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Sir Pipsalot's Wenesday Market Update 04-28-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Apr 27, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    Well, I got a little ahead of myself yesterday on the EUR/USD. The fact is that the 1.3425 did hold and we did not get the confirmation I mentioned yesterday and on Monday we needed for a long. I tried to get in a bit ahead of myself and get long when that level looked like it would give way, but that was obviously a dumb idea =P

    Anyhow, today at 11:23 EST we saw a massive downgrade of Greek debt 3 notches to junk status, and the markets have taken a hard hit on this news. As I have mentioned several times over the last few months, the Euro is in a lose-lose situation here with this Greek debt situation and long term we should see continued weakness. However, we're still stuck in this 1.3000-1.3300 range that is very tough for the EUR/USD to break through. As long as we continue to stifle in this area even when we make new lows, I'm not going to jump back on the aggressive short bandwagon... Again, my plan is to get more aggressively short after a larger bounce above 1.3700, or upon more definitive confirmation (break of 1.3000) that we've initiated wave 3 down that should target below 1.2000.

    Short term, I'd have to say my bias is a bit bullish looking for some short covering here from the 1.3200 area as I type. Probably a recovery at some point today near the 1.3300 area is my best guess, but I'm neutral in the market right now waiting for a more clear setup. A long on NZD/USD though (now at 0.7138) also makes good sense though as described in the news breakdown at the bottom of the signal. It will still take a rally through 1.3425 to put me in the market for a long, and a selloff through 1.3000 to convince me to get back in for a short. Keep in mind we have the FOMC statement Wednesday that could send the EUR/USD very decisively in either direction, so put your hard hats on!

    On stocks, we saw a very ample 2%+ down day as the Greek debt situation thoroughly spooked the markets around 1130. The move is very impulsive and alluring, and it is quite enticingly setting up April 26th highs around 1220 to be more long-lasting highs; however, as with the Euro I need a bit more confirmation before jumping on long-term short wholeheartedly because this could play out with still higher highs before the big cycle wave 2 high is complete, or at least with some short covering here to the 1193-1200 area before resuming lower. Just for a reminder, if/when cycle wave 2 tops out, we should see a 70% or greater selloff over 1-2 years (that would mean S&P around 370 or lower). Long term, stocks are still well positioned for another major slide.

    A break of 1170 will be enough to convince me that the 1220 highs are of weekly chart significance and we should see and additional 50-100 points lower at least. As with the Euro, I'm playing wait-and-see on stocks at least for another day. If I had to pick a trade though, I'd short at 1193 on futures with a 16 point stop with initial TP around 1147, and final TP around 1080.

    In news Tuesday, we saw US Consumer Confidence come in a bit high, but not high enough to signal a trade; however, AU Trimmed Mean CPI came in just high enough to signal a long and is up about 25 pips as I speak. A bit less of a move than I envisioned, but there was a lot of prenews strength holding back the post-news rally. In news Wednesday:

    1415 US FOMC Interest Rate Statement (no change at 0-0.25% expected) - The market is slowly starting to price in a chance of rate hikes here with about a 20% chance of a hike by August, and a 65-70% chance of a hike by the end of the year.
    --Any strong reiteration of keeping rates low "for an extended period," or any dovish tone strong enough to push back these rate hike expectations further should send EUR/USD and GBP/USD higher by 50 pips or more.
    --Dropping the "extended period" statement, and/or a more hawkish stance from unwinding of additonal emergency measures or upwards revisions to growth and inflation should send EUR/USD and GBP/USD lower by 50 pips or more.
    DailyFX has a decent breakdown here:
    DailyFX - EUR/USD: Trading the Federal Open Market Committee Interest Rate Decision

    1700 NZ Interest Rate Statement (no change at 2.50% expected) - Expectations are unanimous that NZ will keep rates unchanged; however, there have been rumors as of late that the RBNZ are going to go out on a limb and put out a more hawkish statement. This sets the NZD/USD up to be a great long even right now at 0.7442 (maybe 50 pip SL). You can consider taking profits around 0.7196, or closing just ahead of either the FOMC statement at 1415, or holding through until just before the NZ release at 1500 EST.
    --If they confirm the rumor with a shift towards a hawkish tone, NZD/USD should rally 25-50 pips on the news, but have a lot of profit taking pressure making the trade tough to stick with.
    --If the RBNZ surprisingly maintains or intensifies their dovish tone, NZD/USD could see a strong selloff as new sellers and those exiting prenews long all sell. I would expect at least 50 pips down in this scenario assuming the USD isn't still going nuts from the FOMC statement.

    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
     
    #1 Sir Pipsalot, Apr 27, 2010
    Last edited: Apr 28, 2010
  2. cataquil

    cataquil Recruit

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    ES trade yesterday

    No mention of the Indices trade from yesterday...of course it is great when you get it right, but at least a little acknowledgement that it was wrong.

    From yesterday

    "On stocks, there was an early rally RIGHT to 1220 barely hitting my 17 point TP on my futures trade. For now, there's very likely going to be a bit of a pullback near 1195-1200 and then a continuation higher to modest new highs. I plan to reenter long stocks with a buy limit at 1200.25, with an SL at 1189.75 (10.50 points) and TP at 1219.50 (19.25 points) which is almost 2-1 reward to risk."
     
  3. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Haha, thanks for keeping me honest. My signal was so long I forgot to mention it, but yes, I lost 10.50 points on that limit order. So between the two trades I made only 6 points net. Like most traders the winners are a bit fresher in my mind than the losers, but usually I'll recap both, so I'm sorry I forgot to today.

    Also, I wrote down the release time for NZ Interest Rates wrong, so I'm fixing it now.
     

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