Wednesday, September 29, 2010

Asian Shift FX update: Sept 29, 2010

It seems that mid day mild dollar strength is giving up its gains. On the Daily ADX all the majors except the CAD show non-range-bound trading. There is a good possibility trading will be very volatile starting tomorrow with GDP, Jobless Claims, and Fed Speak, if not volatile it will stir the waters for Friday's Motor vehicle sales, Consumer Sentiment, Construction Spending, Personal Income and Outlays, and ISM Mfg index.

Technicals are showing that the GBP will fail to reach its highs of today, if this is truly the case the EUR should follow as the dollar starts to correct. I won't get my hopes up though as earlier trading in the week was similar and I am not ruling out a repeat of continued weakness.

On the upside (dollar upside), technical are getting riper everyday for a dollar correction.

-Alexander T Lê

US Day Trading Day Recap: Sept 29, 2010

The dollar SLOWLY but steadily started to firm up vs the Majors. Very mixed overall, kinda the same pattern we saw on the USD/CHF two days (the 27th of Sept) ago that led to the Huge sell off on the 28th Sept (aka the huge buying of the EUR).

Timing has been poor as ever for the dollar strength, though looking at the weekly charts today the day of reckoning is sooner than later imho. Friday with all the Econ data certainly have plenty of catalyst to set the tone for next weeks trading.

NG DEC 10:

WIDE trading range today as wide as below 4.122 - 4.194. Getting stopped out at 4.12 when the registered low was 4.122 is frustrating, though tis the nature of slippage or the likes on discount broker accounts. On the whole though IB is a rather decent platform for starters.

The downside still is very viable to get lows around 4.10 on the lower BB's 2nd STD. LMT in at 4.11

CL DEC 10:

Slightly up barely budging from the mixed dollar. Though yesterday the dollar correlation was not strong with crude. Perhaps due to underlying fundamental drivers? OR perhaps the dollar weakness yesterday was an artificial move to the upside.

GC DEC 10:

Making higher highs 1313.50 and lows of 1306.10. Currently on the downtick around 1309~ . My long term read on gold is that this is the tipping and is in for a large pullback to new resistance formed on the break into the current higher highs. 

-Alexander T. Lê

Asian Shift: Sept 29 2010

Markets have been quiet half past Asian equity open. FX are being quiet and the same in energy and gold... Its kinda like the "calm" before the STORM.

Navigating Global Capital Markets

Trading FX is right now is like navigating the Amazon River, 'Grey Swans from Extremistan' lurk around every land mass..... As the often quoted John Maynard Keynes once advised, "The market can stay irrational longer than you can stay solvent."
    Credit Default Swaps on Irish, Portuguese, Greek, and Spanish Debt continue to widen. Anglo Irish debt was downgraded by Moody's on Monday and now needs another lifeline of 5B Euros.  Yet, the Euro continues to strengthen.  Mr. Bernanke and Mr. Obama must be smoking a fine Cuban cigar at the moment because they are the only 2 policy makers of recent memory to weaken their currency without  significant lip service.  The Japanese MOF should take the lesson...start a trade war with China and watch your currency tank...There is much fear in holding US Dollars at the moment.  Mr. Guido Mantega of Brazil is right, we do have a full fledged currency war of devaluation and the U.S. is winning.
      Also of note, Mr. Yu Yongding an advisor to The People's Bank of China spoke in Singapore  of a full fledged dollar crisis, to quote the man, "Such a huge amount of debt is terrible and the situation will be worsening day by day.  I think we are one step nearer to a US Dollar crisis."  Cheers to you too mate.
        This morning AUD is off its highs of .9780 levels seen in Tokyo trading overnight and has pulled back toward .9700 levels.The AUD continues to test new highs as it inches towards parrity with the USD and makes new highs against the JPY.  Though, the latter has internal economic issues of its own which continue to put downward pressure on any of the Yen's major pairs.  The appreciation in large is due to sustained demand for Australian base/industrial metals from China and ASEAN countries in general.  Also, Australia maintains the highest nominal interest rates, currently at 4.5%, of any G20 country and thus is perfect for a reverse carry trade involving the USD.  Ironic how times have changed.  I can remember the days when U.S. assets became the beneficiary of an Asia Pacific carry trade.  And then we had a realestate market collapse in correlation with all other asset classes for that matter....Low rates, continued AUD strength!
          Meanwhile, the only commodities that want to rally are precious metals...Agri commodities crashed like the titantic yesterday and continue to hit icebergs today.   This is possibly due to the recent sanctions China placed on imported U.S. Chickens.  Chickens love grains as a main source of their diets.  Also, the recent run-up in Agri prices does justify a correction if prices are to move higher in the 4th Quarter.  Natural Gas is trading lower and Oil cannot hold on to any incremental gains.  Though API data from last night was somewhat bullish, and DOE data should help prices firm a bit, but their is no support in sight. Nat Gas is suffering from a lack of supply scarcity.  In fact new inventories appear every day and remain above our famous 5 year average range.  Yet, this makes little sense considering storage capacity and new LNG technologies make storage and shipment of the energy easier and cheaper than ever. I will note that Sugar, Cocoa, and Coffee performed well in yesterdays session largely attributed to you guessed it, dollar weakness.
            Bill Gross published a grim outlook in his October outlook letter.  He highlighted Stan Drunkenmiller's retirement as a Harbinger of things to come in the fund management industry.  He argues that the days of double digit returns are over due to a lack of asset inflation, increased regulation, and deregulation.  Indeed these things are all true.  One must take Mr. Gross' comments with a grain of salt as he manages the world's largest bond fund in PIMCO.  His comments do coincide with a 10% workforce reduction at DE Shaw, one the world's largest Hedge Funds with approximately $21 B of assets under management.  HF's are struggling to produce alpha these days.  According to HFN Hedge Fund Aggregate Index funds are up only 0.14% YTD through June 2010.  The FT reports Hedge funds are up 1.45% YTD.  Times are grim when the best managers of money can't make a buck.
              It is understandable that there is an underlying current of fear surrounding the developed markets of the world.  Emerging Markets were thrust into the spotlight during the most morbid of days during the credit crisis and have been in the spotlight since.  OECD economies continued to point to Emerging Market Demand and growth as the way of the future and how this shift is a 'structural' one that will change the way the global markets do business.  All I can say is, not so fast jack.  Without demand for emerging market exports from developed economies there will be no new growth.  Unless of course the ubiquitous Emerging Markets can create a sustainably contempory domestic demand system for domestically produced goods.  I doubt Malaysia needs all those those textiles and garments they continue to churn out.

