SPY Breaks Out, USD/CAD Provides Double Fall Line Trade

Good Morning,
After yesterday's Fed meeting minutes, the threat of QE3 is more present than ever. So regardless of good or bad news, the markets want to go higher. Maybe, if it is bad news, we rally farther than if it is good news. We live in a sick world!!
Again, throw out yesterday's Consumer Confidence number. As Rick Santelli put it so well: "the downmove that we had will be reflected in August numbers, not July's". Today's CHIPM was for July and it was basically on the numbers. The unemployment component was as well. Tomorrow, when we get ISM, that may give us some more recent data.
And oh yeah, you see that I don't mention ADP Payrolls. It isn't a government number and its history of forecasting the real data is pretty bad.
To switch things up, let's go with the technicals in forex first. We had pretty muted ranges - again, notice the dollar. It is holding its strength against most currencies. Does that mean if equities fall, the dollar is ready to take off? Overall, yes the dollar is weak, but I am just stating the facts. And overall, as I mentioned, pretty muted today with VIX declining a bit (30ish), but there was one pair that I would like to highlight. It was nice to see the equity/USD relationship back in place - giving us (if you stuck with it) a DOUBLE FALL LINE TRADE. The USD/CAD, rallying when equities went from 120 to 30 and sold off (and triple topped) when equities bottomed out and went back towards highs:

Past performance is not indicative of future results

Moving to the SPY, as I mentioned yesterday, whether it goes up on bad or good news, who cares, cause technically, the SPY broke through its trendline and is the 125-130 area next? Please, please get there so I can add on some monthly protection. Please!

Past performance is not indicative of future results

Remember to think in percentages folks. The SPY is up 10.7 percent from its lows earlier last week. Again, if you are nervous about downdrafts, here is your chance to put on some cheap protection. Trade appropriately as the threat of intervention is still there. What does that mean? It means, pick your level, have an exit strategy for a loss already in place in case the intervening continues if you are playing a defensive position.

What about playing the upside breakout? Think about percentages!! Is the risk to reward still there to get long? For a day trader, maybe not. For someone playing the next few months and you are bullish, well, maybe, because you can risk more than the day trader (and not get shaken out by one or two down days).

Happy Trading and Be Environmentally Cool

Keep an eye HERE for a link to next week's free webinar.

Coach Brian

Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: SPY Technicals and Dollar Divergence

Good Morning,
First of all, I would like to thank the Park City Trading/Investing Club attendees for being so prepared and providing great content to discuss. As you know I always lead in with fundamentals, so here we go.
Consumer confidence -  a total bummer and also a toally lagging indicator. It follows the stock market - so the stock market was down and everyone said "woe is me!". If the stock market is higher when we have our next survey period, it will be higher. So the number caused the stock market to break, but technically, we have a much different picture now as we are making new highs as we speak. We also have soooo much data to look at over the next few days that worrying about consumer confidence a month from now isn't high on the list.



Technically, let's look at the SPY, first on a 1 minute and then on a longer term chart. A severe rally on the intraday chart and new highs on the longer term chart. We are busting above the neckline of the double bottom. Are there shorts out there that are about to get stuck in a short rally and puke and cause us to head towards 125-130?

Past performance is not indicative of future results



Past performance is not indicative of future results
Moving into everyone's favorite commodiay, GLD has some resistance as well. As we talked about last night in the club, is this a place that is calling out: I am up here so you can play defense!!

Past performance is not indicative of future results
Moving into forex, I had a nice position on last evening into this morning as I really was intrigued by yesterday's dollar strength. Let's think about this, dollar strength and the marke rallies 200+ points - that is very RARE!. Who is wrong? The dollar or equities. Well, it was equities (albeit briefly) and we saw the dollar strengthen. You know I love those Fibs so here is that all to famous DOUBLE FALL LINE TRADE!

Past performance is not indicative of future results
Final thought: will the equity rally hold if CHIPM and ISM fall below 50, signaling contraction?
Final Thought 2: U of U Classes start in 4 weeks - here is the link to sign up
Happy Trading and Be Environmentally Cool (link to Park City's Low Carbon Diet program)
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: SPY Technical Picture

Good Morning,
Lot's to talk about. Fundamentally, we have the biggy at the end of the week in the form of unemployment. Early consensus is 90k - I am OK with that. It may even get towards the 150k mark, but nothing above that. Either way, if it comes in at or above the consensus, it isn't enought to spur confidence as we have already heard from the Fed: slow going on the jobs front (slower than we anticipated), hence an accomodative policy stance for the next 2 years.
In between now and Friday, we have lots of data (consumer confidence, CHIPM, ISM and unemployment claims.
Technically, the SPY is holding onto its double bottom. We are the "neckline" at the 121 area and it if gets above this, we could be looking at the 130 area as a target. I am not sure how long tradres want to be heading into the unemployment number on Friday, so intermediary data could put a halt on the run if we get poor data:


Past performance is not indicative of future results
A stock that has a similar look is Ford (F). If you are using options, you had already bought your call in the 10 area if you were bullish. If you were neutral, you already sold your 10 or 9 put for the income. That is the great thing about certain option strategies, you can make money and the stock doesn't have to go your way.


