FX Daily Update - 10.6.09

Overall I have a general weak dollar thesis in mind. Some SMA action in the GBP questions mid term strength of the GBP direction. Soon I will re-balance my portfolio to incorporate some currency ETF's since I can't move my capital around too much until the beginning of next year.

I will consider trading ULE, YCL (yes I will start tracking the Yen once again!), BNZ (if i can't find a Aussie pair I like). I will have to look around for some GBP and AUD ETFs. For hedges I will consider UUP and UDN. Also, I will try to do some research on RYDEX products. If anyone has an opinion on these products let me know!

-Alex

Daily Morning Forex Commentary - 10.06.09

A rather significant move on the hourly chart. It seems that the EURO equities are feeding of the US equities from yesterday. With such dollar weakness today I'm expecting another strong day in the US domestic equities (will energy and financial sectors lead or will the consumer sectors?).

EUR:

Hourly Chart:

The EUR has already pierced its upper 2nd BB as we speak and is poised to retrace back to its lower 2nd SD BB. Its seems as the EUR is range bound at 30-40 pips, as I drew out via support and resistance levels. This is more confirmation that a big move is on the way, especially with the light volume we have been seeing across all markets.

The 6-month Daily chart is equally impressive, it is reminiscent of the EUR moving a few days earlier than the previous BOE Quantitative Easing Announcement back during summer.

Other Major Pairs:

3/4 the four major pairs I'm following confirm the price squeeze seen in the EUR leading to dollar weakness. The major pairs confirming this being: GBP, CAD, and EUR.

The only pair that contradicts this is the AUD

AUD and Asia Pacific Events:


"BIG NEWS" <-- Click Here>


MR. Stevens of the RBA (Reserve Bank of Australia) today decided surprise everyone with a interest rate smack in the face of a 25 basis point increase. He must be bragging about how well his economy is doing. But, on a more serious note, this maybe reflecting some fundamentals in the Asia region: Strong consumer demand in the East, commodities strength (confirmed via dollar trend weakness), and possibly hinting at inflation worries.

What I'm interested in is if this move is significant enough to affect the JPY and maybe reignite carry trade fundamental plays in the currency arena.

I'm also aware that southeast Asian equities have been performing quite well compared to two summers ago when equity markets were dieing along with hyper inflation in some countries (eg, Sri Lanka and Vietnam).

All these circumstances makes me think HSBC management knows something everyone else doesn't, as they are selling off assets in more developed countries and focusing on more growth oriented countries.

"HSBC NEWS <-- Click Here">

But then again, HSBC has always been oriented this way, its banking model is conducive on focusing on top priority countries with highest growth rates and rotating best performing managers to new developing regions. In a sense this is kind of a managerial meritocracy. This model has certainly thrived in the HF industry and maybe points to why HSBC has survived "relatively" better than its peers.

As I pointed in my last blog Stephen Green, predicted that the recovery will be Asian led last summer. Based on HSBC's strategic moves, its possible they don't believe the recovery has begun in full force yet.

I will end with a quote from an EX Deputy CEO of Corporate Banking HSBC who I used to work for in Vietnam.

"China certainly will certainly can keep us busy for the next decade or more."

Such a thought is definitely worth thinking about when one orients their strategy in a constantly evolving financial landscape. The point should also extend to all emerging markets, just not Asia alone...

Anyway... Off to class!

-Alex

Comments on "Trader Mike's Market Recap": SPX market commentary - 10.5.09

Trader Mike's Market Recap for 10.5.09 <-- click here>

I will have to say that my analysis is in agreement with trader Mike's in terms of the SPX. He brings out a very good point about low volume levels. He calls this a "purely technical" play (ie. prices bouncing off 50 SMA). For those looking for more of a fundamental perspective, today can be considered people covering their short sales from Sept. 29, 2009, hence the relative volume weakness.

I will also like to add in that if prices do continue to form higher lows and lower lows, I expect support at around 1010 (4 week ATR calculated range). 1010 maybe a bit too extreme if one were looking at Bollinger Bands, either way 1000+ support is a key level to be watching. This key level will determine whether or not the SPX topped out at 1070 or if it will confirm a bullish trend that is still in place.

Either way prices are coming to a squeeze as seen in default parameter bollinger bands. Keep in mind, any directional move will certainly needed to be confirmed by volume to ascertain true trend.

Google Search: Analyze Capital LLC & "Analyze Capital LLC"

• Looks like we make it to front page, 1 away from the top spot.

