The Local’s Take – Next Day Forex Setup

Good Evening Traders and Investors.

As the equity markets have rallied and have now gone sideways over the paste few months, the dollar has begun to show some strength. I know, I know, the trend in the dollar is still DOWN and the trend in equities is still UP (until further notice) but there are some signs of trend changes/reversals.

In the charts below, can you detect any chart patterns or failures in SEQUENCE that can be a safe entry going counter trend?

As you can see, there has been a direct relationship between the weakening USD and the strenghtening equity markets over the past 9 months, BUT there are signs of strength in the greenback. I am NOT saying the trend is over, but trendliens, double bottoms and overall sequence change are beginning to appear (see USD/CAD and NZD/USD.

The dollar is making higher high and higher lows against both the CAD and NZD. This clearly shows up in both pairs as the dollar is significantly higher since bottoming in October. The equity markets have gone relatively sideways since October – if you recognize this relationship, you can find low risk opportunities in the forex markets and cover your long portfolio in the equity markets with covered calls.

See you in the morning for The Local’s Daily Commentary and The Local’s Take: Mid-Day Forex Update

Happy Trading and Be Environmentally Cool

Jupiter Peak Financial

Mid-Day Forex Report

Hello Traders and Investors,

Bernanke is on the docket in a few hours so that may keep things calm.

The dollar strengthened overnight and now with the equity markets sideways, there seems to be pretty sluggish trading activity/volume.

The GBP/USD is retracing last night's move - to about 50% - could be a good DOUBLE FALL LINE trade if it gets a little higher, but that probably depends on equities.



Be careful trading around Bernanke.

Happy Trading and Be Environmentally Cool

Can You Say Resistance?

Good Morning Traders and Investors,

Does a positive jobs report mean the phones are going to be ringing off the hook at the ski resorts? Well, with 7 straight days of snow in the forecast, conditions are ripe for an increase in phone traffic for Wasatch/Park City resorts.
Does the jobs number point to an increase in retail sales and an overall continue to the recovery?

Let's go to the charts....


The $SPX still has resistance (lasting almost a month) at 1115.00. As we know, the trend is up, BUT the charts need to make a higher high to continue the trend. As of now, we have that new intraday high on the charts, but let's see how we close going into the last hour of trading and more importantly the weekend. I repeat, the close is important!

As I mentioned last week, Bear Calls have worked well as we have primarily been sideways over the past few months - slow growth is what we want!! Your out of the money calls (number one way to generate income in your 401K/portfolio) would have worked very well for most sectors/stocks.

The dollar is up over the past two days, but still very close to its lows overall against the majors.

Happy Trading and Be Environmentally Cool

Ho Hum into November Options Expiration

Good Morning Traders and Investors,

Futures were down about a 1/2 percent from yesterday's close, but alas, we opened pretty much flat and without any data ahead of a shortened week, the trading looks lackluster at best.

As I mentioned yesterday in "The Holiday Setup", bearish to neutral going into the holidays with tight stops, using the $SPX highs at $1120 as an exit strategy. This also provides the opportunity to "cover" your portfolio or at least "sleep at night" if you have covered calls and/or married puts.

I could sleep a lot better at night if there was snow in the forecast! I know it is early, but we only get 4 months of it, so let is snow December through March and I don't think anyone should complain.

Speaking of complaining, if you put $100.00 in your savings account one year ago and pulled it out exactly a year later, you would earn a quarter. A QUARTER! The dollar is weak, BUT it is showing signs of a bottom - I am not saying it has hit its lows, but from a traders perspective, look at it against the GPB - it has come back down below its breakout level. Against the EUR, it is sitting on a trendline connecting the lows of the upmove from MARCH. Same with the AUD and it already broke that trendline on the NZD. The USD/CAD broke that trendline and is now using it as SUPPORT! The CHF is on the trendline.

SO, does this signal a shorting opportunity in equities and a long opportunity in the dollar. If you are right, double gains, if wrong, small loss. That is what trading is all about!

Happy Trading and Be Environmentally Cool

Park City Trading/Investing Club and The Holiday Setup

Hello Traders and Investors,

A big thank you and congratulations are in order to the Park City Trading/Investing Club - we had close to twenty members (free membership) show up to discuss short and long term opportunities.

Now if we could see 20 inches on the ground of light, fluffy snow, we would be in business!!

The markets are "cooling off" as we head into options expiration tomorrow. After 9 months of consistent gains, I warned about increasing volatility (bear markets) heading into options expiration - will we finish the week down? It has been rare as options expiration week typically trades in the direction of the trend and the trend as we all know (whether we like it or not) has been up.

Economic data has been flat (see initial claims) and Philly Fed and some data has been weak - see housing data. After 8 of 9 higher closes in $SPX, maybe an oversold level going into the weekend and next week's Holiday is enough for bears to be in control for a little. BUT, as I have written, the trend is still UP until we have a failure in sequence.

The dollar is a little stronger (holding the lows and making higher lows or double tops/bottoms against most crosses - see USD/CAD, EUR/USD, NZD, USD

I would have to be bearish to neutral if I were carrying trades overnight and into the holiday week with stops at old highs in the $SPX

Happy Trading and Be Environmentally Cool

More of the Same

Good Morning Traders,

Just as the 10 day forecast is bleak for snow here in Park City, it looks like another week of options expiration will go out WITHOUT A BANG. I am still pricing in a slight chance of a severe market correction in a short time.

The reasons:

• Since March (9 months) we have been higher than the previous month and we have options expiring on Friday
  

• At option expiration volatility can pick up
  

• Cheap protection! Buying puts to protect your portfolio/positions are very, very CHEAP

The market has been steady and yesterday the $SPX hit a new high, breaking through key resistance at 1100.00. The trend is still in tact until we have a significant pullback and fail to make a new high (lower high or double top or other pattern) as there doesn't seem to be a fundamental shift in sentiment or policy (see Bernanke's comments yesterday).

We have retraced over 50% of the downmove starting in 2007 and with the current trend, a 62% retracement seems likely - putting the $SPX closer to 1200 - quite impressive if you remember where we were about a year ago. PANIC was in the streets.

Have fundamentals changed that much? Is it time to start taking profits off the table (see commodity gains such as VALE or tech gains such as AAPL!) and start to get a little bit neutral with good risk management? Many stocks have gained over 100% in less than a year!

Remember, any investment or trade needs to have reasons for entry, reasons for a stop/target and management throughout.

Happy Trading and Be Environmentally Cool