              Undoubtedly, big corporates still reside in developed markets.  Inventories have refilled after bone dry levels spawned a rampant increase in production over the last 2 quarters.  Thus, unless OECD demand returns to the global marketplace, emerging markets will not be able to maintain their 'robust' growth systems and will inevitably slow down.  Global 'Austerity' is in order.  We should all trade accordingly.

              Patrick M. Ambrus

              Sources: Financial Times, The Gartman Letter,,, The Black Swan,

              Quick Skelton FX update: Sept 29, 2010

              I wrote from last week that I expected the dollar weakness to carry into this week. The rate of change should not be surprising but always feels like its faster than expected. Though currently  We are seeing decreased volume in early trading. We are getting price squeezes on the 60 min charts with the correlated majors (CAD, CHF, EUR, GBP). The daily charts on the EUR and GBP and CHF are all screaming overbought vs. the dollar. I wonder if this price pop will lead to further weakness or we will finally get the results we are seeking.

              Weekly Charts:

              Arguably the CAD has been range bound with a narrowing range since mid may to the end of sept.

              The weekly on the GBP and EUR show room for the upside as well

              I feel the CHF weekly is more ripe for shorting whereas the GBP and EUR have more room to move further up. This would be a good position to leverage given the weekly technicals.

              The JPY is showing that mid 82 as a very feasible support level but beyond those levels scaling in longs would be optimal into the Q4.

              TAKE AWAY:

              I think our dollar strength call may have been a bit premature given the nature of the longer term charts. Considering this is more of a sentiment/fundamental driven market at the moment, using the longer charts may have been more fruitful. I think it would be optimal to increase the hedges going into next week.

              -Alexander T. Lê

              Tuesday, September 28, 2010

              Skeleton Shift into US open update: Sept 28, 2010

              FX and Equities:

              5:00am Big jump on the major pairs vs the dollar, this temporary weakness caused European equities to trade higher bar the cac40.

              The EUR did jump up 80 pips on the hourly chart but still trading below 1.35 resistance.

              The USD/CHF still range bound from .982 to .986

              the USD/CAD followed the EUR/USD after its big rally and sold off slightly from 1.036 to 1.03 currently back on the uptick of 1.03161

              the USD/JPY still range bound from 84.1 an 84.3 currently trading on its lower BB bands at 84.09.

              The pound made a higher high on its hourly chart (unlike the EUR which failed at resistance) but is currently on the down tick down to 1.5864 from 1.589

              TAKE AWAY:

              The dollar strength we saw at the end of Asian Trading and the start of EURO equity opens is now mixed. On the whole the dollar strength picture is still in tact and as the US opens we may see continued strength. This down tick is a good opportunity to scale in if you are dollar bull in the coming days/weeks.

              The brief dollar weakness is showing up in equity strength, though if I am correct continued dollar strength will lead to a down day for US equities.

              -Alexander T Lê

              Skeleton Shift Update: Sept 28, 2010

              3:00 a.m.


              It seems that after getting a belly full of lunch either the Asian traders got sick and bearish or European bearish news started to filter in. Asian equities started to tank once the wires were hot around 5am UK time. European equities opened with bearish sentiment from downgrades of Irish debt. Banking banking banking again the media wants to keep on highlighting. All European indicies are currently down over 1% with Asian Equities slightly down.


              Instantly with 12am US EST the EUR/USd sold off hard, with the pound right behind. In fact all major pairs correlated to this dollar strength mainly: AUD, CAD, EUR, and GBP. The only pairs lagging this move are the JPY and CHF (core positions). Both the JPY and CHF have been range bound with since Sunday’s 5pm US EST open. Times like this are golden opportunities to scale in.

              The strongest leader in the dollar reversal has been the CAD its bottom with its bottom forming with yestedays US equity open. As my partner Pat mentioned to me, for sure with the UK open we are seeing markets move in our favor. With the US open we will see continued momentum of dollar strength and equity weakness.


              3Q busiest for M&A according to Bloomberg. Corporate Cash stands at 3T dollars with the tech sector with 200B of the chucnk between, China Mobile, CSCO, MSFT, and ORCL.

              Media likes to spin this M&A activity as a view of confidence for future investment. I don’t completely disagree, but I get the feeling that these cash cows have more money than they know what to do with. Its much easier to grow through acquisition than innovate and generate organic growth; especially when your 10x the size of an elephant. Helping these big cash cows are low borrowing cost and higher productivity from cut backs. Of the industries/sectors to help float the SPX with strong cash and earnings: energy, chemicals, telecom, materials, and pharma. These industries will see strong activity in M&A into 2011.


