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November 30, 2010

U.S. Stocks Fall

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

By Donna Kardos Yesalavich And Kristina Peterson

NEW YORK—Stocks ended November on a sour note, falling on continued worries about the European sovereign-debt crisis and representing the market’s first monthly drop since August.

The Dow Jones Industrial Average declined 46.47 points, or 0.42%, to 11006.02. Bank of America was the measure’s worst performer, off 36 cents, or 3.2%, to $10.95, while Procter & Gamble shed 1.06, or 1.7%, to 61.07, and Hewlett-Packard dropped 67 cents, or 1.6%, to 41.93.

But Caterpillar climbed 93 cents, or 1.1%, to 84.60, boosted by a better-than-expected reading on Chicago-area manufacturing. Wal-Mart Stores also rose, up 24 cents, or 0.5%, to 54.09, and Walt Disney added 9 cents, or 0.3%, to 36.51, after the Conference Board’s measure of consumer confidence topped estimates.

The blue-chip measure ended November in negative territory, down 1.01%, its first down month since August. The Standard & Poor’s 500 and the Nasdaq Composite also fell in November, snapping two-month winning streaks for both measures.

The Nasdaq Composite Index shed 26.99, or 1.07%, to 2498.23, hurt by a drop by Google of 26.40, or 4.5%, to 555.71, following reports that the online-search giant is offering to buy Groupon, a social-network site geared toward discount shoppers, in a deal worth $6 billion. Separately, the European Commission opened an antitrust investigation into allegations that Google has abused a dominant position in online search.

The Standard & Poor’s 500-stock index slipped 7.21, or 0.61%, to 1180.55, led by its technology sector.

Investors were encouraged by the better-than-expected manufacturing and consumer-confidence data, but the reports were overshadowed by persisting worries over the euro-zone.

The U.S. data are “tending to suggest that people’s worst fears about the U.S. economy have been overstated,” said Kevin Gardiner, head of global investment strategy at Barclays Wealth. “I think if it weren’t for the ongoing uncertainty posed by what’s going on in the euro zone at the moment, [the U.S. data] would have a more pronounced impact on equity prices.”

As market sentiment toward the euro zone deteriorates, European officials are planning a new round of bank “stress tests” that they say will be more rigorous than the exams conducted earlier this year.

The euro-zone issues are “something the market is pricing in now and it is just going to have to get accustomed to dealing with some of these rolling solvency issues in Europe,” said Stephen Wood, chief market strategist at Russell Investments.

Global risk appetite was also undermined on Tuesday by talk of higher Chinese interest rates as well as disappointing Japanese jobless figures, encouraging investors back into safe havens, such as the dollar and Treasurys.

Among stocks in focus, Seagate Technology dropped 45 cents, or 3.3%, to 13.41, after the maker of computer disk drives cut off talks with private-equity firms about taking it private because potential suitors didn’t value the company highly enough.

Barnes & Noble fell 85 cents, or 5.7%, to 14.02. The book retailer’s fiscal second quarter loss narrowed, but it gave a muted outlook, projecting a wider-than-anticipated loss for the year and third-quarter earnings below analysts’ expectations.

Baldor Electric surged 18.20, or 40%, to 63.31, after Swiss power and automation group ABB Ltd. said it will pay $4.2 billion, including $1.1 billion in debt, for the electric-motormanufacturer. U.S. shares of ABB slipped 21 cents, or 1.1%, to 19.36.

Altera declined 38 cents, or 1.1%, to 35.09, after the chip maker reiterated its fourth-quarter revenue view and projected 2011 gross margins in line with Street expectations. The market had hoped Altera would boost its revenue view.

Force Protection added 11 cents, or 2.2%, to 5.14, after the military-vehicle company received a $280 million order to supply 200 Ocelot military trucks and spares for a U.K. defense program.

Seadrill shed 51 cents, or 1.6%, to 31.09. The Norwegian oil-services company’s third-quarter earnings rose 3.8%, meeting analysts’ expectations, but revenue came in just shy of consensus.

