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August 31, 2010

Rough August for Dow

Filed under: Investing — Tags: , — admin @ 11:59 pm

By Jonathan Cheng And Kristina Peterson

Stocks battled to a stalemate on Federal Reserve uncertainty over how to handle the faltering economic recovery, ending the market’s worst August since 2001.

The Dow Jones Industrial Average finished the day up 4.99 points, or 0.05%, at 10014.72, after spending parts of the day below the psychologically significant 10000 level. The blue-chip index shed 4.3% this month as investors lowered their economic-growth expectations in response to a flood of weak data.

The Dow’s performance this month is its worst since May, and the measure’s first down August in five years.

The Standard & Poor’s 500-stock index gained 0.04% to 1049.33, while the Nasdaq Composite lost 0.3% to close at 2114.03. The S&P 500 slid 4.7% for August, while the Nasdaq shed 6.2%.

Small-capitalization stocks, seen as a leading indicator of the economy, took an even bigger hit in August. The Russell 2000 index of small-cap stocks posted its worst August in 12 years, down 7.5%.

Crude-oil prices also fell, dropping 3.7% on Tuesday to bring the month’s decline to 8.9%, just north of $70 a barrel. Gold, meantime, gained $11.20 on Tuesday to approach its all-time record high.

On Tuesday, the stock market lost its intraday gains after minutes of the Aug. 10 Fed meeting showed most policy makers agreed that the new strategy of reinvesting maturing or refinanced mortgage-related securities was necessary given the weakening economic recovery.

“There’s very little change from last Friday’s Bernanke speech, but if anything there are hints that the Fed is leaning toward lowering its growth forecast for 2011,” said John Brady, senior vice president at MF Global.

That news wiped out an earlier intraday gain fueled by slightly better-than-expected housing, manufacturing and consumer-confidence data.

Technology stocks took a hit after technology researcher Gartner cut its 2010 projection for world-wide personal-computer shipments, saying the second half won’t be a strong as it previously expected. Intel fell 1.6%, while Cisco Systems shed 1.7% and flash-memory device maker SanDisk fell 3.3%.

Meanwhile, J.P. Morgan Chase, which had been one of the Dow’s worst performers in August, rose 1.4% on Tuesday. The gains came as Dow Jones Newswires reported the bank would close its commodities trading desk, in line with the Obama administration’s financial regulation overhaul.

Luxury retailer Saks soared 20% amid speculation that a private-equity consortium is preparing a cash bid of $1.7 billion, or $11 a share, for the retailer, according to the Daily Mail newspaper, citing unidentified sources. A Saks spokeswoman said the company doesn’t comment on rumors or speculation.

Biotech agribusiness company Monsanto dropped 5.8% after predicting its fiscal-year earnings will come in at the low end of its prior view.

The yen gained strongly against the dollar, trading at less than 84 yen to the dollar. The euro gained to $1.2682, up from $1.2665 late Monday in New York.

Demand for Treasurys rose, with the 10-year note up to push its yield down to 2.48%, its lowest since January 2009.

Write to Kristina Peterson at kristina.peterson@dowjones.com

August 31, 2010 Stock Market Recap

Filed under: Forex Trader — Tags: , , , , — admin @ 10:51 pm

This lackluster session was an appropriate end to a lackluster month of August. The market feels heavy to me yet it refuses to breakdown under the July lows. That could change if we get a bad number out of Friday’s payroll report. Until then, I expect trading to remain muted and contained within some clearly defined ranges. I’d want to get long above last week’s high and short below last week’s low. On the short side I’d be ready to cover quickly if the July lows don’t break though.

Historically, I’ve always liked to see the financials as a leading group. Right now they seem to be on the verge of a breakdown. Some of the banks (BAC, WFC) look especially weak. So I’ll be watching the July low on this index closely.

Trend Table

The trend table continues to look like death…

Trend Nasdaq S&P 500 Russell 2000
Long-Term Down Down Down
Intermediate Down Down Down
Short-term Down Down Down

(+) Indicates an upward reclassification today
(-) Indicates a downward reclassification today
Lat Indicates a Lateral trend

*** I’m simply using the indices’ relations to their 200, 50 and 10-day moving averages to tell me the long, intermediate and short-term trends, respectively.


FOMC minutes should be more interesting than usual

Filed under: Central Banks — Tags: , , , , , , — admin @ 5:34 pm

These should be the most interesting FOMC minutes in a long time based on the Wall Street Journal article several weeks ago which highlighted the unusually large number of participants (7 of 17) who took issue with the Fed dipping its toe back into the quantitative easing waters.

From a policy perspective, Bernanke laid out several alternatives at Jackson Hole, so that will be the most likely course for the Fed to follow going forward, but from a soap opera perspective, today’s minutes will be the most interesting in terms of the internal debates taking place within the FOMC in some time.

