Day 14 Higher for SPY

By Jeff Pietsch | March 17, 2010 | 2:37 PM |  0 CommentsTweet This

The market is putting in a solid trend-day follow through to yesterday's FOMC inspired launch.  While internals look very strong, the SPY is seeing strong mid-day resistance at its second pivot of $117.20.

 |  | 

My Favorite Trade: AUD/NZD Update

By Kathy Lien | March 17, 2010 | 2:37 PM |  0 CommentsTweet This

Last week, I wrote that shorting AUD/NZD is my favorite trade. At that time, I said that if the currency pair rallies back above 1.31, then the uptrend has resumed and my call is wrong. However, AUD/NZD tortured me and came within 2 pips of 1.31 (1.3098) before reversing sharply lower. There is no major support in the currency pair until 1.2775, but as indicators adjust to the movements in price, so have support levels. The 1.2850 level is now the new support and that's where I am targeting.

On a side note, I am kicking myself for not posting an official call because the moves have become deeply oversold in these currencies. However I think USD/CAD is going test parity (currently at 1.0105) and EUR/GBP is could fall to at least 0.8915 (now 0.8975).

Forex Trade Alerts & Intraday News from FX360.com

 |  | 

The Gambler's Fallacy

By Jeff Pietsch | March 17, 2010 | 1:08 PM |  0 CommentsTweet This

It's more of a mathematical curiosity than anything else, but check out the odds of 14 successive up-days below, the record for which looks to get set by the SPY today. If that's not a pot of leprechaun gold for the bulls on this St. Pat's day, I don't know what is!

What really stood out to me in this quick study, is the dramatic bullish bias shown this last year with over 60% of days ending higher as compared to 53% since the SPY's inception seventeen years ago in 1993.

This strong bullish bias significantly increases the odds of successive runs over a "fair" 50/50 flip of the coin.  However, what are the independent odds of another up-day tomorrow?  Well—coins don't have any memory—do traders?

Note: Observations are non-overlapping.

 |  | 

PPI and BoJ Provide Signal Upside Potential in USD/JPY

By Kathy Lien | March 17, 2010 | 12:12 PM |  0 CommentsTweet This

If you are wondering why the Fed did not remove the pledge to keep interest rates at an extremely low level for an "extended period" of time yesterday, just take a look at this morning's producer price figures. Inflationary pressures in the U.S. are extremely modest and the lack of inflation gives the central bank the flexibility to leave monetary policy easy for longer than otherwise. The Fed may not have had the PPI report in their hand prior to their meeting, but they would have seen the import price report which had already reported softer price pressures. Producer prices fell 0.6 percent in the month of February due primarily to a big drop in energy costs. Excluding food and energy, producer prices actually rose 0.1 percent. However, with oil prices increasing materially since then, the decline in PPI should be temporary. Therefore we still believe that at the end of the day, the Fed is closer to actually tightening monetary policy than its European counterparts. Furthermore, despite the hot employment numbers from the U.K. this morning, investors feel there is greater risk in putting their money in Europe than in the U.S. at this time. For this reason we are still bullish dollars, particularly against the Yen.

Another Reason Why USD/JPY Could Rise: Bank of Japan Increases Stimulus

Meanwhile, the big event overnight was the Bank of Japan announcement. The central bank doubled the size of their special lending program to 20 trillion yen, making them effectively the most dovish G7 central bank. Interest rates were left unchanged at 0.1 percent, but that did not stop the Japanese Yen from trading lower against all of the major currencies. Given that the central bank upgraded their economic outlook for the first time in 8 months earlier this week, their move was clearly an attempt to pacify government officials who have been on their backs to use monetary policy to jumpstart inflation. Not all members wanted to bend over backwards for the politicians however - for the first time since last October, Noda and Suda dissented. In a statement released after the monetary policy meeting, the BoJ said "Japan's economy is picking up, mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand." Shirakawa also said ""Showing the BOJ's clear stance against deflation will help ensure an improvement in the economy and prices." The question now is whether the BoJ's act will be effective in bolstering prices. The BoJ has increased the money supply, but this is not the real problem - the main issue is that Japanese consumers are not willing to take money out of their wallets and spend. Although the Japanese Yen did not have a big reaction because the announcement was not much of a surprise, it provides an additional reason why the Japanese Yen could extend its losses against the U.S. dollar.

Forex Trade Alerts & Intraday News from FX360.com

 |  | 

What Works in Trading? Part 2

By Ray Barros | March 17, 2010 | 11:39 AM |  0 CommentsTweet This

In this blog, I attach the ‘climax’ - James’ four part ’secret to FX trading success’.

I totally agree with the four principles:

1. Success requires time, effort and preferably a mentor. This idea is in line with the new discoveries in Neurology.
2. Create a set of trading rules and follow them.  I believe in Mark Douglas’ dictum that all newbies should start as mechanical traders. Having said that, I know from experience that to succeed each trader will have to make a set of trading rules his own.
3. Have a set of risk management rules and follow them.
4. Learn to use the magic of compounding rather than looking for ‘instant’ wealth.

All good stuff as general principles. Of course the devil is in the details of implementation. This is where the work of Daniel Coyle (The Talent Code) and David Rock (Your Brain at Work) come in.

The caveats I mentioned in What Works in Trading also apply here.
secret2.pdf

 |  |