Sir Pipsalot's Wednesday Market Update 07-14-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

Well, the market has pushed through resistance in some markets, and is sitting at resistance in others. At this point, we seem to be in a bit of a no-man's land where the odds of an impending move in either direction are hard to ascertain. While the last run down was very orthodox and predictable, this bounce has proven to be too atypical for me to get a good finger on, so I'm on the verge of shifting to a more neutral status until things clear up.

On the EUR/USD and EUR/JPY, we've seen a lot more bullish risk appetite short term than I've expected which makes it look like either wave C is extending higher or we may have 5 waves up from the June low. Short term, things could go either way. Medium term, we're nearing a high, but it be pips away or 100's of pips away, so it's not anything we can trade off of yet. Once the picture clears up here I'll be able to provide a bit more insight into either a short term or more ambitious medium to long term trade.

Stocks have exceeded their typical retracement target in both the length of the rally and price achieved. The odds are looking tougher, but either way you cut it, the pattern is a bit atypical so it's hard to run typical odds on it. If this is indeed just a retracement, the max time is today (the 14th, same amount of time as the recent decline), and the max price is just above 1100 (78.6% retracement). Theorectially, as long as 1131 holds, the case for the long term selloff being underway is still plausible, but if we fail to top out Wednesday around the 78.6% retracement level, the odds may be a bit too stacked against it to keep the money on the table with a short. Either this is one heck of a short squeeze that will reverse lower, or it's time to switch horses... always a tough call to make, but I'm giving it another day based on the levels I mentioned.

Assuming we are forced into a more neutral stance, I'll be shifting more of my coverage to short term pip grabbing opportunities while the long term picture clears up. More on this tomorrow.

In news Tuesday, we saw UK CPI, German ZEW, and NZ Retail Sales come out too close to expectations for a clear trade, but the small +0.1% deviation on GBP/USD actually caused an abnormally large rally (larger than +0.3% deviations in recent history). In news Wednesday:

0430 UK Claimant Count Change (-20.0K expected) - Typically on this news we'll see about a 40 pip move that has a good chance of a strong initial move and strength after a retracement of that initial move. If you get in on a retracement, a good time to get out is 40-60 minutes after the news.
If it comes out at -10K or higher, GBP/USD should drop 40 pips.
If it comes out at -30K or lower, GBP/USD should rally 40 pips.
Also watch out for the ILO Unemployment rate (7.9% expected) and avoid trading this news if there's a conflict there.

0830 US Retail Sales Ex Autos (-0.1% expected) - Usually Retail Sales numbers don't have a lot of staying power, but they do pack some temporary punch. I wouldn't hold onto this one for more than 20 minutes.
If it comes out at 0.5% or higher, USD/JPY should rally 40 pips.
If it comes out at -0.7% or lower, USD/JPY 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. If you have any questions, you can also email me at

To our success!
Sir Pipsalot
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