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

Trichet: Not my problem, these poxy countries

Filed under: Central Banks — Tags: , , , , — admin @ 5:30 pm
  • ECB’s mandate is price stability, not responsible for monitoring countries
  • Don’t think working assumption that large Spanish banks could go bankrupt is appropriate
  • Would not suggest reopening Pandora’s box of default mechanism at this stage
  • ECB has never been a proponent of issuance of joint euro bonds but would never say never
  • Cannot confirm China s buying euros rather than dollars; ask China
  • Not wise to give more details on bind-buying program
  • more flexible emerging currencies would be better

jct pray

EUR/USD – Continued Steep Bearish Bias

Filed under: Technical Analysis — Tags: , , , , — admin @ 4:51 pm

Price action on EUR/USD (a 4-hour chart of which is shown) as of Tuesday (11/30/2010) has just dipped tentatively under 1.3000, establishing a new 11-week low. Price action has continued its methodical bearishness of the past month (November), regularly breaking down below key support levels, pulling back (rallying) and retesting those previous support levels as resistance, and then continuing on its bearish way. For more technical analysis on this currency pair, please click here for Tuesday’s (11/30/2010) 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.

Nightmare before Christmas

Filed under: Forex Strategies — Tags: , , — admin @ 4:45 pm

You know that dream where you find yourself back at school about to go into your finals and you have done NO revision and what’s more for some reason you aren’t wearing your trousers? No? Well we bet some Eurocrats are wishing that was their reality compared to their current “Nightmare before Christmas”.

But say we were to wake up and find ourselves in their nightmare. What would We do?

TMM notes that our path from here is not exactly clear but there are options for which we have invented code names used by the leaker in Merkel’s office***:

  1. Increase the size of the EFSF (“Big Bertha”).
  2. Create a pan-European bank recapitalization fund and new stress-test round (“Groundhog Day”).
  3. Explicitly rule out the SDRM (“Horatio Nelson”). Burying head in sand optional.
  4. Instruct the ECB to go nuclear and buy bonds unsterilized (“Dr Strangelove”). Utter loss of credibility counseling to be provided by the Fed.
  5. Require Sov CDS to be 100% margined (“The Little Bighorn”). Watch Euro dive some more as all those “down with Europe” flows go into the one remaining market they can.
  6. Immediately stick Portugal and Spain into the EFSF (“2 tons of you-know-what in a 1 ton bag”). Have you ever had your shopping bags rip breaking all your eggs on the way home from the grocery store? We have.

We would view (2) as the most positive development. In terms of finance, we would imagine that the Euromandarins are looking at the pre-funded EUR60bn EFSM as a potential source of bank recapitalization funds, supplemented by another draw to take us to, say ~EUR100bn which we would say is enough for the system. If the Euro-banks are capitalized properly (and credibly) this time, then there will be nothing to stop them scooping up all this peripheral debt and thus the sovereign-bank feedback mechanism will work in reverse.

At least, that’s what we would do it was our nightmare. However, the Eurocrats have shown themselves to be utterly clueless and comments such as:

*FRANCE’S BAROIN: NO RISK OF A DOWNGRADE FOR FRANCE

show that they are obviously suffering from sleep paralysis. Which as anyone who has suffered it will know is very frightening indeed.

But back to reality.

Another day, another 1.x% down on the Spanish 10yr and the Euro, though TMM notes that equities are doing OK all things considered. Maybe it’s that the supranational sector equities are actually becoming a sanctuary away from sovereigns, FX and bonds. Even the Ibex index is rapidly turning into the “Telefonica and Banco Santander” index, both of which have big businesses outside of Europe.

Telefonica got $6.4bn of its $15bn of Q3 revenues and $5.4bn of its $7.3bn of operating profit from Latin America. At 8% dividend yield and 8.5x PE it appears that the largest index constituent has reached, as pointed out by our friend, Charles, in the comments yesterday, the point of “compelling un-leveraged cash yield” from whence few things can trade down without any of the complexities of having a heavily debt financed balance sheet like Banco Santander. Though that is looking pretty ridiculous too. Take earnings from Latin America at 12.5x (Banco Itau’s level) and the rest of the bank comes at 4.6x PE. That does look pretty cheap and with those two comprising 41% of the Ibex TMM wonders whether mindlessly selling Ibex futures might have had its day.

We are thinking of donning the Kevlar knife catching gloves as we cannot believe there isn’t a “surprise” change around the corner as the Eurostriches wake up and pull their heads out of the sand.

Dow’s lethargy and Dollar’s strength still driving the markets.

