Posts Tagged ‘Forex’

Tempting Tuesday – Weak Dollar Props Up the Markets

UUP WEEKLYWhenever the manipulators need to boost the markets, they just crash the Dollar.  

And what a dive we've had!  As you can see from Dave Fry's Chart, the Dollar is down 7% since last summer and down 2.5% this year and that keeps stocks and commodities 2.5% higher – because we buy them with Dollars.  

Keep in mind, at the same time you are buying IBM shares for $200, someone is buying the same shares for 20,400 Yen and another guy is buying them for 340 British Pounds and yet another guy is buying them for 280 Euros.  

It's obvious that, if the value of the Pound or the Yen or the Euro changes, the price of IBM in those currencies will change to reflect the currrency valuation but Americans tend not to realize the same thing happens when the Dollar gets stronger or weaker too.  Once you do realize this – you have a huge advantage in trading the Futures (and we have a Live Futures Workshop this afternoon at 1pm).

SPX WEEKLYThe Fed's easy-money policies keep the Dollar weak (because we're printing another Trillion of them each year and, in this economy, no one is using them – ie. no demand) and that has goosed the market by 7% since last summer, when the S&P was about 1,650 – about 10% lower than it is now.  

That means that 75% of the gains in the S&P since last summer have been the result of a weak currency and have noting to do with a "strong" economy.  Now THAT makes sense, doesn't it?

"THEY" had to tank the Dollar to get us over the 1,600 level, which was a very key technical off our consolidated bottom at 800 during the crash.  It's no coincidence that we were hitting resistance there in May and pulling back to 1,560 and looking weak in July when, suddenly, the Fed went into a new round of crazy, which led to 6 months of fairly steady value erosion for every single Dollar you have worked for and saved your entire life.  

It's kind…
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Flip Flop Friday – 2% Up or Bust!

 

As the great John "Hannibal" Smith used to say: "I love it when a plan comes together."  

Of course Smith’s plans usually involved a great deal of mayhem culminating in things blowing up – very apropos considering the massive market blow up this week.  The plan in Monday Morning’s Alert to Members, which was titled "Cashing in Longs and Back to Cashy and Shortish" was pretty straight-forward:  

If you want to play this rally for more upside, you can still short the VIX (we did the Aug $19 puts on Friday for $1, now 1.20) or play gold down with the GLL Aug $22s, that are still .35 or the GLD Aug $155 puts at .72 BUT I’m not really believing things are fixed so these are SPECULATIVE plays to follow the rally – WHICH I DON’T BELIEVE IN.  Clear? 

What I do believe in is shorting the Dow with DIA Aug $119 puts at $1.20 or the SQQQ Aug $21/23 bull call spread at .85, selling the Sept $19 puts for .55 for net .30 on the $2 spread.  

USO Weekly $38 puts are .44, 20 of those in the $25KP for $880!  (longs are, of course off).

Let’s be straight about that, all the short-term long, including the ones in the Income Virtual Portfolio – are DONE.  This was the pop we hoped for and now it’s done and back to cash!  

The VIX puts are, of course dead with the VIX now at 31.66 but the Aug $22 GLL calls are still .15 (down 57%) and the GLD Aug $155 puts are now .95 (up 32%) thanks to that same rise in the VIX.  Not bad for trades I did not believe
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Rage against the machines… by building your own machine!

This is intended to be an introduction to the world of robotic Forex trading.  By the end of this you should be able to construct a working automated Forex trading robot.  These automated trading bots are called Expert Advisors, EA’s for short.  I am going to assume that you don’t have much FX trading experience and walk you through the whole process of setting up your first EA.

Step 1.  Download and install MetaTrader4.  This is the platform our EA’s will run in.  Once MT4 is dowloaded go ahead and start it up.  Just click cancel on any dialogs that show up.  We are not going to hook it up to an account yet, we are just going to set it up so that you can play around and backtest your EA’s.  Once MT4 is up and running you should see something like the following screen.

(click for life size version)

Click Tools then History center (or hit F2).  Now we should be looking at this.

Expand Forex then EURUSD then click on M1 (the one minute candles).  Hit download.  This will download some of the historical data.  At this stage we need to download some additional data which will fill in the holes.  Here is a file which contains data for all of 2010, EURUSD1.  Now we need to import this data into our program.

To import this data click on the M1 data for the EURUSD just like in the previous step.  Hit import.  You should see the following screen.

If you dont see the candles in the import box then just close the history center and open it again.

At this point we are ready to build and backtest our first EA.