              HSBC’s management shuffle shall prove to be interesting as another Ibanker takes the reigns of the largest bank in Europe. No longer are incomes generating positions favored alone, income generators with risk background seems to be the right mix. Many challenges lay ahead and it will be interesting to see where Gulliver takes HSBC. Bloomberg cites that 56% of HSBC’s revenues came from western nations with only 36% coming from Asia last year. Using the Asia will be key for HSBC’s growth engine, and may be its saving grace. Though, getting ahead of its main competitor in Asia (Standard Charter Plc), will very challenging. Given Gulliver’s treasury/risk/IB background, is he really prepared to take on Asia? Considering that capital markets are not fully developed in Asia, focusing on Corporate/Global Banking will be key to getting ahead in untapped markets. Surely there are growing IB opportunities in HK, Japan, Australia, and maybe Singapore, but the rest of Asia is still far behind.

              Gulliver states, “You should not expect a significant change,” … “It’s important to take away from this that the processes that Mike has started and Stephen has started I will continue.”

              Well, Mr. Gulliver, as they say “easier said than done.” Let’s see where this story goes…

              Michelin & Cie plans to raise 1.2 billion Euros. According to Bloomberg, the capita will be used for expansion into emerging markets. With continued industrialization in Asia, start watching those rubber prices. Expect more money to flow to ANRPCs (Association of Natural Rubber Producing Countries – Cambodia, China, India, Indonesia, Malaysia, Papua New Guinea, Philippines, Singapore, Sri Lanka, Thailand and Vietnam). Leading indicators; investment in automakers abroad, chemical industrial development etc…

              Takefuji Corp Japan’s third largest lender is filing for bankruptcy protection today. To me this just speaks of institutional sclerosis and much financial reform needed in Japan. I guess the recent financial crises was not enough for an Olsonian Shock as Japan for the most part was insulated. Though, it seems now that American banks are not the only ones who need to clean up their loan portfolios.

              Ningbo Port Co., dropped 3.2 since its IPO on concerns of slowed export growth. The figure given is that export growth will slow by 15% on weak consumer demand from the US and Europe into next year. I will have to say that any slowed consumption growth will be lagged in nature and probably be hangover from 2010. I question a continued weak consumer as I expect job’s number to start firming up into 2011.

              PSA Peugeot Citroen breaks into the electric car market. Is green really the next asset boom? This also comes with news from Germany employing penalty taxes on nuclear energy and ramping up investment on renewable energy.

              MGM Resorts China Ltd, files for Hong Kong Stock Exchange Listing.

              - Alexander T Lê


              Michelin Capital Raising:

              Takefuji Bankruptcies:

              Ningbo slow trade:

              Peugeot entering green car space:

              Nuclear Tax in Germany:

              Monday, September 27, 2010

              Headwinds of Change

              Unpredictable Market Forces at Work

              After a positive week for U.S. equities, market action lacks directional impetus. What will drive equity markets higher? It is clear to us window dressing season is in full effect. Many fund managers and Institutional Investors continue to pile into crowded, growth-oriented, and alpha-seeking equity trades. In addition, many prominent investment bankers sitting in the position of 'Head of Global Equities', at their respective shops, continue to preach 1300 on the SPX by year end. Is this feasible? Sure, but it is not likely.

              Much of the current rally in the SPX from August lows of 1015 has been due to a weaker USD across the board. One can argue the impact of illustrious economic data releases on price swings until blue in the face. Yet, since the fear of debt contagion in the Euro-zone abated panic and worry shifted back on the country with the world's largest Gross Domestic Product. Since then, the EUR, CHF, JPY, and AUD have all made substantial advances against the 'Greendback'.

              Down Under

              Australia continues to benefit from their trade relationships with Asia in that exports of commodities have led to sustainable growth down under. The economy picked up last month creating 29,000 new jobs predominantly in construction and industrial sectors. As long as Chinese demand for iron ore, copper, and aluminum remains consistent, thE AUD Will continue to appreciate against all major pairs.


              The 'Swissy' benefits predominantly from the risk-on/risk-off trade. The linguistically diverse country maintains a current account surplus of 8.9% of GDP, inflation hovers around 1% while unemployment is below a comfortable 4%, and 2011 GDP growth forecasts 2% growth. If one wants safety what is not to like? In addition FX traders seem poised to test the patience of the SNB again. Recall when the SNB stepped in with 'unilateral intervention' and sold Swiss Francs to keep the rate above 1.30 EUR/CHF. Will they sell Francs and buy Dollars? No, the Japanese already failed in this endeavor.


              The Japanese economy, like the U.S., is struggling to maintain growth. Deflation wanes in the balance and export demand is tailing off in large due to a strong currency and shrinking profit margins at the likes of Sony, Toyota, Bridgestone, and Kobe Steel. With a dire economic situation the MOF stubbornly talks up the JPY and the need for intervention. Though, by 'unilaterally intervening' in the FX markets already traders know the MOF has a gun. The question is how many bullets are in the gun, and does the Ministry possess the courage required to fire a full clip? Time will tell on the latter. I doubt we have seen the last of 'unilateral intervention'. Speculators who place bets in JPY strength will not learn until the MOF reverts back to 2004 tactics and dilutes the market with over $1 Trillion of Yen. Whether or not Kan's $55 B stimulus package helps weaken the JPY remains to be seen.

              Lastly, I would like to touch on the political issues underpinning the currency. Since Ichiro Ozowa was ousted in his most recent attempt to gain power, Naoto Kan appeased the former's supporters with currency intervention. I trust the exporters mentioned above took note of this and will put pressure on Kan's administration to intervene again. Many have made it resolutely clear; 'we want USD/JPY rate at 95'. If Kan wants to keep his job longer than his predecessors he will intervene again and again until the Yen stops strengthening.