Filed under: Currency Charts — Tags: , , , , , , — admin @ 3:47 am

The U.S. Dollar has continued to rally as the dollar bulls still seem to have plenty of gas in the tank. Despite today’s pullback from the 81.20 level on the front-month contract of the U.S. Dollar Index, the uptrend is still intact across the 60 and 240-minute time frames. Even more significant is that fact that the daily chart’s bullish sentiment and momentum has finally transitioned the end-of-day time frame into a mark up market phase as the 34EMA Wave has taken on a more “twelve to two o’clock” Wave angle. This is a “fresh” transition however since the Wave is not established in this angle but there is no denying the momentum as the U.S. Dollar Index surges towards what seems like an inevitable test of the 200 period SMA on the daily at 81.95.

11-29-2010 6-26-39 PM.jpg

In today’s video I discuss the flat Dow Jones and the dollar as well as my continued focus on the five-minute set up and some nuances on how to differentiate the between the angles on the five-minute chart for ideal “Between the Greens” entries.

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Reissue: My Top 10 Forex Resolutions for 2011

Filed under: Forex News — Tags: , , , — admin @ 3:16 am

Who said that resolutions can only be made on New Year? Well, it’s still roughly a month from the first of January and I already made mine. I mean… the earlier I make the changes the better, right? So let me cut to the chase and tell you now what they are. Here are my top 10 forex decrees:

1)      Don’t hesitate to trade the breakouts!

  • Chart patterns are the bread and butter of technical analysis. There are five basic must-know chart formations – triangles, head and shoulder (inverted), double bottom (tops), cup and handle, triple bottom (top). If you spot a breakout.. trade it!

2)      Don’t forget the fundies!

  • Marry fundamentals with technicals like you’re marrying Jessica Alba. Okay, the latter does not make any sense. In any case, you should always try to execute trades that are both supported by technicals and fundamentals/sentiment as this would increase the chance of them winning.

3)      Don’t gamble!

  • Say no to rogue trading! Trading currencies is not like in a casino where you can just do a one-time big time trade. Of course you can do that but don’t fret if you find your account down to zero the following day. If you want to gamble.. go to a casino! It’s more fun there! If you want to profit… trade forex in a systematic way!

4)      Don’t revenge trade!

  • Did I say no rogue trading? Well, losing is part of the game. So if you do just relax, calm down, and move on. Don’t hit the entry button again and trade twice or thrice of the position that you lost in hopes of getting it back and even winning in one go. You’ll find yourself in a deeper ditch if you lose again.

5)      Manage your positions wisely

  • Manage your positions wisely like your managing your chicks… I mean your checks. Don’t risk more than 1% of your account balance in one trade. Enough said!

6)      Avoid trading in a highly volatile time

  • Trading during the releases of high profile reports like GDP and NFP is not my style. I got whipsawed the last time I tried to ride a sudden slide in prices from a GDP report. You cannot really gauge how much a currency will move given a report. You might get the tail end of the move if you decide to just jump in. If you miss it… then stay away.

7)      Trade on retracements

  • This one is related to number 6. If you miss a breakout or the initial strong move in prices then don’t just jump in. Wait for it to retrace (sounds fancy, eh?) so you can get a better price. Hit the limit order function… it’s there for a reason.

8)      Be flexible

  • The market acts like a girl… fickle minded. You just don’t know what she wants exactly. So sometimes it is best to just adjust and be flexible. To be profitable and likable you gotta do what the woman wants.

9)      Use a journal

  • Okay, journalizing sounds kinda gay-ish. But if you want to keep track of what’s working and what’s not in your trades then you better jot all of them down. Write down your trade ideas, what happened, what you did, what you felt… everything.

10)   Go out. Drink. Chix.

  • Yes. You read that correctly! Forex is a tough business with all the things that you have to read and analyze. We’re just humans. We get strained too. Sometimes we have to take a break as well. So for my tenth decree… Free yourself from stress. Clear your mind. Go out. Drink. Chix.

So there you go… my top 10 forex resolutions. Currently, I’m working on the tenth (Hey Babe!). Alright. Got to head out now. Peace!