Past performance is not indicative of future results
Moving to forex, the dollar has gotten beaten up. Is it going to strengthen a bit? Hard to say as the dollar usually weakens when equities strengthen. Today, the dollare strengthened and equities strengthened, which one is wrong (if any)?
Check out the up move in the GBP/USD over the past few days:

Past performance is not indicative of future results
This dollar/equity relationship led to a DOUBLE FALL LINE TRADE in the USD/CAD:

Past performance is not indicative of future results
Park City Trading/Investing Club meets this evening.
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: USD/CAD Trade

Good Morning,
It was a gap to the upside and a huge move to the downside and then, fairly flat. As equities found their footing, the USD/CAD provided a DOUBLE FALL LINE TRADE:

Past performance is not indicative of future results
Overall, we can't count out the lows in SPX around the 100-1120 area.
Bernanke and GDP tomorrow - all you need is one good trade! That was the idea today. Find one good trade, trade with the correct account and trade risk and manage it using ancillary markets.
Happy Trading!
Coach Brian

The Local's Take: Gold Hedge

Good Afternoon,
I have a reference that Monday was the day to protect gold. I was sitting with a client and we talked about hedging strategies. Remember, hedging isn't for everyone, but in my "later years", I value the value of cash and the run up that Gold had was too far too fast and even if it keeps going, you have to say: "this is a great run, let's use that to hedge our downside a bit."
Case in point, the following charts. GDX, GG, SLV:

Past performance is not indicative of future results

Past performance is not indicative of future results


Past performance is not indicative of future results
I also took this opportunity to put on a light hedge using the broad indices. I am not convinced that the lows in the SPY will hold, so after a really strong month last month of hedging gains, it was silly not to put on just a taste of protection.
Fireworks will keep coming with claims, Bernanke, etc...
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Forex Volatility

Good Afternoon,
All I can say, is glad to see you back VIX! You shouldn't stay away for so long! With the VIX in the 30's to 40's, option premiums are back (great for sellers), markets are giving multiple opportunities per day and guess what, it should be around for awhile.
I am hoping that Uncle Ben Bernanke doesn't ruin it with QE 3 through 10, but even so, I have a feeling that QE measures will not have the same bullish effect on the stock market that it has had in the past. Which means: VIX is hanging around!

It was a busy day yesterday and between trading and speaking to clients and teaching at the U of U, I didn't get a chance to post a commentary. Here it is, heavy in forex opportunities with descriptions below the charts:


Past performance is not indicative of future results
Classic DOUBLE FALL LINE TRADE as equities swoon then find fair value.


Past performance is not indicative of future results
DOUBLE FALL LINE TRADE with same entry reasons as the first chart.


Past performance is not indicative of future results
BUFFALO BOUNCE


Past performance is not indicative of future results
DOUBLE FALL LINE TRADE as equities rallied and then paused.
Moving into equities, the bottoms held (for now) and we are well off those lows. With data starting in earnest tomorrow, we could be back there quickly if economic data dissapoints.
For the most part, stocks are tightening up a bit and I am waiting for them to get stretched one way or the other before committing.

Happy Tradng and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Sell the Equity Rally

Good Morning,
Rallies are to be sold - I said that in my first post on IBFX Connect this morning to aler traders that the SPY has made a huge move - from down 2 to the positive on the day- I can't imagine who wants to go home long. Short covering maybe, but anyone who is buying the dip is providing us with a great trading opportunity to the downside. It wasn't super clear technically as we didn't have a double top, overall it was more of a "this move has gone too far trade", but that can work out when you layer in the size of the move and a (hopefully) Friday selloff.