              The Little King of Everything

              Alas we have but one more pair to discuss, you guessed it, EUR/USD. As mentioned by Dennis Gartman this morning, 'This was the level from which the EUR plunged earlier this year... it marks almost perfectly the 50% retraetment of the EUR's collapse from the highs of 1.5200 last December to the lows of 1.1900 this spring.' 1.3500 will serve as a hard line of resistance over the next trading session. This morning around 10:00 the pair jumped above this level on a large candle to the upside. However, the pair rocketed back down to the 1.3450 levels within the next hour.

              Also, ECB buying of sovereign debt is slowing. Last week the ECB bought only 134 M EUR of bonds in comparison to 323 M EUR the week prior. Maybe the ECB feels confident the liquidity in the sovereign debt market is here to stay, only until it dries up again. Another important point to note; many Germans are becoming unhappy with the 'Christian-liberal Coalition', noted in the latest edition of the economist. Any political instability surrounding the Euro-zone's growth engine may cause uncertainty in the single currency. However, I should note that this is pure speculation on my part.

              Undoubtedly, the EUR/USD pair is driven by none other than the U.S. FED action. Various traders, analysts, and media alike expect a second round of 'Quantitative Easing' in which the FED once again opens up its balance sheet to buy U.S. Government Debt. Rumors suggest debt purchases of $1-2 Trillion of longer-term U.S. Treasuries. This is nonsense. If the FED wanted to create artificial inflation they already would have done as much. Especially considering the mid-term elections put a choke-hold on any further monetary policy action. I suspect, as a rumor from the WSJ this afternoon put it, 'Rather than announcing massive bond purchases with a finite end, Fed officials are weighing a more open-ended, smaller-scale program that they could adjust as the recovery unfolds.' Cheers. This ought to give the Bond market rally a bit more time run and allow equities to cool after a monster September.

              Impetus for Change

              Now let us examine a few possible harbinger's for a trend reversal in Dollar weakness. On Friday October first Global PMI data will release staring with CHina and ending with U.S. ISM. Last month trader's took China's moderate August reading of 51.7, up .5% from the month prior, as a reason to buy equities. The SPX rallied nearly 3% and closed up more than 30 points on the session. What would have happened if Chinese PMI came in around say 48 or 47? Equities would be in for a sharp and painful sell-off methinks. Hence, the fear of a global slowdown in consumption/demand would shift to the far east and away from the U.S. Perhaps poor EU PMI might just do the trick if the Chinese index posts 'robust' gains. Either way, I expect this data release to be a harbinger of asset allocation in the coming month.


              We are gearing up for a switch in sentiment with a 'Strong Dollar Story' leading the charge. Specifically we like the the dollar against the CHF, CAD, and JPY. In addition, we see energy as the place to be in the coming months as seasonality changes. Be cautious though, this type of trading environment is dangerous.

              Patrick M. Ambrus

              Sources: The Economist, The Gartman Letter, Financial Times, FT Alphaville,,

              Skeleton Shift Update/Recap: Sept 27, 2010


              Start of the shift we see continued slight dollar weakness across major pairs (excluding the CHF). Currently I expect minimal weakness to continue into todays US equities trading day. Daily charts on the GBP and EUR starting to look topsy in the coming days, this may indicate the start of the dollar strength we've been expecting. Already the CHF is taking the lead from friday's close with continued dollar strength opposite to all the majors. Currently, the latest hour (4:00am EST) we are seeing some firming of the dollar, our hope is that this leads to range bound trading; currently all pairs are in range bound range via the ADX expect the JPY.

              Risks to the GBP: current political uncertainty

              Risks to the EUR uncertainty on the banking sector

              Risk to the dollar: sentiment revolving around floating the yuan

              The US may not be the only ones who will be contemplating more stimulus with recent uncertainty in Europe and the Japanese government considering stimulus through taxes (vs. through JGB).


              Asia closed higher up for the Asia Pacific region (ASP). The Asia momentum carried through to European trading and European equities are trading up currently. My thoughts are that US equities have plenty upside to go. Resistance is below 1200 and strong closes above may fuel the SPX to 1300. If that is the case dollar weakness will remain as long as US equities continue to rally. However, I think prices will top out below 1200 and we will get a dollar correction to the upside (currency are currently leading this trend). Amazingly the S&P managed 9% in Sept despite that historically Sept is a poor month for trading.


              Unilever and Alberto Culver, Potash and Sinochem, Wall Mart and Massmart, Santander and M&T Bank Corps, China's Bright Foods and United Biscuits.

              The Netherland/UK, US, Canada, China, South Africa, Spain. It seems that the M&A, P/E, LBO recovery will be led by big multi nationals. With western corporations hurting from scaling back from the financial crises, foreign corporations are lush with cash from strong emerging market growth. Once the western countries economies show a few straight quarters of strong econ data with improved credit markets with strong consumer demand, this may help spark the M&A recovery.

              Debt Markets:

              Dubai reached agreements on debt restructuring. Its up coming debt offering will seek to raise $1B this week. S.M.B.R.A.M (Sheikh Mohammed Bin Rashid Al Maktoum), may say Dubai is back on track, but I would like to see how these projects get dispersed in the context of a slowly recoviering world economy. High energy prices may soften the blog but roughly 95% of Dubai's GDP is non-oil based and relies heavily on trade, tourism manufacturing and transport.

              Housing prices will surely have negative effects on investor sentiment for the region. The 41,000 new houses to be added to the current housing supply will only keep prices lower.

              Dubai as a financial hub imho is very feasiable with a strong world economic recovery, as long as Dubai leverages its advantage in Islamic banking and finances.