Bernanke was able to herd the cats last time (only Hoenig dissented) but we’ll have to read the minutes closely to see if there is a wider rift (or rifts) developing within the Federal Reserve Board.

If it turns out that there is a hawkish wing of the FOMC coalescing to oppose QE, that is a potential dollar plus from a yield perspective but a negative from an asset market perspective. Stocks won’t like it.

Postcard from Greece

Filed under: Forex Strategies — Tags: , , — admin @ 4:42 pm

Sorry for the lack of posts, but, hopefully, frequency will increase as TMM pack away their beach towels and knotted hankies for another year. But for now we would just like to say that if the rest of peripheral Europe are taking the crisis anywhere near as seriously as Greece is, then the whole place is f%”ked. We have just found local prices in Greece exceed high-end London supermarkets with even olives and olive oil more expensive. Greek super yachts happily ply the waters and the bars are still full of locals paying positively Alpine prices for food and beverages in establishments where the plumbing is still Third World. At current prices, they shouldn’t be surprised if tourists start to choose Antibes or the Maldives over Poros. But as far as the bars, restaurants and supermarkets are concerned its either “what crisis” or they are taking the “rip ’em while you can” policy. The number of bleak concrete quay wastelands with big blue signs proclaiming EU funding from unification/friendship funds is depressing and you can understand German concerns as to when the subsidies will stop.. if ever. (A good article in the FT on how German / Peripheral imbalances are not diminishing through the normal routes.)

All this adds weight to the feeling that September’s seasonality sell offs are this year going to return to the Euro zone, just when all eyes are pinned on the US.

But for now we leave you with a postcard we were asked to pop in the post to Germany.

GBP/USD – Bearishness Targets Downtrend Continuation

Filed under: Technical Analysis — Tags: , , , , — admin @ 3:46 pm

Price action on GBP/USD (a 4-hour chart of which is shown) as of Tuesday (8/31/2010) has dropped to approach support in the 1.5350 price region. This occurs within the context of a relatively choppy descent from the 6-month high just under 1.6000 reached in early August. This descent has formed a clear downtrend resistance line. For more technical analysis on this currency pair, please click here for Tuesday’s (8/31/2010) Chart of the Day.

James Chen, CTA, CMT

* For information on my DVD set, High-Probability Trend Following in the Forex Market, please click here.
* For information on my book,
Essentials of Foreign Exchange Trading (Wiley), please click here.
* For information on my new book, Essentials of Technical Analysis for Financial Markets (Wiley), please click here.

Is the Euro’s Short Rally Over? – August 30, 2010

Filed under: Forex News — Tags: , , , , , — admin @ 3:15 am

eurusd, fiber, euro, eur usd, euro usd, usd eur, usd euro, forex, forex market, forex trading, trading forex, currency trading, daily forex picks, forex forecast, forex analysis

Good day to you my Forex friends! Here’s an update on the EURUSD or the fiber as what they call it on Wall Street. The last time I covered the pair (please see my previous post here), it had just broken down from a head and shoulders formation. Since then, the pair has rallied to form what appears to be a rising wedge pattern. In case you do not know, a wedge is generally a continuation pattern as it just represent a short term rebound in prices. Such rally could be due to profit taking or short covers. At present, the pair is encountering some resistance at the neckline of the head and shoulders. If it’s unable to move past the neckline and it falls below the support of the rising wedge, it could slip at least back to 1.2600 level. Further weakness could push it all the way down to the previous low at 1.2150.

The highlight of the week for the euro zone will be the the European Central Bank’s monetary policy decision on Thursday (September 2). The ECB is expected to hold its interest rates again at 1.00% following a drop in German yields. 30-year yield, for your information, have dropped to below 3.00%. And despite the “cheap” borrowing costs, inflation at least in Germany remains subdued. In fact, the latest month-over-month German CPI reading reads at 0.00%. With consumption and inflation low, the ECB would likely be a little dovish about its short term forecast on the euro zone’s economy as a whole. Such could then send investors back to the safety of the USD.

