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.