Step 2.  Building our first EA.…
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Currency War

Currency War

Courtesy of Michael Snyder at Economic Collapse 

Are you ready for a currency war?  Well, buckle up, because things are about to get interesting.  This week Japan fired what is perhaps the opening salvo in a new round of currency wars by publicly intervening in the foreign exchange market for the first time since 2004.  Japan’s bold 12 billion dollar move to push down the value of the yen made headlines all over the world.  Japan’s economy is highly dependent on exports and the Japanese government was becoming increasingly alarmed by the recent surge in the value of the yen.  A stronger yen makes Japanese exports more expensive for other nations and thus would harm Japanese industry.  But Japan is not the only nation that is ready to go to battle over currency rates.  The governments of the U.S. and China continue to exchange increasingly heated rhetoric regarding currency policy.  In Europe, there is growing sentiment that the euro needs to be devalued in order to help European exports become more competitive.  In addition, exporters all over the world are already loudly complaining about the possibility that the Federal Reserve is about to unleash another round of quantitative easing. 

Virtually all major exporting nations want the value of the U.S. dollar to remain high so that they can keep flooding us with lots of cheap goods.  The sad reality is that our current system of globalized trade rewards exporting nations that have weak currencies, and many nations have now shown that they are willing to take the gloves off to make certain that their national currencies do not appreciate in value by too much.

Some nations have been involved in open currency manipulation for some time now.  For example, Singapore is well known for intervening in the foreign exchange market in order to benefit exporters.  Also, the Swiss National Bank experienced losses equivalent to about 15 billion dollars trying to stop the rapid rise of the Swiss franc earlier this year.…
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Media: Expanded Thoughts on Potential Currency Trading Bubble

Media: Expanded Thoughts on Potential Currency Trading Bubble

Courtesy of Joshua M Brown, The Reformed Broker 

Oil being poured into water, studio shot

I gave an interview to My Private Banker the other day. They wanted to take my discussion of the potential bubble in currency trading a step further. 

Enjoy:

Investing in currencies is all the rage in wealth management. Currency ETFs, ETNs and currency structructured products are springing up like mushrooms. Inspired by the Euro crisis many private investors in the EU have started investing in currency products. Wealth managers and bankers play also a big role as more and more products are pushed on to their clients. But does currency investing make any sense? We talked about this topic to Josh Brown, who is one of the best known global finance bloggers providing daily comments on The Reformed Broker. Josh Brown has been recently a vocal critic of the boom in currency investing.

MyPrivateBanking: Why do you see a bubble in currency trading – comparable to bubbles in stocks or house prices?

Josh Brown: With currencies, we are still at the stage where we’re talking "prospective bubble", but all the ingredients are there. This isn’t going to be a Price Bubble, it will be an Activity Bubble should the mania take over.

MyPrivateBanking:  What differentiates this bubble from “normal” investment bubbles?

Josh Brown: Normal investment bubbles require a certain backdrop of speculative fervor along with some exogenous encouragement to fan the flames (think innovative mortgages or freely available margin leverage). This one is more akin to the Texas Hold ‘Em craze of the mid-2000′s where all of a sudden all your friends and neighbors were poker sharks out of nowhere.

MyPrivateBanking:  Why do wealth managers increasingly recommend currency products to their clients?

Josh Brown: I think wealth managers are introducing ETFs that are currency-related because of what’s known as "reverse inquiry". The financial media has done a really terrific job of painting the currency markets as unstable and exciting, this has led to product introductions and marketing which has in turn led to inquiries from the public to their advisors – "How can we get in on this". The reality is that it’s foolish to "invest" in a currency from an asset management standpoint, unless we’re talking about swinging for the fences with the Iraqi Dinar or something. Currency is not an investment, it…
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Which Way Wednesday – Beige Book Boost or Bust?

Our last Beige Book was June 9th and we liked that one.  My comment to Members at that time was:

Wow, this is good stuff!  Ben was not BS'ing -  It's a slow, tedious recovery but a recovery nonetheless!  On the whole, a pretty good report!  Not enough to support $75 oil but a nice, not too inflationary recovery is in the works.   It's no quick fix though, as it will take 2 good Qs before corporations will be willing to add staff so I bet not much until next spring unless the government steps in (and they'd better)

At the time, the S&P was at 1,055 and we flew up to 1,120 on June 21st before the next market flip-flop, which we have just flip-flopped back from and yesterday we tested 1,120 again and here we are, back at the Beige Book.  So now, the market is about where it should have been based on the last BBook (and no government help so far).  I thought yesterday was too early to pop through ahead of the data and it turns out it was.  If anything, I'm a lot more worried that a deteriorating report tanks the markets this afternoon (2pm release). 

We'll get a clue this morning as we see Durable Goods at 8:30 and those are expected to be up 1% from down 0.6% in May.  Oil Inventories are reported at 10:30 and don't expect demand to be picking up and no one has even mentioned what a disaster this is during summer driving season (speculators are circling their tankers one more time as they pray for hurricanes to make their long bets pay off).  If we do survive the BBook this afternoon, we have a 10% upgrade to Q2 GDP to look forward to tomorrow morning (to 3% from 2.7%) along with Chicago PMI at 9:45.

