Forex/Futures ST for Week 5/27-5/31

greenback

Let's open this weekly thread today to throw some meats to the discussion of the market during the long weekend.

In last week's opening statement, we said "intermediate-term wise, bulls are fine". However, we also sounded the same warning for the last two weeks: "The weekly bar has broken out of the BB band, which 'usually' indicates some consolidation in the coming weeks if not a small pullback. So bulls want to be careful."

Unfortunately for bulls, this time around, we were correct in predicting a pullback. I guess if you keep predicting the against-trend direction, you'll always get it right sometime down the road.

However, correct prediction or not is not important, we recommended and utilized the suggested strategies when trading NKD. We first re-entered the long position (only 1/2 since we were thinking about the possible topping process) after it broke out the previous high (~15400 in the chart) with a stop buy on Mon and used the trailing stop strategy to ride it up to ~16000, another new high. It happened around Bernanke's testimony in the Congress. Our positions were then all stopped out after the broad market started sliding and we were all cash since then. You may want to choose the strongest-trending asset in doing so. Otherwise, you can be easily stopped out prematurely. So weekly/daily review of all assets is important.

However, we did not change the portfolio positions except a rebalance on Fri based on the bullish intermediate view. This is also to follow Cobra's principle that a new high shall always be retested before a top can be claimed, as can be seen in the chart below: the two circled cases.



Some kind of divergence should be observed too in the retest of the high. Of course, let's hope the retest come sooner as in last Sept. Otherwise, bulls have to endure couple of months down and up. But you want to be prepared.

Finally we can bear the psychological pressure in using this "trading on the right side strategy" because we are never 100% in the bullish positions.

greenback

Here are rest of the indices ...

One thing standing out is NIKKEI. I still believe it had a fire sale, due to the vague communication by the BOJ chief on their bond market. Note that the chief and the policy are both very new. You should give them some leeway: they really want to get it done right in the end.

It is clear by now that BOJ should never allow JGB 10yr to tank so violently while on QE, leading to doubt that the QE is not working at all (because the free money goes buying the bond in the open market). Maybe BOJ still thinks its rate (it spiked to 1%, a new high on Thur, leading to the pullback in NIKKEI) is still too low since the normal 10yr rate should be somewhere around 3%. However it beats the purpose if it became so volatile as in the last few weeks, see below.

Maintaining our NIKKEI position in the portfolio (meant to follow the intermediate term trend since we used in our retirement account) is consistent with the trading strategy in the opening remark.

greenback

Purely from the charts, the pull back can last quite some weeks. So be careful in managing your positions.

From a FA point of view, bears shouldn't be too aggressive. Why? Because we are still in the QE_infinity. What does it mean? It means that FED can keep it or even increase it as long as the economy is in a slum or getting worse. Don't bet the market will nose dive from here, which would lead everything else to go south, INCLUDING BOND. This is a double whammy because interest rates would be high too! Hard for economy, i.e. housing, to come back!

Thus, there would be no more basis for stopping the QE_infinity any more. This is why the QE is called "Bernanke Put".

The higher chance move would be a sideway move, or a bull flag, waiting for the fundamentals to catch up with the equity prices.

greenback

Bonds are turning weak again, consistent with the expectation of tapering QE. So maybe indeed, the data would be good enough for FED to start tapering in Sept, 3-6 months earlier than the Street expectation!

greenback

The above analysis shows that maybe we should short bonds instead of guessing the direction of equity. Their down trend, at least US 10yr and 30yr, is getting clearer by the week!

greenback

Currency majors:

AUD may have bottomed for now.
EUR is possible forming a double bottom.
CAD is posed to test the S/R above.
JPY may at least consolidate another week.
GBP is hesitating ... may or may not go back to the low.

九天

EUR is possible forming a double bottom.
Thanks.

greenback

九天 发表于 2013-5-26 03:44 AM
EUR is possible forming a double bottom.
Thanks.

Good for you!

greenback

The buy-dip contract in NKD was stopped out at 14360 during the slide after hitting 14460. Got in again at 14200 with a trailing stop loss of -100.

Sorry again for doing this. I know this is 100% against TA doctrine. Just for fun ...

greenback

greenback 发表于 2013-5-26 08:24 PM
The buy-dip contract in NKD was stopped out at 14360 during the slide after hitting 14460. Got in ag ...

Shit, it's weak ... got stopped out again ...
Let's don't do this game any more.

greenback

greenback 发表于 2013-5-26 09:11 PM
Shit, it's weak ... got stopped out again ...
Let's don't do this game any more.

Let's go back to our break out set up ...

hahaa

greenback 发表于 2013-5-26 08:11 PM
Shit, it's weak ... got stopped out again ...
Let's don't do this game any more.

NKD 这次跌得太狠，不太寻常。

greenback

hahaa 发表于 2013-5-26 10:34 PM
NKD 这次跌得太狠，不太寻常。

That's why you buy on strength and sell on weakness as Cobra always says ... even if it's easier to set stop loss if you do the opposite.

greenback

Let's watch the two lines above. A bottom may have formed to prepare SPX to back test the previous high.

greenback

As for Japan. Need to see JPY to break out first, not sure which way though:

greenback

Here is the update of the portfolio at the end of Fri after rebalancing:

cc2265

greenback

A crazy dip buying within 15min of Japanese market opening!
Very likely our breakout buy will be triggered today ...

hahaa

CT

greenback

Okay first order filled, second to come ...