More on LaidTrades.com …

“Real Forex” daily analysis for 30-11-2010

Filed under: Forex News — Tags: , , , , — admin @ 3:11 am

AUD/USD

Daily graph: http://www.real-forex.com/charts-daily/November2010/AUD_DAILY_301110.JPG

AUD/USD daily

After an uptrend who last for 3 weeks, the pair clearly broke down the support of 0.9662 during the last session. As mentioned, it is not recommended to enter any transaction immediately after a breakdown; it may be safer waiting for a small correction and then go “Short” (in our case) along with the trend.

As a result, a confirmation of the new trend is required through the identification of a decreasing configuration on 1H graph, unless the pair, during the correction process, would break back the Support of 0.9662. If it does, the previous opportunity is not relevant any more.

Actually, in order to catch the opportunity to go “Short”, the identification of a decreasing configuration on 1H is needed to confirm such an opportunity.

Potential trade

1H graph: http://www.real-forex.com/charts-daily/November2010/AUD_1H_301110.JPG

AUD/USD 1H

The required configuration should appear with the breakdown of the 1H support on 0.9567. In this case, a transaction may be ordered.

–        “Limit” order on “Short” position 10 pips below the mentioned 1h Support, which is: 0.9557

–        “Stop Loss” order on the last peak appeared: 0.9610

–        1st degree to place the “Take Profit”: 0.9524

USD/CHF

Daily Graph: http://www.real-forex.com/charts-daily/November2010/CHF_DAILY_301110.JPG

USD/CHF daily

After several weeks of sideways movement without any specific trend, a new uptrend started. Please notice the presence of a very important resistance on the daily graph situated around 1.0069.

Once that resistance will be reached, there are two possible outcomes resulting:

  1. The collapse of the resistance followed by a closing above that level. In this case, it would be safer waiting for a small technical correction to occur and after the previous trend will be restored, going “Long” with the trend, after the identification of an increasing configuration on 1H graph.  Since, for the last weeks, an important support was created, our intuition is that this outcome is the most likely to occur.
  2. Stop on the resistance, with test or without. In this case, waiting for the end of a “resting period” of at least a session and a half, to confirm the implementation on that resistance would minimize the risk. Then, waiting for the rebound to occur and going “Short” along with the new trend, until the closest support.

Have a nice day

Real forex team logo

Dollar continues to get stronger

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


Quote of the day: A lie can travel halfway around the world while the truth is putting on its shoes. – Mark Twain

EURUSD

Trading strategy: standing aside

Euro’s collapse continue amid fears that more countries in Europe will join Ireland and Greece. The tension between North and South Korea is also fueling current decline and the euro trades below last week’s 1.3300 which provided support for 2 days. Upside correction signs are not visible yet but in case of a break above 1.3300, a run up to 1.3500-1.3550 should be favored – and that is where fib barriers of last week’s down leg are formed, along with the former bottom established two weeks ago. Short-term sentiment remains bearish as long as the pair doesn’t return above 1.37 and it most likely won’t get that far up. Current exchange rate is 1.3234 @06:45 GMT

Support: 1.3200, 1.3100 and 1.300
Resistance: 1.3300, 1.3385/00, 1.3450/60, 1.3500 and 1.3550
Market sentiment: long term – mixed, medium term – bullish, short term – bearish, intraday – bearish

EURUSD 4hrs forex chart 11-29-2010
EURUSD 4hrs forex chart 11-29-2010

More trading setups

EURGBP

EURGBP daily forex chart 11-29-2010
EURGBP daily forex chart 11-29-2010

AUDJPY

AUDJPY 4hrs forex chart 11-29-2010
AUDJPY 4hrs forex chart 11-29-2010

EURCAD

EURCAD daily forex chart 11-29-2010
EURCAD daily forex chart 11-29-2010

Have a great day


© liviu for innerfx.com, a Forex Analysis blog, 2010. |
Article Source | Post tags: AUDJPY, EURCAD, EURGBP, EURUSD

Risk: when it rains, it pours …

Filed under: Currency — Tags: , , — admin @ 2:24 am

Risk: when it rains, it pours …

It’s resurfacing. Perhaps not in the exact same places or at the exact same frequency or with the exact same magnitude, but things are resurfacing.

For a good many months there we had been harping on the US dollar’s potential to rally on risk aversion. We regularly brought to light the lingering risks and new risks that could have ultimately flipped the investing environment on its head again. But during that time our expectations were suppressed by the markets; risk appetite was surprisingly resilient, investors surprisingly accepting.