              Ireland's 5 year plan: a five year plan, a historical facet of economic policy around the world. Cutting Ireland's public deficit is surely on track if one excludes the Anglo Irish Bank bailout. The deficit currently at 11% of GDP down from 14% may seem impressive for such a short period, but under EU account rules the Anglo Irish bank bailout will push the public deficit to roughly about 25% of GDP. Even though if investors follow the underlying deficit, there is still much uncertainty around the banking sector in general. Whose to say that there won't be more bailouts needed, and when will the government get paid back. All of these points to negative sentiment for the EUR.

              Speaking of Pay backs AIG is preparing to return the tarp money taken from the US government. Exit stratgies and discussions are still in play

              HSBC's Chairman Stephen Green steps down and the succession skips over HSBC's CEO Michael Geoghegan and goes to Douglas Flint. Geoghegan has decided to step down and the new CEO role goes to Stuart Gulliver. Challenges ahead for HSBC maintaining a Universal Banking model and continuing the Asian Platform Green and Geohegan has created.


              Alexander T. Lê



              Friday, September 24, 2010

              Over-Night Recap: Sept 24, 2010

              Inter-market dollar correlations remain strong as ever:

              With over night trading FX markets saw dollar weakness across the board continue.

              Early morning crude saw jumps in prices in Dec contracts. While equity markets are enjoy three month higher highs from the dollar weakness.

              The SPX has enough room for high 1150's and low 1160's remain bearish. Given the continued upward momentum in equities the dollar weakness may persist longer than we have expected. Now would be a good time to get some partial hedges over the coming days.


              Alexander T. Lê

              The Skeleton Shift: Update - Sept 24, 2010

              The overnight shift here we go!


              Technical Issues:

              One thing we've been grappling with is trading the 8 hour to daily trends. Most of the time you know you are right on the trade but entry is almost never nearly perfect entry on the 60 minute charts. Hindsight 20/20 is that on the daily charts entry looks flawless.

              The problem with this is how to set up appropriate stops if one is trying to capture daily trends. Often 2 ATR ends up being too tight of a stop, though perhaps if trading on 60 minute charts a 2 ATR stop is way to wide. As follows, if one wishes to widen the stop to be able to capture the right move, naturally the risk/reward increases. Obviously this is the age old problem of risk/reward.

              Due to the dynamic nature of forex, each trade technically requires specific tailoring. Ideally, we are slowly working out a solution to this problem to maximize the upside while having reasonable risk management.

              FX movements:

              The dollar strength forming slow and steady. The past 24 hours on the USD/CHF show up ticks with the latest 8 hours trading down (temporary weakness)

              The USD/CAD in the past 24 hours saw a very large up tick on the price squeeze and has been trading down since then.

              The GBP is still lagging the euro in performance. Don't be surprised to see large upticks on the GBP/USD with down ticks on the EUR/USD. On the whole the pairs remain correlated, with slight divergences easily seen on the 60 minutes. On a fundamental level, in the region we may see flight to quality to the GBP if the Eurozone economic data weakness further.

              Currently the US/JPY is leading the majors and found support 84.26 and currently trading on the down tick. For picky traders I would wait for around 50 RSI on the 60 for those bearish on the YEN long term. I would maintain a small position now and scale in on the way up.

              The AUD/USD has since been trading down since its 1.96 highs from 9/22/2010. These levels are pre-crises levels, I believe if I am not mistaken the AUSSIE is the only pair (besides the yen) to reach is pre-crises levels of the majors. I think the RBA decision to hold rates will fuel the short selling of the AUD. The rest of the major pairs need time to close the gap


              Essentially though in the past 24 hours we saw slight dollar strength the majority of the pairs are showing short term dollar weakness. This in turn is fueling crude on later DEC contracts higher. With prices in contango on the front months we expect a trend of later contracts to have upward price pressure with  nearer term contracts with downside price pressure.

              On the day to day movements though, the dollar strength we expect should push crude prices lower leaving room for entries for those who are long crude into the winter season. This will also leave opportunities to explore re-entry for weak dollar strategies in the following months.

              Alexander T.

              Thursday, September 23, 2010

              Buoyant Natural Gas

              EIA Data release for week ending September 17, 2010:

              Working gas in storage was 3,340 Bcf as of Friday, September 17, 2010, according to EIA estimates. This represents a net increase of 73 Bcf from the previous week. Stocks were 175 Bcf less than last year at this time and 195 Bcf above the 5-year average of 3,145 Bcf. In the East Region, stocks were 16 Bcf above the 5-year average following net injections of 53 Bcf. Stocks in the Producing Region were 114 Bcf above the 5-year average of 915 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 65 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,340 Bcf, total working gas is within the 5-year historical range.

              Price Data


              A significant portion in achieving upward price momentum has been unpredictably moderate temperatures. We are in an environment in which Nat Gas is not needed for cooling nor for heating. Additionally, Hurricane season has yet to come to fruition (that is an oxymoron but rings some truth for an energy trader) and will likely continue upon its uneventful season. However, hope remains in the form of tropical storm Lisa. WIth warmer temperatures in the Atlantic, the potential for greater velocity of headwinds and illustrious destruction increases rapidly; think Hurricane Rita. If the storm hits the North East, I would look for Philadelphia output to stagnate.


              We'd like to see the November contracts find support at $4.15/mmBtu. Though the contangion spread between November/December contracts (.216) is much wider than that of December/January (.1620). A scenario could develop in which the November/December spread widens until demand firms for the near-month contracts. Otherwise, spreads should narrow as the near month November contracts gain demand traction. We expect to see sustainable support of $3.98 on October contracts expiring on Tuesday.

              December NG: 3-Month Daily Chart


              As Alex astutely alluded to yesterday, we are long MINY December Contracts. We will look to'pyramid' once prices move into a tighter range at higher price levels, if there is such a thing.

