrong, I'll be happy to get in a bit more short at a higher price.

    Longer term on stocks, my research is uncovering more and more reasons to suspect a major turn lower at some point in the next month or so. Beyond the various aspects of Elliott Wave theory I've discussed is the concept of the Hindenburg Omen. It's a correllation of certain stock market indications that you can read more in <a href="http://en.wikipedia.org/wiki/Hindenburg_Omen">This Wiki Article</a>, but we've essentially got this signal twice last week, and while every Hindenburg omen doesn't necessarily mean there's an impending crash, every stock market crash since 1985 has been preceeded by a Hindenburg Omen and "Looking back at historical data, the probability of a move greater than 5% to the downside after a confirmed Hindenburg Omen was 77%, and usually takes place within the next forty-days." Some additional food for thought about impending stock market downside.

    In news Tuesday we're looking forward to one item out of the UK:

    0430 UK CPI (headline) y/y (3.1% expected) - With the disappointing outcome of the BoE Inflation report last week, most attention the GBP gets may be negative attention, but the EUR/GBP has held up a fairly steady decline, so there's plenty of room for the GBP as a whole to lose a lot of ground on bad news. Because of this sentiment setup and the way the economists estimates are tilted (range from 2.9% to 3.5% with 3.1% median), I'd recommend a -0.1% trigger for a sell and a +0.2% trigger for a buy.
    --If it comes out at 3.3% or higher, GBP/USD should rally 35-50 pips quickly in the first 1-4 minutes of the release.

    --If it comes out at 3.0% or lower (and no conflict with m/m figures), GBP/USD should fall 35-50 pips quickly in the first 1-4 minutes of the release.

    --Afterspike traders should have 2 chances for a nice retracement:
    1) GBP/USD may retrace 50-100% in the first few minutes, if it does, it's a good retracement to trade into.
    2) If the initial move is 40 pips or more, a 50%+ retracement 15-30 minutes after the news is historically a good time and place to get in for 20-40 pips profit with a similar level of risk.

    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
     
  2. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    *bump* EUR/USD around 1.2900
     

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