Friday, September 25, 2009

Is it really Friday?

First, a word cloud based on the text of the FOMC minutes from Wednesday. I hope you had a chance to read the lighthearted take on the minutes I posted a couple of posts ago. This word cloud tells me that their most frequently used words are federal, committee, economic, and markets. Why am I not surprised?

I’m still in the AUD/USD (currently at 78 pips) and USD/CHF (currently at 38 pips) trades from yesterday. The USD/JPY trade stopped out at 20 pips profit. GBP/JPY stopped out at a 40 pip loss and I’m currently short in this pair with my stop at breakeven. Since the AUD/USD and USD/CHF both have stops at a profit point and the GBP/JPY is at breakeven they are “free” trades. Traders love those things because once the stop is at or above breakeven you can't lose money or are profitable. But I’m in these trades thinking bigger things could happen. Whether they will or not is the question.

Today began looking like one of those days when the USD could continue to strengthen. Why? Equity futures are bidding down. Plus there’s lots of buzz and chatter out there about how the equity markets have seen their highs and a turning point is here. Of course some of those buzzing have been saying this for at least six weeks or so, some longer. Much in the area of market prediction is downright silly. That said, I do believe the market provides clues and markers for those alert to them. Seeing them requires awareness, something I’ll write about this weekend.

Ten days ago I did an Elliott wave count on the EUR/USD. I’ve updated it in the daily chart below. The trouble with Elliott Wave is that when you’re in a correction it’s difficult to reach agreement on what it is until after the fact. This makes it less than tradable in most cases. But I do believe it reflects a market psychology. I still believe we’re in wave C of a correction on the daily chart. Once the Euro reached past 1.4720 I put a sell order in at 1.4849. My thinking was that it would reach towards its September ’08 high of 1.4868. It climbed only to 1.4845 so it didn’t quite reach the order. Frankly, I’m a bit surprised. A sell order I put in place this morning at 1.4712 was just triggered. I’ll move my stop to breakeven (if possible—it can reverse quickly but it’s a tight stop so I won’t pay too stiff a price) as soon as it looks as though it’s going to continue down. I won’t be troubled if I’m taken out since there may be one last push up. In any case, the pair is looking a bit top heavy.

Besides that I went long the pound this morning at 1.5987. I don’t have time to include the chart right now but I have a tight stop on it.

None of the above are trade recommendations. Remember that trading involves substantial risk. My hope is that by posting this analysis on some of the trades I take, people can start to learn an approach for themselves. The biggest part of trading is handling emotions and this is something I'll be dealing with in future posts.

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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