              Patrick M. Ambrus
              Twitter: AnalyzeCapital


              Wednesday, September 22, 2010

              Market Recap Sept 22nd 2010


              Dollar strength early in US trading hours since then the strength is now fading. The question is will the dollar strength correction continue or has this been a slight whipsaw in the dollar weakness trend. We are betting on more sustained dollar strength correction which will lead to a continuation of dollar weakness. We are aiming for the dollar to get some strength over the next few days before re-examining entries for shorting the dollar on major pairs. It would seem the GBP is favorable as it has slightly lagged the EUR in % performance gains though moves remain correlated. I am still looking for entries on shorting the JPY. Fibs are saying the 61.8% retracement in the 84 range though an early entry around 84.5 may not be a bad idea, all in all the major pairs are moving in sync so I am gonna hold off on the JPY trade.


              Its a dollar dollar game, early strength led to a selling of in the december contracts I'm following, and just when the strength started to fade oil started is late day rally though still far from early morning highs. Since we are betting on continued dollar strength the next few days we feel oil is gonna fall to resistance levels. On December mini's thats about to the $75 level.

              Nat Gas:

              Nat gas has been jumping around all day the spread between the bid ask has been volatile, though on the awhole quite a flat range. The Dec 2010 mini's have been trade in the low 4.30's after gapping down from its 4.365 highs. Technicals are telling us prices are coming to a squeeze, and we are betting to the upside.


              Alexander Lê
              Managing Partner
              Analyze Capital LLC

              Tuesday, September 21, 2010

              Opinions in Politics: Sept 21, 2010

              ****This blog post contains opinions which do reflect the whole belief of the AC group and are not meant to show disrespect in anyway what so ever: all comments and concerns can be directly addressed to the author****

              Perhaps it is me alone who feels this but I found Scaramucci's demeanor and air to be a bit unbecoming of a hedge fund manager of a "7.4 billion dollar" hedge fund (no disrespect intended). Name dropping and number throwing is quite the turn off in my humble opinion.

              On the flip side, I found Obama's perceptions on hedge funds to be very misguided. The top 25 hedge funds who brought in over a billion dollars in profits are probably less than 1% of all hedge fund managers. The majority of hedge funds being under $100M AUM, come no where near the top hedge fund managers. At most, small hedge fund managers are only bringing in a modest six figures, which is no different from middle class americans.

              To single out the top hedge fund managers and apply that across a whole industry is the same using stereotypes on whole race of people, a whole class of people, or a whole country of people. Perhaps a better comparison of what Obama is saying would be to take a big fortune 500 company, and say, since this fortune 500 company brought in 1 billion dollars of revenue this year EVERYONE in the company needs to be taxed higher including the janitors.

              I find it a bit disheartening that our leader of this great country to be so misinformed and because of this the little guys have to pay the price of such ignorance.


              Alexander Lê
              Managing Partner
              Analyze Capital LLC

              Monday, September 20, 2010

              Do Your Own Homework-SPX Update

              'Buying Gold is an excuse for people not to do their homework.'


              SPX: 1 Year Daily Chart:

              Another day another dollar: that is true if you were long the SPX in U.S. trading today. The SPX rallied 1.45% to 1141.92 on the session led by Energy, Consumer Discretionary, and Industrial stocks. Many Tech bellwethers displayed robust performances as Google rallied 3.7% to 508 and AAPL closed above 280 up 2.85%.

              Pop Quiz: Why did equities rally today class?

              a. President Obama's Town Hall assured investors America is "The Greatest Nation"
              b. The SPX broke resistance of 1131
              c. Japanese Markets were closed
              d. The Tea-Party will uproot American Politics
              e. No significant economic data released
              f. I forgot how to take these tests

              The answer is probably a combination of b, c, and e. The S&P finally broke out of its uninspiring trading range on light volume. Though, this may be short lived. Early in the session gold rallied to new highs around 1284. However, these gains were unsustainable. In addition, agricultural commodities, base metals, and Natural Gas led commodities lower. The USD failed to sustain any gains against the Euro, Sterling, 'Aussie', and CHF. Also, the bond market lacked bullish convictions. Alas, capital flowed into equities by default.

              October Nat Gas:1 Month Chart

              December SPX E-mini: 1 Month Chart

              We took advantage of the sharp sell-off in December Nat Gas contracts and entered a long position as prices firmed. Also, we are long the Dollar vs. CHF. U.S. Housing Starts come in at 08:30 and The Fed decision is at 14:15 EST. We expect equities to pair some of their gains in tomorrow's session.

              Patrick M. Ambrus
              Twitter: AnalyzeCapital

              Sources:,, VanityFair

              Wednesday, September 15, 2010

              Japanese Denim With Money Tucked in 'em

              'Fear Keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse his natural impulses. Instead of hoping he must fear; instead of fearing je must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may be a big profit.'

              --Larry Livingston , Reminiscences of a Stock Operator

              Alas, intervention from Japan. I have been patiently waiting for this move, and it came sooner than I anticipated. In case you were hiding under a rock somewhere:

              The yen tumbled from a 15-year high versus the dollar after Japan intervened for the first time since 2004 to curb gains that threaten an export-led recovery. Japan’s currency slid the most since December after Finance Minister Yoshihiko Noda said the nation unilaterally sold yen.

              Six Questions for Yoshihiko Noda:
              1. WiIll G-7 countries accept this policy and help Japan with coordinated intervention?
              2. How Much Yen will the BoJ sell? (rumors circulating say 1 T Yen for today)
              3. How much USD will be purchased in comparison to EUR?
              4. Will traders test 'the line in the sand', a USD/JPY rate of 82.00?
              5. WiIll Naoto Kan remain PM through 2010 and into 2011?
              6. WIll potential 'QE 2' from The U.S. FED derail any unilateral intervention?