• The specific search yields two results and Son's Profile! Good work Son, whatever you did to get on that search!

Thoughts on the U.S. Economy - 10.05.09 - An Email Dialouge

Alex,

(CLICK HERE FOR LINK I SENT TO PAT <----)

Its funny you sent me this because I was just about to e-mail you an article of quotes from Roubini, Soros, and Geohegan. I do agree with this sentiment as you know I am bearish. The fact is that Valuations are too high right now. Also, as we see 3rd quarter earnings we will see bad top line numbers which will matter much more in economic growth, job creation, and undeniably equity prices. A W shaped recession would not surprise me at all. Seeing as we have pumped so much stimulus into a system that is now feasting on it. I think Sauros is right to "trade the fed" or central banks for that matter. Is deflation really a concern? May be. Could we see this equity market collapse again? 50/50. It depends on how much guts investors have. Will investors pull money out if the market starts to go down? probably. Think Cattle mentality. As you and I have even discussed, If the S&P breaks support levels around 1005 or so it could free fall. If this is the case it means two things for Analyze Capital LLC: 1. We need to figure out a way to play this as a "hedge." 2. "We will need to follow the economy and earnings very closely to determine equity prices in the near term. It is entirely possible that "trading the fed"/earnings going forward is the correct way to play equities. Only time will truly tell what happens.

I'll leave you with this. "When you do battle, even if you are winning, if you continue for a long time it will dull your forces and blunt your edge; if you besiege a citadel, your strength will be exhausted. If you keep your armies out in the field for a long time, your supplies will be insufficient...Those who like to fight and so exhaust their military inevitably perish" (Sun Tzu, The Art Of War).

Reflection on Market Movements ending 10/2/09

• Weak US jobs data along with relative dollar strength.



• Dollar strength with oil up around 70.



• Strong Dollar Weak Equities.



• Strong Dollar Strong Gold at 1000+ levels.

The only play that may have made sense was risk aversion to gold due to economic weakness. It seem that the Euro and Asian Equities are just following the US drop. With Correlations out of whack, Im just glad I'm a technical hybrid.

It will be interesting to see if gold will break out of its range bound trading. Technical resistance at 1000 has been holding for so long now. Price Pressure certainly must be building.

The best way to play this market, when nothing seems to be fundamentally sound, is using Technical and Sentiment analysis. Carefully observing the sentiment indicators and technicals should give a trader/manager leading indicators as to how markets might react to trumping fundamentals. If this doesn't seem feasible, one should be in cash or close to being fully hedged.

-Alex

PS: much of this volatility maybe due to pricing in of a bad upcoming earnings season. If one believed the past earnings season was due to cost cutting and severely reduced expectations, this upcoming season must be a bearish one considering underlying economic fundamentals have not significantly changed. One key sector that may lead this move is the financial/banking sector. One can confirm overall SPX movements by individual equity analysis vs expectations in the sector if they believe the financial sector to be of significant importance. If a bearish thesis plays out I expect the SPX to hit 1010 within a four week time frame.

SGP Technical Play - 10.02.09

Technical Indicators:

Bullish Evidence

RSI:

Showing Upward Price movement to 70+ range. Has Proven in the past that it has traded above 70 for few days to two weeks.

MACD:

Momentum is going to switch from downward momentum to upward momentum (longer average crossing under shorter average). Seen on the longer term chart (1 year or so) Momentum is far from highs seen in April 09 (well above 1). In other words, momentum has lots of room to the upside.

SMA:

Continued Perfect formation; though some short term risk if prices interact with 50 day SMA.

Volume:

No significant volume that matches marches highs. Though relatively higher than the past two months indication some support for short term movements up. Also confirms a bullish trend up.


Candle Stick Analysis:

Bullish Engulfing forming today.




Bearish Picture:

Resistance:

Experience technical resistance around 30.

Fundamental Risk:

Prolonged permission from FTA to permit Merck Merger.


Summary:

Technical resistance is probably reflecting fundamental risk which may force price to behave in a sideways manor.

Overall the bullish picture seems to be intact with multiple confirmations across trend, pattern, and candle stick analysis.

Its the end of the week. I would suggest adding in if you are long since prices have relatively pulled back from September highs. If you are a bit risk averse due to overall market thesis you could possibly hedge with a put option around entry price. My option duration would be until the end of the year due to tax purposes (though I'm not to sure how expensive this hedge would be, so for example, don't hedge this way if the cost of hedge exceeds your risk/reward ratio expectations).