Past performance is not indicative of future results
Moving into forex, the huge move up in equities gave us a weak dollar and provided two BUFFALO BOUNCES:

Past performance is not indicative of future results



Past performance is not indicative of future results
To wrap up, next week will bring our regular slew of decisions, debt debates, and speakers. Regarding US specific data, watch out for fireworks late in the week with:
-unemployment claims
-GDP
-Bernanke
-Jackson Hole Symposium
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Protecting You Investments and Trades of the Day

Good Afternoon,
Looks like intraday volatility has returned! Here is the link to last night's webinar that warned of its return. I will say it right now: if you aren't protecting your long term investments and aren't learning to trade versus invest, you will underperform.

While sitting outside and having a conversation with friends, someone asked how long can this last? I answered: 10 years. Someone else asked when will things get better? I answered: they already did. Don't get me wrong, corportations will make money (albeit lean and mean and knowing they can fire you today and pick up cheaper labor tomorrow) and people still will spend money, but will it be a smaller percentage. If it the unemployment numbers rise significantly, how can "things get better?". Regardless, fixed costs will go up: schools, health care and I haven't even touched on if inflation rears up and commodities get more expensive. Worse yet, and this is the word I use over and over: STAGFLATION - zero growth and zero price pressure so no inflation.

What does that mean for investors - sub par returns. What does that mean for traders? Above average returns!
To the charts. I mentioned you must protect in yesterday's blog and webinar. Here is an updated SPY chart. Big move down, 23.6-38.2 retracement up, followed by big move down.

Past performance is not indicative of future results
Check out the next chart, SBUX. If you didn't protect it here, what were you waiting for, new highs? And who cares if it makes new highs. You still have to protect it. This was a freebie!

Past performance is not indicative of future results
This is similar to a MMM chart just before they had bad earnings where they were giving away puts for a very, very low price and then, woops, things stink!
Moving to forex, it was a 3 for 3 day (although I only got 2 of them as had to take my son to the doctors). The first two are BUFFALO BOUNCES and the third is  DOUBLE FALL LINE TRADE.


Past performance is not indicative of future results

Past performance is not indicative of future results


Past performance is not indicative of future results
Weekly wrap up tomorrow as well as intraday comments in Interbank FX's Connect

Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to los

The Local's Take: Afternoon Commentary

Good Afternoon,
Again, I have to reiterate that rallies in the equity markets may now be able to be sold. The problem is, so far, some equities and indices aren't rallying that much.
Look at the SPY and more importantly, look at the past 3 trading days. Volatility has decreased and our average trading ranges have definitely decreased:

Past performance is not indicative of future resultse is an individual stock (MMM) that has hasn't retraced much either:

Past performance is not indicative of future results
Finally, here is USO, which is outperforming on the upside as we get equities to stabilize:

Past performance is not indicative of future results
So two schools of thought:
1. If you are bearish, then any rally can be sold and if you are really bearish, a 23.6 or 38.2 retracement may be very large. This may also be the "bearish protection" trade for the investor with a lot at stake in the equity markets.
2. If you are bearish, and are more patient, you may get an upmove and as the equities move higher, puts get cheaper and cheaper, giving you a "better deal". Better deal meaning cheaper options, but no guarantees that the markets go in our intended cirection. The key here is also "may" go higher. The markets have a lot to digest on a daily basis and it wouldn't take much for the current prices to be the highs for days or weeks as lots of market drivers could push us lower (a lot lower and very quickly).
People who write covered calls have option 1 and 2. They can wait for a rally and with patience, see higher call premiums to sell into. Or they can just take what is currently given and not be a market timer, but an income producer. This way, they don't miss out if the markets don't rally and they get their .05 to .01 percent no matter what. If the markets rally, they are happy either way.

It all comes down to you as an individual and how greedy or conservative you are. Remember, overall, the person who does nothing but hope that things work out is the most risky of all as they are leaving it to chance, fate and the past as "the markets always rally".
Moving into forex, we had GBP/USD break out to the upside. Here is a daily chart:

Past performance is not indicative of future results
For the second day in a row, we had a strong GBP/USD and a weaker EUR/USD. In the USD/CAD, we saw a DOUBLE FALL LINE TRADE as equities came off their highs (sharply) causing the USD to strengthen:


Past performance is not indicative of future results
See you this evening for the Interbank FX webinar on trends (long and short term) and an update on recent volatility!
Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Afternoon Commentary

Good Afternoon,
It has been a wild few weeks, but looks like (for now) we have found some support in equities. We do have wild intraday swings which are caused by breaking news stories, announcements, debates, and results. These "unforseen" volatility shakeups can make it quite unnerving to be in a position. So, the answer is money management. If you are right or wrong on a trade, the tradea has the possiblity to go further than normal, so you don't need huge size to have a positive effect on your account (or negative). It is about location, timing and percentages, not dollars. So contract size does not matter, not in these markets as the size of the move matters.
There were numerous trades today in the forex markets. Two to highlight are the BUFFALO BOUNCE in the GBP/USD and the late day DOUBLE FALL LINE TRADE in the AUD/USD:

Past performance is not indicative of future results

Past performance is not indicative of future results
Moving to equities, the USO naked put should work out as we only have 3 more days and if USO dropped from 33.75 to 30.50, I might just take ownership. Given today's first paragraph, since it is a real possibility in these markets, I have raised my stop to lock in profits.