              On Monday I was able to get long at an average price of Y83.36. Last night I pyramided and thus was able to get the maximum profits out of my trade. I exited the position around Y85.30. Recently I have tried various new trading strategies to get the most of my profitable positions. See Edwin Lefevre's Reminiscences of a Stock Operator to understand pyramiding better. Currently, I maintain no open position in the pair. I am uncomfortable with all of the fundamental uncertainty of 'unilateral intervention' as I adressed in my questions above. I will enjoy my profits and take the rest of the day to spend with family.

              Check out my fellow trader's blog: . He had success trading this pair today as well. In addition, please utilize the forum on his site. It is packed with all sorts of trading goodies.

              Patrick M. Ambrus
              Twitter: AnalyzeCapital


              Monday, September 13, 2010

              Ripe for a Short

              Today the SPX rallied and finished up 1.15% to 1122.29 above the 200 Day Simple Moving Average. The rally was in large part driven by 'robust' Industrial Production and domestic demand data released by China over the weekend. The Energy and Materials sectors led the SPX higher today. WTI Oil was up over 1% on the session to $77.20. Copper and Natural Gas also benefitted from the rally.

              GSCI Commodity Index

              Last night Basel III capital requirements released and were essentially a practical joke on banks. Banks will be required to maintain a Tier 1 Capital ratio of 4.5% (common equity after deductions) and a buffer of 2.0% by 2013. Keep in mind, Lehman had a Tier 1 Capital ratio of 11% when the investment bank imploded. So much for stringent regulation. Needless to say, financials rallied hard on the session.

              SPX 1 Year Daily


              Where do equities go from here? 1131 is the next key level of resistance on the SPX. Tomorrow U.S. retail sales release at 08:30 and disappointing numbers could be the impetus to drive equities lower. In addition, we are approaching overbought technical levels on the RSI (62 on the 1 year daily). In addition, the VIX traded down around 21 today. The volatility index is ripe for a pop up to 23 to 24 over the next few sessions. Thus, now may be the time to get get short the SPX.

              Sports: Jets vs. Ravens tonight. Gang Green will be victorious.

              Patrick M. Ambrus
              Twitter: AnalyzeCapital

              Sources:, FT Alphaville,,

              Thursday, September 9, 2010

              Black Gold

              But eventually it's a question of access: Getting access to fields is on top of the oil companies' agenda. We see a substantial build-up of supply occurring over the coming years.

              -Daniel Yergin

              WTI Crude Oil traded higher up to $75.95/barrel during the morning session. However the commodity pulled back when the EIA data was released. The October contract currently trades at $74.10 Below, I compiled some of the key EIA data for your own synthesis & analysis.

              Price Pressure
              Why has CL1 traded in a range for the past month? There is a large contagion gap between the near month October Futures contracts and the November Contracts of 2.04%. As settlement date approaches, November prices will fall. In addition, supply levels in Kuching Oklahoma remain above historical levels for this time of year.

              Macro View
              Growth numbers out of China have been less than stellar. China PMI data was up only .5% from July to 51.7%, HSBC numbers were below 50. Also, the 'Deflation Story' in the U.S. and Japan will not help the perception of commodities. As money continues to flow into the bond market inflationary investments become less attractive. Lastly, there has been less conflict in the Middle East than normal. Thus, OPEC sour-crude supply is not in danger of shortages in the near-term.

              Highlights from EIA Report

              -U.S. crude oil imports averaged 8.9 million barrels per day last week, down by 794 thousand barrels per day from the previous week.
              -Over the last four weeks, crude oil imports have averaged 9.5 million barrels per day, 500 thousand barrels per day above the same four-week period last year.
              -U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week.
              -At 359.9 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year
              -Distillate fuel inventories decreased by 0.4 million barrels, and are above the upper boundary of the average range for this time of year.
              -Total products supplied over the last four-week period has averaged 19.6 million barrels per day, up by 0.7 percent compared to the similar period last year
              -Jet fuel demand is 0.8 percent lower over the last four weeks compared to the same four- week period last year.
              -During June and July of 2010, the Gulf oil producing region was impacted by two storms: Alex and Bonnie shut in a cumulative total of about 1.6 million barrels of crude oil production.

              Patrick M. Ambrus
              Twitter: AnalyzeCapital

              Empirical data is courtesy of

              Wednesday, September 8, 2010

              JPY Trade: Reloaded

              Morpheus: I imagine that right now, you're feeling a bit like Alice. Hmm? Tumbling down the rabbit hole?
              Neo: You could say that.

              --The Matrix

              I do feel a bit like Alice. TheUSD/JPY pair rallied in London and New York trading after selling off in Asian trading. The FX rate established a new 15-year low during the session, trading down to levels of 83.35. I took profits on the pop, during morning U.S. trading, around 84.00 levels. Prices recovered when Finance Minister Yoshihiko Noda 'said he is prepared to take “bold” steps on currencies if necessary.' However, I am contemplating a long position in the Yen until 82.50. I watched the tape for the majority of the past 48 hours (fun times) to get a feel for directionality. I am confident prices will move lower.

              Part of me wants to believe all of this intervention talk, led by PM candidate Ichiro Ozawa, will lead to more 'normalized' price levels (i.e. 88-90). However, my sinister half believes this was a short-covering rally today. In the ten minutes preceding the Beige Book announcement the pair came to an abrupt slow down in trading. Once the words 'decelerated growth' were uttered on CNBC prices gapped down to 83.79-81. During President Obama's 'Economic Speech', shortly thereafter, prices jumped back up to 83.92-95 levels. Hence, U.S. economic speak was not a significant momentum catalyst, net of direction, for the pair.

