Sails Up

↓€/AUD

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↓€/AUD

Capital flows look good:

  • According to the COT report, swap dealers are short the AUD
  • Hedge funds are short the AUD

Technicals are lining up:

  • Head & shoulders forming on the weekly chart
  • expecting CCI divergence on the weekly & daily charts

Downside:  DXY is expected to fall which will strengthen the €uro.

Also, China’s PPI is up, strengthening the AUD.  So, with all that, I entered an order at 1.585 with a normal stop.  Risking a full bell.

If the weekly chart plays out as expected I intend to hold this trade longer than my usual 1 week holding period.  Keeping a weather-eye on the DXY.

Update:  closed 2/3 of the position before the weekend then bulletproofed the chart.  Stop hunted on Monday; gain on trade was +25.6% of margin.

What To Do …And Not Do… In A Confused Market

What Is A Confused Market?

A confused market has several symptoms.  A confused market is more than just observed volatility.  It also ranges, has no clear trend, or no clear price action.  In a confused market, price may also get stuck between our traditional exponential moving averages (EMAs).  Think of someone spilling rum on your best nautical chart while you are preparing to get underway  …you can squint at it all day long but still won’t be able to make out the channels from the currents.

Observed volatility leads to expected volatility.  This is the thing investors may not like, financial salesmen do not like, but what the calm, patient trader needs to pay the bills. A  confused market has none of that.

In a confused market, patience is key.  Be patient, Stay up-to-date on fundamentals, update your risk model, calculate your probabilities, reconcile your accounts, wait for price action to cross the proverbial line in the sand, but do not make any hasty trades and gamble client accounts.

Remember, capital is one of the three key factors to economic prosperity and capital preservation is number one rule.

That all leads up to my recent trades –which have all been purely technical with a short holding period (and less than 2.5% gains).  I am currently holding a PLN and CHF long which will probably play out before Sydney opens.

The greatest challenge I face in a confused market is holding a trade for too long.  I use many off-chart market indicators that guide me on when to close a trade.  Those indicators are just not very accurate in a confused market.  Again  …p a t i e n c e.

A little bit goes a long way in times like these.

If you want to make sense of a confusing market, go visit the fine folks who taught me how to read a chart:  Infinite Prosperity, a Corp. Authorised Representative of Alpha Equities & Futures Ltd ABN 76131376415

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US: Federal Reserve FOMC Meeting Minutes

Economic Calendar: FOMC

The Federal Reserve’s Meeting Minutes

The Federal Open Market Committee (FOMC) always delays the issue of its meeting minutes. The minutes of the previous meeting are reported three weeks after the meeting.

Why The FOMC Meeting Minutes Are Important

The FOMC has changed dramatically in the transparency of its operations. It now discloses policy changes at the end of each meeting. Historically, the Fed used to keep investors and traders guessing about policy changes and Fed officials did not appear on the speaking circuit to set the tone of expectations as frequently as they currently do.

Since the Fed moved up the release of the minutes to three weeks after a meeting from six (in January, 2005), the minutes have become a market mover as analysts parse each word looking for clues to policy.

However, the minutes do include the complete economic analysis compiled by Fed officials and whether or not any FOMC members have dissented with the rest of The Committee.  These dissentions can be important in forming future expectations.

Investors who want a more detailed description of Fed opinions will generally read the minutes closely. However, the Fed discloses its official view at the end of each FOMC meeting with a public statement.

Fed officials make numerous speeches, which freely give their views to the public at large.  When they do this, watch out for extreme short-term volatility in the market

Generally,  I shore up trades when I see the economic calendar filling up with pirate meetings and wait for the storm to settle.

↓€/PLN

Weekly eur/pln market structure looks good, so I put in a foundation trade at 4.23 with a wide stop. After the weekly candle finished, I checked for CCI divergence & positioning on the COT report.

Today, CCI divergence is confirmed on the weekly & daily.  The CFTC reports that dealers increased their euro shorts & non-commercials are taking profit on euro long positions this week.

Initial foundation trade (4.23) is a 1/3 bell, but looking at the DXY, not sure when I will add to it.  So keeping a weather-eye on the DXY for now.

Update:  added a bit of outside leverage to the trade, held for a couple weeks and eventually scaled out on the 4-hour chart; closed at a total of +18% of margin.  this is an extremely volatile pair and my risk management model was definitely put to the test.

Sails Up

Long The Japanese Yen.

↓ CAD/¥

The global macro picture looks squared away: swap dealers are short CAD and long Yen; institutional managers are actively buying Yen contracts.  Bond activity indicates risk-off verifying ¥ long positioning.  Retail positioning is not optimal and BoJ numbers are due out this week so a wide stop.

The charts show good CCI Divergence on the daily and weekly.  Stop is set north of ¥92.  Position size is a full bell.

Update:  10/01, order triggered; 10/18, closed at +2.4% of margin;

 

↓ €/¥

Similar global macro factors with institutional managers  actively closing their euro shorts.  CCI divergence on the weekly; stop-loss is set above the weekly high.  A correlated trade so I will be trailing the stop on this pair if it triggers. Risk taken is a 2/3 bell.

Update: 10/01, order triggered;  10/18, stopped out, -1.94% loss on equity

Trader Error:  this trade was held too long, I was away from my laptop and missed the profit target on the morning of 10/16.

Sails Up

↓€/£

Sails are up on this short trade due to global macro and technical confluence.

Global Macro

On the macro side, the COT report shows swap dealers are stretched long the GBP-USD contract and institutional managers are actively taking profit on their euro long positions. Also, the economic calendar lists favorable winds for the big island pound. However, BoE pirate meeting ahead so I will be keeping a weather-eye and trailing stops.

Technicals

The weekly shows good CCI divergence and a pair of tweezer tops on the four-hour chart.  Order triggered on the second pair of tweezer tops.  Lot size is a full bell with a stopper knot set at .9241.

Order triggered at  0.9180

Update:  09/10/2017,  2/3 of trade bulletproofed at 0.9175 & 1/3 of position set to scale-out at 0.9127 –tracking the 4-hour, later trailed to 0.9095.

Update:  09/11/17, closed out 1/3 of position at 0.9095.  Managing remainder of position on the daily chart.

Update:  09/18/17, entire position closed; gain on trade +43% of margin

Antique Maps of the WorldCelestial MapAndres Celariusc 1708
circa 1708

Sails Up

↓ EUR/$

Good CCI divergence on the charts.  The economic calendar shows good numbers on the GBP.  I expect a DXY pullback.  However the economic calendar lists pirate activity this week so will keep my position size 33% of normal with a wide stop.

Update:  position open, currently below the 1.185 stop-loss

Position stopped out;  risk capped at -7.6% of equity

↓ EUR/NOK

Daily high-test and double top off the 50 ema.  I expect the GBP and USD to apply downward pressure on the Euro.  NOK is a commodity currency.  Position sizing will be halved due to correlation with EUR/$ short.

Update:  position open, currently below the 9.366 stop-loss

Position closed, 08-24-2017:  closed out on 200 ema bounce; gain on trade +23.1% of required margin.

↓AUD/¥

Update:  took a minor short on AUD/JPY at 87.3;  closed position early due to change in retail positioning; gain on trade +15.4% of required margin.

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