Past performance is not indicative of future results
The SPY is in "no man's land" and hasn't retraced much. Remember, in past posts, I have mentioned that rallies are now to be sold due to a change in technical picture. BUT, you still have to decide on where and when you are going to sell the rally. Will you sell it here, thinking this is a dead cat bounce? Will you sell it higher (if it gets higher?) It all depends on what you are trying to accomplish. If you are a nervous investor, hedge it. If you are a trader, maybe you wait for a higher retracement which makes your put options cheaper.



Past performance is not indicative of future results
Webinar tomorrow evening, here is the link: https://www1.gotomeeting.com/register/764826112
Currency trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.
Happy Trading and Be Environmentally Cool
Coach Brian

The Local's Take: Afternoon Commentary

Good Afternoon,
These are exciting times. If you were patient and didn't over-trade during the slow times, you are probably hitting a high percentage of your trades due to patience and the number of opportunities that are lining up. I guess you don't have to have that much patience when they are coming this quickly.
First off, the fundamentals:
**FOMC tomorrow
**claims on Thursday
**retail sales on Friday
They all could be overshadowed by the downgrade, but things will settle down my late this week and we should focus on economic data.
Let's go right into forex. We had a BUFFALO BOUNCE in the GBP/USD followed by a DOUBLE FALL LINE TRADE in the USD/CHF and then the very rare BUFFALO BOUNCE in the USD/CHF:

Past performance is not indicative of future results

Past performance is not indicative of future results

Past performance is not indicative of future results
Moving into equities, I am loving the drop in commodities. Have you seen VALE?

Past performance is not indicative of future results
This to me is getting close to oversold and thus, I love picking up ETF's that we all need, like oil:

Past performance is not indicative of future results
Practice good trade management as we will have plenty of opportunities this week!
For all of you forex traders, you can follow my real time updates at Interbank FX's new Connect - I am "thelocalstake".

Happy Trading and Be Environmentally Cool
Coach Brian
Forex trading is one of the riskiest forms of investment available in the financial markets and suitable for sophisticated individuals and institutions. The possibility exists that you could sustain a substantial loss of funds and therefore you should not invest money that you cannot afford to lose.

The Local's Take: Afternoon Commentary

Good Afternoon and Happy Friday!
What a week to take vacation! I last traded/focused on the markets on Monday and had a positive day (started off with a loser and was able to get green on the day).  Then! the trading began. Finally, today I am back in front of the markets and after having missed Tuesday, Wednesday and Thursday, and with family all around, I knew that it wasn't time to "make up for lost time" It was time to trade small due to market volatility, use patience and discipline and look for one to two opportunities. That opportunity came in the form of  a DOUBLE FALL LINE TRADE on the AUD/USD:



It took about 20 seconds to log off and shut down as soon as I exited the trade at my pre-determined gain. After all, it is vacation! Trading on vacation can be stupid and costly if you don't have the right frame of mind. So just like going into the backcountry, the avalanche mitigation work is done before you leave the house. In trading the pshychology is determined before you turn on the computer and engage the markets.
In equities, we are about halfway back from the 105 to 135 move. Any rallies that occur that are significant will be sold into, I am just not sure how long it will take to get that significant rally as it seems that this break is large enough to prevent us from making a higher high. I would be shocked to see us above 137 in SPY any sooner than months from now. I just don't think that lean, mean corporations who will lay off more workers are good enough. I don't think cheaper gas prices are enough to get people to spend significantly more. The bottom line: we were too low at 6600 in the DOW and too high at 12,800 in the DOW and we will find a trading range at some point. I hope that the trading range we find is large enough to provide great trading opportunities with overbought and oversold sectors and stocks. Here is the SPY and the 50 percent retracement followed by one of those sectors (oil) that I think is getting oversold. Taking ownership of the August 31's gives you one percent in 2 weeks - very, very attractive!






Ownership at 31 is a 20 percent discount on top of May's 20 percent discount.
Happy Trading and Be Environmentally Cool
Coach Brian