              JPY 2day chart- 5 minute bars

              Will the tape top out at 84.125 resistance levels? What has changed over the past 48 hours to stunt the momentum of a six month downtrend in the USD/JPY pair? Clearly, many uncertainties and rapid-fire change engulf trading. Thus, I look to a glut of international economic data releases that may potentially impact price directionality:

              19:50- JPY BSI Large Manufacturing Conditions
              01:00- JPY Household Confidence
              02:00- JPY Machine Tool Orders
              02:00- German CPI (MoM)
              04:30- ECB Monthly Report
              07:00- BoE Interest Rate Decision
              08:30- U.S. Trade Balance
              08:30- U.S. Initial Jobless Claims
              19:50- JPY GDP(QoQ)
              19:50 BoJ Monetary Policy Meeting Minutes

              If I have learned one thing in my short few years of trading it is, 'don't trade against the tape.' I will leave you with some wise words from Adam Smith:

              "The chance of gain by every man is more or less overvalued, and the chance of loss is by most men undervalued and by scarce any man who is in tolerable health and spirits valued more than it is worth."

              Patrick M. Ambrus
              Twitter: AnalyzeCapital

              USD/JPY = 93.9150 as of 19:37 EST. The 'Matrix' theme for this post was inspired by a fellow trader of mine, Sauros, please view his blog: Yoshihiko Noda quote was borrowed from

              Tuesday, September 7, 2010

              Japanese Machine Orders

              Japanese machinery orders rose for a second month in July as overseas demand encouraged investment by companies. Orders, an indicator of business investment in three to six months, rose 8.8 percent from June, when they increased 1.6 percent, the Cabinet Office said today in Tokyo. The median forecast of 25 economists surveyed by Bloomberg News was for a 2 percent gain.


              I am short the JPY at these levels. I expect political instability to derail or at least correct the temporary risk aversion flows into the JPY. The Beige Book tomorrow ought to clarify the FED's stance on 'QE 2.'

              Patrick M. Ambrus
              Twitter: AnalyzeCapital

              Thursday, September 2, 2010

              FX Briefing

              The USD/JPY pair is yet to break out of its trading range established during the last 2 sessions between 84.00-to about 84.50. I'm still waiting for an entry around 83.75. I expect Non-Farm Payrolls to drive the pair lower in early trading tomorrow morning.

              On another note, the EUR/USD pair is up marginally sitting at 1.2815. I'm looking for a rally to the 1.2950 levels before I get long. The Dollar Index is flat on the session pairing early morning declines.

              'The US Dollar Index includes the exchange rates of the following six currencies: euro (EUR), Japenese yen (JPY), Pound sterling (GBP), Canadian dollar (CAN), Swedish krona (SEK), and Swiss franc (CHF).'


              The table comes courtesy of Interactive Brokers

              Patrick M. Ambrus
              Analyze Capital LLC
              Twitter: AnalyzeCapital

              Wednesday, September 1, 2010

              Bear Trap or Bull Run?-SPX Update

              Wait and watch. That is where your tape reading comes in, to enable you to decide as to the proper beginning.

              - Larry Livingston, Reminiscences of a Stock Operator

              Unless, you were hiding out in a cave somewhere with Osama Bin Laden watching endless re-runs of President Obama's Oval office adress you probably noticed the huge rally in equity markets yesterday. Many analysts, economists, traders, and journalists attributed the rally to 'robust' PMI data from The People's Republic of China, Europe, and The U.S. Though, ADP employment showed glaring mediocrity in job growth leading up to Non-Farm Payrolls on Friday. Regardless of trailing economic data, the tape tells the true story as always.

              3 Month Daily E-Mini September SPX Chart

              3 Year Daily SPX Chart

              1100 is the key price level I'm looking for. If the candles trade above this line I expect a retest of 1130 and maybe a break out to 1150. This must happen in Tomorrow's session though. I fear awful Non-Farm Payroll numbers will allow the shorts to plunge the equity markets once again. The RSI will move up and re-test 60, if it fails to do this, I expect heavier selling-pressure to result. As of writing time, 12:00 EST, Nikkei is up 32.27 points @ 895.29 down significantly from the open. Make it a good trading day.

              Patrick M. Ambrus
              Analyze Capital LLC
              Twitter: AnalyzeCapita

              Illustrious Imperfections

              This evening I was perusing FT's Alphaville blog and came across a great piece written by Mohammed El-Erian. The PIMCO Chief Investment Officer breaks down Bernanke's speech from Jackson Hole.


              Some questions for the FED

              El-Erian alludes to some great points....

              1. Is the FED over-estimating its 'grip' on the U.S. economy?
              2. What happens when Treasury purchases become the new norm?
              3. How does the FED's current monetary policy measures stack up against those of other central banks (ECB, BoE, and BoJ)?
              4. The main question that trumps all, is the FED comfortable maintaining a $2 Trillion Balance Sheet over the next 10 years?
              4a. If yes, will Quantitative Easing become the new tool to re-inflate economies?

              Seems to me 'Helicopter Ben' did his homework on the lost decades in Japan.

              Patrick M. Ambrus
              Analyze Capital LLC
              Twitter: AnalyzeCapital
              This Blog has been developed by Analyze Capital LLC, and as an independent organization we provide “AS IS” information without warranty. The ideas and opinions expressed by the contributers of this blog are personal and do not represent the actions or policies of Analyze Capital LLC. The contents of this blog do not intend to assert recommendations or to offer advice of any kind. We are not responsible the consequences, be they gains or losses, that may result from using any of the information from this blog.