We know that Leading Economic Indicators turned down 0.2% since the last BBook, the Philly Fed has dropped from 21 in May to 8 in June to 5.1 in July, Construction Spending fell 0.2% with Commercial far worse than Residential, ISM fell almost 6% with a 10% drop in orders leading the downturn and a very deflationary prices paid, Factory Orders in general were off 1.4% (which does not bode well for today's Durable Goods), Auto Sales
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Toppy Tuesday – LA “Out of Money” on June 30th?

Is Los Angeles unique or just the first?

City Controller Wendy Greuel declared an "urgent financial crisis" and said the only way to continue paying bills in the short term was to begin to drain the city's already limited emergency reserve.  Greuel said the city would need to pull money from its $191 million in reserve funds immediately to pay its bills next month. She expects the city to be out of money, and probably in the red, by June 30.  Some officials fear that using that money would not only leave the city without reserves in case of emergencies, it would also probably trigger another downgrade in its Wall Street credit ratings.

Cities all over the nation are scrambling to pay their bills and that's nothing compared to the disasters state budgets face.  A study released Monday by Stanford University estimates that California's three largest state-operated, public-employee pension funds—the California Public Employees' Retirement System, California State Teachers' Retirement System and University of California Retirement System—currently face a total shortfall of more than $500 billion.  Gov. Schwarzenegger warned Monday that pension-fund shortfalls could lead California, which faces a $20 billion budget gap in the coming fiscal year, to divert more funds from other state programs to cover pension costs.

Fortunately, for the dollar, we are by no means the most screwed-up economy on the planet.  The Euro is dropping to new lows this morning amid speculation that a plan for Greece to obtain European Union and International Monetary Fund help in cutting its budget deficit may falter (again).  The report that Greece “isn’t keen on the IMF being involved in any bailout would seem to throw the whole plan into question,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “As an investor, do you really want to hang around and see what’s happening next? The Greece story is definitely a negative for the Euro.”  

The Dollar is not doing so well against the Aussie Dollar, which rose to 92.14 this morning as the ACB raised their main interest rates to 4.25%, it's fifth rate increase in six meetings.  Even more shocking to most Americans is the Canadian "Loonie," which is now trading at $1.0008 to the dollar – almost on par to the dollar
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Faber: The Euro Has More To Fall, S&P Could Fall 20%

Faber: The Euro Has More To Fall, S&P Could Fall 20%

Courtesy of Joe Weisenthal at Clusterstock 

Marc Faber appeared on Bloomberg today to talk stocks and currencies. Not surprisingly, he’s negative on US equities, and though he thinks the euro could rebound in the short-term (because it’s so oversold) he says there’s nothing good about the currency and that it could fall a lot further.

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Which Way Wednesday – Fed Edition

What a great morning!

Well, if you are a futures bull anyway.  We keep telling you that's where the action is.  Last Thursday we gapped up 100, Friday another 50 and Monday another 50.  Wow, what a market right?  And where did we close a week ago Wednesday?  10,337.  And where did we close yesterday after 200 points of futures gains?  10,452.  So we LOST 80 points during real trading hours and gained 200 when no one was looking – yet no one is being arrested – go figure

I already made my skeptical note to Members this morning as the pre-market action tacked on another 50-point gain that pretty much started at 3am on the dot as the Hang Seng threatened to fail 21,500, which would have been a serious breakdown on a triple test over 5 days.  It still looks to me like the Hang Seng will be looking at a 10% correction in the very near future but the pump crowd aims to put off that day of reckoning for as long as possible.  

The Nikkei, on the other hand, had their own gap up, back over our 10,200 target (we went long on EWJ again yesterday) but failed to hold it and closed at 10,177, up 1%.  Once the Nikkei closed, the dollar was allowed to drop back to 89.5 Yen and the Euro was jammed up from $1.451 to $1.458 but that was nothing compared to the Pound, which went from $1.623 at 3:45 to $1.636 at 6:45 – a spectacular move that allowed copper to get back to $3.17 (up 1% from yesterday's close) along with 1% gains in Silver ($17.50), Gold ($1,135) and Oil ($71.50) all of which made great futures shorts at those prices.

Circular Economy Graphic

The dollar is being jammed down on whispers in Europe that the Fed will announce today that the US Economy is  much improved BUT they have no intention of raising rates in the foreseeable future.  This enables the burgeoning dollar carry-trade to continue and, as John Carney points out at Clusterstock, it allows the Fed to keep buying Mortgage Backed Securities from the Banks as fast as they can turn them over. 

