Marc Walton on January 6, 2013
Hi,
I mentioned in last weeks post how ridiculous the reaction was to the
USA’s avoiding (for a couple of months) the drop off the fiscal cliff.The “markets reaction” was predictably silly and further fuelled by irresponsible press reporting like that of the right leaning British “Daily Express” whose cover you can see on the left.
This kind of headline is guaranteed to persuade the financially naive that a stock market boom is on the way and some will no doubt have bought this week.
The BIG clever money that has been made on shares recently was the shorting in the run up to the fiscal cliff pantomime “will they , won’t they”? (of course they will). Then buying back or longing after the drop.
However for markets to move up and down there needs to be a steady group of losers willing to hand over their cash.
This has been going on for over a century and its important to not get sucked in & realise that the rules of the game need to change. The fiscal cliff was not fixed. It was simply shored up for a couple of months.
Member Larry & Moneyrunner in the forum, both sent me these figures last week to show how bad the debt situation really is in the US at the moment. These figures have been doing the rounds for a while but they do highlight just how much the situation needs to be properly addressed:
Lesson # 1:
* U.S. Tax revenue: $ 2,170,000,000,000
* Fed budget: $ 3,820,000,000,000
* New debt: $ 1,650,000,000,000
* National debt: $14,271,000,000,000
* Recent budget cuts: $ 38,500,000,000
Let’s now remove 8 zeros and pretend it’s a household budget:
* Annual family income: $ 21,700
* Money the family spent: $ 38,200
* New debt on the credit card: $ 16,500
* Outstanding balance on the credit card: $142,710
* Total budget cuts so far: $ 38.50
The debt ceiling is the next “crisis” on the horizon. there will no doubt be the usual undignified melee of squabbling politicians more interested in serving their own egos and needs rather than what is actually best for the people they purport to represent. This is not an anti US rant on my behalf. The tragedy is that there doesn’t appear to be a single “statesman” of any political party, country nor bloc at the moment.
Forex
The $US rallied last week on the great news! Hey no one said that markets behave logically
I remain convinced that central banks have decided upon a range for
currencies to bounce around therefore there are two options as I see it.
One is to be a very conservative trader and simply go for trades with
the trend from major areas or the 2nd option is to look for bounce
trades. A lot of this depends on your mentality. Can you walk away and
leave the markets for days, sometimes weeks and only take this type of
trade? If not then I show in todays video how to play bounces once more.The Week Ahead
There is likely to be thinner liquidity as bigger traders drift back from the holidays. Less liquid markets are more prone to wild swings. Often Martin Luther King Day is when the currency markets are perceived to really get back into a more regular pattern, so caution is the watchword once more. I show you in the video how to trade bounces simply from support & resistance & candlesticks.
Euro/$: Weekly macd divergence is a concern so a pullback to 1.2930 would be the more conservative entry to long. If 1.2900 breaks then we start to think of M2 shorts but I would analyse that later in the week. Also its interest rate and press conference this week so be ultra cautious around those announcements
Intra day look for clues for potential bounce trades as explained in the video. 1.3000, 1.3170 and 1.3300 are the areas
Chf: I have preferred this pair over the Euro in the last few months, but its messier this week, Last week price bounced off the suggested support at 0.9270 but then the short at 0.9200 lost. I will be interested toM2 short if price breaks and closes below 0.9200 and will again consider bounces back up from 0.9080 area.
Gbp/$:Weekly macd divergence here as well. Price bounced to the pip off 1.600 last week as to be expected. That is the first major line for potential longs but macd, stochs and potetial 5/8 cross make me wary. I will wait until after London opens before trading this pair. Also look for potential shorts if price races back up to 1.6300 as explained in the video.
Intraday look for clues to short at 1.6150
Euro/Gbp: Messy, but I am interested to long at 0.8060 for multiple reasons
Aud: Continues to bounce off fibs for weekly moves & I will look in the same places again, namely 1.0370 and 1.0570
Intraday look for clues to short at 1.0500 once more
Cad: Weekly pullback to anywhere around 0.9970 I will short.
Inra day: 0.9900 is a major area with multiple reasons so watch there on 4 hour charts or above.
Yens: I was too conservative and missed all the major moves. Long term member Mary (trade spotting in the forum) on the other hand made 100′s of pips last week. I need pull backs, Mary may have other, better ideas so check in the forum in Pierres corner for her take on all things yen.
New members please note: If I am looking to take a trade long, at for example 1.6000 , I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.
We are NOT a “tipping service” our aim is to teach you how to trade for yourself. For more up to the minute updates do not forget to drop by the forum
Pierre, Vassilis (Capsmart), Raa, Omar, Mary, and other experienced members will be available in the forum to give you a more up to the minute assessment & whether they see any potential trades lining up in the next few days. Many members tell me this is the best forex forum there is (no back biting & bitchiness, nor spam, that spoils most forums) and all members are happy to help new visitors. Its a great resource, USE IT: Forex Forum.
To View the Video full screen, click on the square shape, bottom right hand corner.