So is now the time to go all in? Is now the time to bet on everyone else taking their money off the table here?

Let’s look at what’s happening:

– Real estate in the US is still in trouble or about to be in trouble. The recent chaos around the foreclosure fraud in the US is really just delaying an enormous number of inevitable foreclosures yet to hit the market. Banks are way behind on processing foreclosures. The outlook for prices is for a decline of 8% or more.

– We know of the potential bubble in China that’s on the verge of bursting. Home prices there have not yet shown notable downside, but sales volumes are slumping and the impact of decreasing demand would hurt the builders and the raw materials providers, in turn having a harmful impact on an economy that could come unraveled all at once … very soon. Hong Kong, too, is taking action. They’re raising down payment requirements and taxes on speculative sales in hopes of slowing down surging home prices which the IMF recently said could rock the Hong Kong economy.

– QE2 is still the devilish plot by the Federal Reserve to debase the US dollar and increase US competitiveness in global trade. Or, in different words, it is a way for the United States to force adjustment on its trading partners who remain reliant on undervalued currencies and their export-centric growth models. The point is: China and other emerging markets are not amused; and smaller emerging economies in particular face sizeable capital inflows — both into emerging market funds and direct investment – and the potential for inflation and asset bubbles.

– A growing number of institutions, analysts, economists and know-it-alls are characterizing central banks’ actions as hazardous bailouts for the banking system. The term “Ponzi Scheme” is being used regularly. Main Street is still suffering, despite a lot of recent improvement in various economic data points; this recovery seems built on a wet foundation. At the same time, focus remains on shoring up the banks, partly for confidence building reasons and partly for reasons on which the public can only speculate. But the ideas are not good. Basically, Main Street types are losing confidence in Wall Street types; the recent investigation into insider trading among hedge funds adds to the mystery of dark pools, computerized trading programs, fraud, corruption and an un-level playing field. This uncertainty does not bode well for US investments.

– In case you’ve been living under a rock, Eurozone sovereign debt concern is boiling over again. The interconnectedness of the eurozone banking system and another economy surfacing in need of a bailout (Portugal and Spain next?) suggest the can is simply being kicked down the road to the doorstep of national governments where, when all piled together, will be too onerous to manage. Here is a chart that was put together by the IMF in October to show exposure to Greece, which is significantly smaller in scope than Ireland relative to the part it plays in the financial sector:

– China is still being dealt criticism over its mercantilist trade policy and the manipulation of the Chinese currency. Apparently they’d like to use their leverage on rare earth metals to silence the haters. And now they’ve got another volatile issue to tend to: Korean tensions. China, being North Korea’s most useful ally, is being pressed to do some pressing on the North Koreans. Simply: markets do not like geopolitical tensions. And if there seems potential for the two largest global economies to take opposing sides (albeit not likely at this point), markets are going to like it even less.

-Last but not least the stock market — all that QE2 love seems to be gone. The stale, overused, unsubstantiated phrase, “Don’t fight the Fed,” is proving useless as usual. In a world focused on risk, stocks look like they have a whole bunch of air in them.

S&P 500 Index (black) versus US$ Index (red) Daily:

Happy Monday!

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November 29, 2010 Recap: Is That a Bear Flag?

Filed under: Forex Trader — Tags: , , , , — admin @ 1:55 am

It was a choppy day as the market tried to figure out if it liked the Irish bailout and the Black Friday results. We finished on a high note with afternoon strength but overall the day didn’t give us much new information. The indices are still consolidating as they have been for at least a couple of weeks. Perhaps they’re building strength to get back above the spring highs but the technical patterns I’m seeing make me think that a downside move is more likely. The S&P looks like it just wants to drift sideways while the Nasdaq appears to be printing a bear flag. If it does breakdown it would still need to break its 50-day moving average before I’d be concerned and/or an all-out bear.

When I last posted GOOG almost two weeks ago it was deeply oversold. It’s now worked off that oversold condition but it’s made no progress and is still in danger of filling that October gap. The 50-day moving average is the last obvious support before it hits that air pocket.

Trend Table
Trend Nasdaq S&P 500 Russell 2000
Long-Term Up Up Up
Intermediate Up Up Up
Short-term Up Lat Up

(+) 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.


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