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GreenForexTrading.com
ForeX forX-tra Gr€€n
Hi everyone,
Please note that the Daily Trade Newsletters will not be available this week March 1st thru 4th and we will not be adding any new subscribers to the Live Forex Trading Room this week as well as we will be maintaining/expanding our web-mail server and chat administrator host login. The Live Forex Trading Room will still be open for sessions for current members. Webmail and new client login will be available Saturday, March 5th. Thank You for your understanding in advance.
In this e-mail I am going to give you my review for the month and week past and view on the market for the month of February and the week ahead, Sunday February 27 to Friday the 4th of March 2011.
FEBRUARY 2011 REVIEW:
Last month I said:
“I give the U.S. Dollar a short leash on the upside going forward.... Bottom line, expect even more monetization/in your face money printing, of the bulk of the U.S. Federal government deficit in 2011 as 2010 was not a one-off and it will continue unabated for the foreseeable future exacerbated by upcoming higher oil prices and new higher interest rates. Yes, hyperinflation is assured with another nail in the coffin by pissing off the oil producing nations through exported higher inflation in U.S. Dollar terms so that an oil supply shock is assured and everyone pays through mutually assured monetary destruction. I REPEAT...GOT PIPS? Turn them into >>> GOLD/SILVER. Preferable, physical, i.e., you can hold it in your hand silver, as it now seems to be in shortage and real cheap if it is. In order to make those PIPS this month we will be looking for U.S. Dollar strength very short term in the first half of the month or less that should fade into a major USDX decline that should be evident by the end of the month.”
I did not realize how right I would be when I wrote that as the first half of the month was the most PIP sucking choppiest I can remember and I am reminded that choppy price action is usually seen before a major change in direction. I hope that some of you took that advice as the markets have thrown traders a few curves as the ForeX markets have been very choppy and that we could be seeing a potential change in the major underlying trends with regards to future price action in all U.S. Dollar pairs. Well, if that is the case then this next move should be a real good one and we hope to be on it early through the “Monster Trade” and other positions. However, the most important question that most traders want an answer to is whether this is a top in equities and a flight to safety or if we are just going to have a mild correction and the risk trades continue and power higher?
MARCH 2011 FORECAST: What should be noted from the recent uncertainty in the marketplace is that the U.S. Dollar Index futures did not rally in spite of the perception that the flight to safety should occur as was the case during the last major crisis in 2008 and during recent periods of market uncertainty such as the European sovereign debt crisis, the U.S. Dollar was considered a safe haven. This most recent market uncertainty caused by political instability in the Middle East has seen the U.S. Dollar Index futures sell off while gold and silver rallied as investors looked to the shiny metals for safety. This is what I expected as the U.S. Dollar is no longer perceived as a safe haven and those that piled in looking for safety will soon find themselves flat-footed and scrambling for the “door” to unwind those positions when the 77 area gives way. Sentiment is way too complacent on the U.S. Dollar right now. Bottom line, in order to make those PIPS this month we will be looking for U.S. Dollar weakness to start the month that should accelerate into a major USDX decline that should be evident by the end of the month.
The “Monster” Trade. Continue to LOAD UP... with the AUD/USD at 1.014 is now on confirmed BUY signals. Sentiment wise, this AUD/USD is set for further gains, and the 1.000 level looks to be bested for good. With a STOP NOW RAISED to under 0.999 as any further decline would invalidate the rationale for the trade (see below). Should the AUD/USD decline any further this trade will be closed for the time being as the AUD/USD is still expected to yield 1000 to 1500 PIPS over the next 2-3 months, maybe even sooner. Adding to existing positions is NOW recommended as scaled in BUYS (0.2 contracts at a time) on any weakness into key support zones NOW AT 1.007 and 1.012. NOTE: All position trade stops are HARD stops, NOT mental stops. Remember, hard stops for overnight positions, mental stops for day trades.
About Scaling In...Scaling in simply means breaking up the initial entry position into multiple parts and deploying them at selected intervals, instead of firing the entire trade magazine all at once. The only reason we might resort to scaling is if we have good reason to believe our expected support zone may have become obsolete. We usually take an initial position in our expected support zone with a fairly tight stop. Obviously if we get stopped, we were early to the trade. Early is just another word for “wrong.” If stopped, we reassess and adapt to the new market reality. If we were not early, and our position shows us that we are right, then we add to that position once the trade has managed to “prove” itself by advancing out of the support zone box, raising our trailing/trading stop in the process. The two or more portions make up a full position. When we speak of scaling, it means we have become willing to break up the trade entry into two or more parts, with the first part at the very top of the expected support box and the second part within it. Rarely will we ever take a new position outside our expected support box.