The Fed can do this with confidence because the MBS's are, in turn, guaranteed
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The Future of Global Finance

The build-up of dollars abroad transformed the United States into a gigantic bank, and like any bank, it was vulnerable to a run.

It has long been recognized that the global financial structure — built as it is around the dollar as the world’s reserve currency — has a fundamental design flaw that makes it inherently unstable. The problem was first identified back in the early 1960s by the Belgian-American economist Robert Triffin, in “Gold and the Dollar Crisis.” Writing about Europe’s accumulation of dollars, he argued that the system carried the seeds of its own destruction. Foreigners could acquire dollars only if the United States ran current account deficits — that is, spent more than it earned. But lending money to someone who lives beyond his means has obvious dangers, and the same is true of countries.

Thus, the American deficits necessary to supply dollars to the world for international transactions simultaneously undermined confidence in the currency. It was only a matter of time, Triffin predicted, before the system would be hit by a crisis — which it duly was in the early 1970s.

In the wake of the 1997 financial crisis there, countries in East Asia set out to build up war chests of dollars as insurance against domestic banking runs or downturns in the global economy. At about the same time, China embarked on a program of export-led growth, engineered by keeping its currency artificially low.

 

Interpretations of what happened next differ. Some argue that to absorb these goods from abroad while avoiding unemployment at home, the United States very consciously stimulated consumer demand. The country, in effect, was forced to live beyond its means. Others believe that the Fed misread the fall in prices as a symptom of inadequate demand rather than for what it was — an astounding, once-in-a-generation expansion in the supply of low-cost goods — and kept interest rates low for an unusually long time, which provoked the real estate bubble.

In either case, the result was an enormous accumulation of dollars in the hands of Asian central banks. Those dollars, when invested in…
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Zero Hedge

Global Banking Stocks Are Crashing Hard - Just Like They Did In 2008

Courtesy of ZeroHedge. View original post here.

"Fortress balance sheets?"...  "It's different this time"... "Greatest economy ever."

If all of that is true, then why are the stocks of the most systemically important banks in the world collapsing?

And the banking collapse is leading global stocks lower - probably not coincidentally as global central bank bal...



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Kimble Charting Solutions

Short the S&P 500 and Go Long Gold Miners Time?

Courtesy of Chris Kimble.

The precious metals sector continues to be a “grind”, offering a few trades but mostly sideways to lower action. Gold prices have slogged along and this had held the Gold Miners (NYSEARCA:GDX) back… until recently.  The Gold Miners (GDX) and the broader Gold & Silver Miners Index (XAU) came to life in September and October.

The miners are in a multi-year down trend, however there is a potential bullish setup in place. See the chart below where we highlight the ratio of the Mining Index (XAU) to the S&P 500 (SPY). The ratio, which Gold Bugs want to see rising, looks to have created a bullish reversal last month at the 2016 lows at point (1).

And October is seeing a follow-through move...



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Phil's Favorites

The risk of 'cascading' natural disasters is on the rise

 

The risk of 'cascading' natural disasters is on the rise

Deadly debris flows came to Los Angeles after heavy rain pounded wildfire-scarred land. AP Photo/Reed Saxon

Courtesy of Farshid Vahedifard, Mississippi State University and Amir AghaKouchak, University of California, Irvine

In a warming world, the dangers from natural disasters are changing. In a ...



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Chart School

Weekly Market Recap Oct 21, 2018

Courtesy of Blain.

After the heavy selling the week prior there was sure to be an oversold bounce and indeed last Tuesday brought much of that.  It is always interesting to see what happens after that bounce – often in this bull market, once the indexes turn back up they move like a freight train.  This time – thus far at least – the action has been less aggressive.  Selling on Thursday took the S&P 500 right back down to the 200 day moving average and rally attempts Friday were fruitless.  In whole the S&P 500 barely budged for the week.

Yields on the 10 year have thus far held their own “breakout” level:

The Chinese market had an interesting Friday with an “...



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Insider Scoop

Morgan Stanley Downgrades A Fleet Of Freight Stocks

Courtesy of Benzinga.

Related UNP 8 Biggest Price Target Changes For Monday Benzinga's Top Upgrades, Downgrades For October 22, 2018 ...

http://www.insidercow.com/ more from Insider

Digital Currencies

Grocers: Get ready to join the blockchain party

 

Grocers: Get ready to join the blockchain party

Five people died and more than 200 got sick during a 2018 E. coli outbreak, the largest in more than a decade. The bacteria was traced to contaminated romaine lettuce. (Shutterstock)

Courtesy of Sylvain Charlebois, Dalhousie University

In the wake of this year’s large E. coli outbreak, Walmart notified its leafy green suppliers that they must be using blockchain technology to trace their products before the end of 2019.

Walmart, one of the world’s largest retailers, has be...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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