More on LaidTrades.com …

USDCAD rebounded strongly from 1.0471

Filed under: Forex News — Tags: , , , , — admin @ 3:12 am

USDCAD rebounded strongly from 1.0471, suggesting that a cycle bottom is being formed on 4-hour chart. Another rise to test 1.0676 (Jul 6 high) key resistance is possible in a couple of days, a break of this level will confirm the cycle bottom, then further rise to 1.0750 could be seen. Key support is now at 1.0471, below this level will indicate that the uptrend from 1.0107 has completed at 1.06666 already, then the following downward movement could bring price back to 1.0200 zone.

usdcad

Daily Forex Signals

Daily analysis and trading strategies 8-30-10

Filed under: Technical Analysis — Tags: , , , , — admin @ 3:05 am

EURUSD
Trading strategy: standing aside
Euro’s consolidation above 1.2700 continues but its recovery is still modest, upside being capped by 1.2770 – following the EURJPY which is facing resistance around former support zone, at 109.25. Short-term studies are bearish while the pair is trading below 1.2900 and its recovery being weak. Interim …

[please click the title above to view the entire article]

Daily Economic Roundup – August 30, 2010

Filed under: Currency Charts — Tags: , , , , — admin @ 1:28 am

What’s on the Economic Horizon

US PCE: Inflation Remains Subdued?
Australian GDP Due This Week
New Zealand Business Confidence to Improve in August

United States

We got a relatively quiet trading day to end last week’s snoozefest, as most pairs stayed within range. EURUSD and GBPUSD traded within ranges of about 100 pips, and finished just a few pips from their opening prices for the day. More…

Euro zone

Is EURUSD gearing up for a comeback? Judging from that slow but steady rise since Wednesday last week, it sure looks like it! Oh, and check it out: The pair gapped up over the weekend, from Friday’s close of 1.2734 to a week open price of 1.2761. More…

United Kingdom

GBPUSD traded lower to its intraday low of 1.5443 after opening at 1.5533. Good thing the pound was able to pull off a Sylpipster Stalone during the New York session, firing BULLets (get it? haha) and punching pips out of the dollar to close the week at 1.5514. More…

Japan

Unlike T.I. who has Keri Hilson to back him up, the yen didn’t have anything or anyone last Friday as risk aversion seemed to have been on the down low and policymakers continued their jawboning. USDJPY closed higher at 85.36 giving the yen a 94-pip loss. Boo hoo! More…

Canada

The Loonie got some investor lovin’ last Friday as it gained 42-pips against the dollar. But posting its second consecutive win wasn’t as easy as pie. USDCAD hit an intraday high of 1.0649 before it closed at 1.0524. Whew! I guess it got lucky when currency traders found more flaws on the dollar than they did on it. More…

Australia

Surf’s up, dudes! Thanks to the US dollar selloff, the Aussie cruised higher last Friday and even gapped higher over the weekend. Will it be able to keep its head above the .9000 handle? More…

New Zealand

Fly, Kiwi, fly! NZDUSD soared past the .7100 handle when the Greenback sold off last Friday. The pair even gapped higher over the weekend as it opened at .7144. It looks like Kiwi bulls are excited! More…

Switzerland

Too much too soon eh? The Swiss franc ran all out of luck on Friday, as it got walloped by the dollar . USDCHF closed almost 70 pips higher to finish just a hair below the 1.0300 handle. Meanwhile, EURCHF traded within a super tight range of just 40 pips to finish at 1.3132. More…

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Yen in Focus!

Filed under: Business — Tags: — admin @ 12:28 am

CURRENCY WEEKLY OUTLOOK

by Abe Cofnas

FOCUS ON USDJPY

The theatre of action for this week is first and foremost the USDJPY. What happens there will be a major landmark of global market direction.   The Yen is clearly a barometer of risk aversion versus risk appetite. Japanese economic weakness, while clearly a function of a multi-decade consumer risk aversion and economic stagnation is also a barometer of global risk aversion. Japanese growth is nearly 0% GDP and a strong Yen is no help at all.    We have witnessed a lot of chatter about intervention by the Bank of Japan.  In any case, whether the intervention will be real action or simply verbal “jawboning” this week trading the USDJPY pair will provide a lot of action.   Let’s take a closer look.

The 4 hour USDJPY chart tells us a great deal about the nature of the price action.  We see that the USDJPY pair has an ability to go to extremes. It went to a lower and Extreme Lower Bollinger Band at 83.6 last week, and then reversed to an upper Extreme Upper Bollinger Band at 85.89.   This pair is swinging!       This suggests being agnostic as to intraday direction and trade the breaks of the Fib levels.
It’s important to keep a very tight watch on this pair, because the event risks are very high with any statements coming from the BOJ or the Finance Minister can cause a large movement. (Click chart to enlarge)

abe083011.JPG

The 15 minute chart is instructive and quite spectacular.  Observe an almost perfect upside down V.  The symmetry is apparent – the time it took to go up is equal to the time it took to come down!  Traders need to watch for a confirmation of a break of the downtrend.   Fundamental traders will want to hold a long position in the Yen and that could be put on the break of the down trend line, however, be prepared for whiplash!   It could go further down if any news is disappointing.  (Click charts to enlarge)
abe08302.JPG

abe08303.JPG

To learn more about how you can take advantage of world events through the currency market, be sure to check out our currency trading courses!

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