Why the “Monster Trade”? In the AUD/USD sideways action of recent weeks has served to further unwind the earlier overbought condition while forming a Head and Shoulder bottom continuation pattern on the 4-hour chart with the neckline coming in the 0.996 area. The interpretation of the pattern in the AUD/USD presented in the last update, which was that it is marking out an upwardly skewed bullish "running correction”, remains unchanged. All that has happened in the past few weeks is that it has reacted back across the up sloping channel to arrive at support near its rising 50-day moving average again and again retesting that area. As we can see on the chart this reaction has resulted in a complete easing of the intermediate-term overbought condition as shown by the PPO indicators, which are now bias long with a new BUY signal on the daily and working on a BUY in the weekly right at the zero line which looks to be happening...and this sucker is ready to explode to the upside. The noted convergence of the short-term downtrend channel earlier last month was an indication that the AUD/USD would soon break out of it to the upside to resume its advance and make new highs, which it has yet to do but I expect it to this week as it breaks out of consolidating from this region. The AUD is seen here, http://www.stockcharts.com/charts/gallery.html?$XAD.
WEEK AHEAD: The pivot support and rising monthly trend-line support is expected to break but not without a little more chop back and forth. Follow-through weakness did occur on a small weekly bearish engulfment pattern from last week, and a little follow through now to 77.2 as things are getting interesting now. Hope for dollar bulls is fading fast if not terminal with each failed rally attempt. The corrective rally materialized and stalled below the broken 50% retracement at 78.5 and now the declining 50-day moving average in the 79 area. We now look for the monthly trend-line to be broken (now at 77), which is expected as this is the third attack at this line (1st July 2008; 2nd Dec. 2009 and 3rd Oct.-Nov. 2010) we will employ the three times a bounce and then a failure rule. With each subsequent bounce becoming smaller, a fast move to 75 should be in the cards followed by a collapse to as low as 72, depending on where sentiment lies at that time. Witness a weekly PPO SELL signal in alignment with a new daily SELL. So look to go long U.S. Dollar denominated pairs on any weakness or anytime this week or next although expect some minor chop early this week as the USDX is looking pretty sick now, as seen in the USD daily and weekly chart here http://www.stockcharts.com/charts/gallery.html?$USD.
The EUR is the inverse of the USDX and with the backdrop of a PPO that now has triggered a daily BUY signal against a weekly BUY signal extended from the 50-day moving average, and the bounce here looks to continue and now look for some bottom action on lesser time frames to enter and go long. The current upside short term target of 1.37 areas has been achieved and now look for 1.41, 1.425, 1.45 and 1.50 in short order as can be expected on future dollar weakness as seen in the chart here, http://www.stockcharts.com/charts/gallery.html?$XEU. Place your trades accordingly. All charts courtesy of www.stockcharts.com.
Serious choppy swings and a reversal upon reversal bar on the daily and we have been avoiding this on of late but still watching it with a long bias as it becomes less stretched on the long side. A PPO daily SELL that needs to turn up against the backdrop of a weekly BUY signal makes cable choppy as of late. All these cross-currents still make cable a cautious play, as seen here, http://www.stockcharts.com/charts/gallery.html?$XBP.
The JPY ... well, YIKES...too extended to play here, unless it starts to fill the gap under 122 as seen on the chart given here http://www.stockcharts.com/charts/gallery.html?$XJY.
This week is rate policy and report heavy spread throughout the week with more reports later in the week. They are:
1. Mon. Feb. 28, 2011 - (8:30am EST) CAD GDP; (8:00pm EST) CNY manufacturing PMI and (10:30pm EST) AUD Cash Rate decision and RBA Rate Statement. Note: this data could affect the “Monster Trade”, and hard stops are recommended.
2. Tues. Mar. 1, 2011 - (4:30am EST) UK Manufacturing PMI; (10:00am) US ISM Manufacturing PMI and (7:30pm EST) AUD GDP. Note: this data could affect the “Monster Trade”, and hard stops are recommended.
3. Wed. Mar. 2, 2011 - (8:15am EST) US ADP Non-Farm Employment Change and US FED speak at 10:00am EST.
4. Thurs. Mar. 3, 2011 - (4:30am EST) UK Services PMI; (7:45am EST) EUR Minimum Bid Rate decision; (8:30am EST) US Unemployment Claims and (10:00am EST) US ISM Non-Manufacturing PMI.
5. Fri. Mar. 4, 2011 - (8:30am) US Non-Farm Employment Change and Unemployment Rate and (10:00am EST) CAD Ivey PMI.
The swing trade for this week’s Asian-London-U.S. sessions is to BUY the AUD/USD @ 1.012 with a STOP @ 1.0085 and TARGETS of 1.028, 1.033, 1.041 and 1.050 for 300 to 400 PIPS over the next week.
That's it for today. Remember that I trade in the Live Forex Trading Room between 1am-6am Eastern Time. I will be hosting my regular 3-4 hour session and assessing and exploiting PIP opportunities as they arise.
Enjoy trading and good luck everyone!
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