Posted by dentist 007 on November 17, 2009 at 8:33am
udn..the us dollar bear fund.some points to watchtriple-top breakout.scenarios are1.a continuation of uptrend.this ,we can pick this up easily2.retracement back into the consolidation zone,followed bya.a new break upwards.this formation is known as a catapult.buy on the break of 28.71.usually get a good breakout.must have rising lows for a decent break above resistanceb.a break downwards,below 28.23.lower highs for a decent break.lower highs will tell us if it is a good breakthe light blue zone is the pewk zone.can give no real directionplease let me know what you think15 min data points.this is the chart to watch...i think
Fundamental Outlook for US Dollar: Bullish
- Even the IMF pegs the US dollar as the top funding currency for a market hungry for yield
- A sharp jump in the trade deficit and drop in consumer confidence contradict an outlook for recovery
- The US dollar has held its low; but can the greenback finally reverse course or will it once again collapse?
The dollar was able to manage its most aggressive rally against its chief counterpart (the euro) in months this past week; but the move would not last. Without a scheduled or unscheduled event to dramatically alter the dollar’s status in the well-worn carry trade, risk appetite would ensure the currency would remain shackled to its eight-month old bearish trend channel. Looking out over the week to come, the most pressing question for any trader is determining if and when the greenback will finally catalyze its next trend. Some may argue that direction is the primary concern; but without momentum and follow through, the result is fundamental chop that leaves the market open to volatility while slowly building up the pressure behind the eventual breakout. So, is there potential for a clear, dollar trend in the week ahead?
While there are a few notable economic indicators scheduled for release over the coming days, the experienced fundamental trader knows there is a low probability that any one (or very likely all of data working in conjunction) could actually leverage such a meaningful change of trend. These indicators’ principal value is in establishing the forecasted pace of economic recovery and, to a lesser extent, offering minor adjustments to the Fed’s time frame for a return to a hawkish policy regime. However, those following the dollar know that the asset’s primary role is as the safe haven and funding currency for the broader market. Therefore, the analysis on this single currency’s future turns into an assessment of overall risk appetite through the global financial markets. Taking a more expansive look at sentiment, there seem to be few scheduled events or indicators that can spark fear or greed all on its own. In fact, the quality of the data is all-in-all relatively reserved. Somewhat counter-intuitively, these may be the ideal conditions to reestablish a true bias. Often times, when there is a major market-moving event due; price action leading up to its release is muted as traders do not want to leverage risk by increasing exposure. What’s more, if the news doesn’t fall far from forecasts or it otherwise doesn’t play into the larger market themes; a modest increase in volatility is all it can rouse. More often than not, it is those times when the docket is otherwise unencumbered that we see sentiment build momentum and define new trends.
Through the coming weeks and months there is little doubt that risk appetite will define the dollar’s future. However, eventually this negative correlation will eventually fade. To break from the all-consuming fundamental current, the greenback will need to shed its role of the market’s safe haven and funding currency (depending on whether optimism or pessimism is the primary temperament at any time). Altering this brand will be difficult; but a shift in interest rates (target and market) and/or the fiscal health of the US can do it. Currently, the benchmark market rate, the three-month Libor, is at a discount to its Japanese counterpart (history’s favored carry trade component) at 0.2725 percent. A major shift in capital flows into the US or an accelerated timeline for Fed rate hikes can change this. To increase the tepid probabilities of a near-term rate hike (there is a mere 5.7 percent chance for January 27th and only 44 percent probability for June 23rd according to Fed Fund futures), we will take note of the week’s economic offerings. Retail sales will serve as a barometer for consumer spending (accounting for approximately three-quarters of GDP) and the October CPI numbers will reveal whether there is any merit to hawkish concerns through fears of looming inflation.
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I recently heard a story about a Texas hold'em poker player trying to reconcile the apparent contradiction between his Christian faith, which opposes gambling, and his desire to be a professional card player. With a bit of humility, he explained, When I sit down at that table, Jesus tells me, 'Son, you're on your own'.
As a Christian, my role as a steward of God's resources gives me pause about gambling. And as a trading coach, I continue to receive phone calls and emails from suffering traders who equate their trading with gambling. They ask me, Bill, do you think it's because God is against trading that I'm continually losing money? Does the Bible forbid trading?
Generally speaking, gambling is the hope that you will win a wager in a game of chance where the likelihood of profit is not better than 50%. Trading, on the other hand, is the diligent application of knowledge, wisdom, patience and self control in the execution of transactions such that the likelihood of consistent profits, with proper money management, is at least 75% (some go a bit lower).
Are there traders who trade like gamblers? Absolutely! These are the folks who call me and want to blame their trading losses on God's wrath instead of on their own inability or unwillingness to exercise disciple. They associate trading with gambling because they trade like gamblers.
Are there gamblers who gamble like traders? You bet (pun intended). Let me give you an example:
My father is an exceptional Texas hold'em poker player. This is the incredibly popular card game where a player can bet all of his chips using the now well known phrase, I'm all in and my Dad's success at the game can be attributed to three things:
(1) a clear plan of action,
(2) an ability to wait patiently for the right cards and
(3) the knowledge of how to maximize the opportunity that those cards present.
A clear plan of action
When my Dad plays Texas hold'em at the local riverboat casino, he treats it like a business. He goes with a predetermined amount of money in his pocket. He has a specific goal: to double his money. As soon as he does this, he immediately leaves, even if it's within the first 30 minutes. If he losses his bankroll, he leaves. If he is there for 7 hours and has not doubled his money or lost his bankroll, he doesn't hit the local ATM. He just leaves.
An ability to wait for the right cards
My Dad will sometimes throw away 10 or more hands in a row before playing a hand. He will wait and wait until the right cards come along. The other card players at the table are eager to gamble. They are there for the action. My Dad knows this. He knows they will play lesser quality hands because they want to play, not sit around and wait. Therefore, by patiently waiting for the right cards, the chances for success are skewed in my Dad's favor.
The knowledge of how to maximize the opportunity
You would think that when the other players at a table see my Dad bet a hand after throwing away ten hands, they would be scared off. Hardly. Remember, virtually everyone else at the table is there to gamble, not run a side business like my Dad. Once my Dad gets a hand he wants to play, he employs a betting strategy to maximize the profit potential of his hand. I am not endorsing gambling, nor do I necessarily approve of my Dad's card playing. But the reality is, my Dad is more responsible as a gambler than most traders are as traders. This description of how my Dad plays Texas hold'em sounds more like how successful traders trade than how gamblers gamble.
Examples of trading found in the Bible
The Bible references many nuances of trading that we are familiar with. For example, in both the Old and New Testaments we find that the Bible describes centralized trading locations, trading of proprietary accounts, and trading of specific commodities. A good illustration to help us answer the question, Does God oppose trading? comes from the Parable of the Ten Minas found in the New Testament book of Luke, which deals with the concept of proprietary accounts. Jesus used parables to deliver Kingdom principles using earthly illustrations. Jesus used earthly subject matter that the crowds were familiar with. This only makes sense. If Jesus chose an earthly subject matter that the people were unfamiliar with, He would be stuck having to explain both sides of the parable.
Trading of proprietary accounts
Several traders that I traded with on the floor of the Chicago Mercantile Exchange had financial backers. In return for financial backing, these traders gave up 50% or more of their trading profits, but could receive a bonus at the end of the year based on their performance. The accounts were generically called proprietary, or prop accounts. Many Wall Street traders trade the capital of large banks. These, too, are commonly referred to as proprietary accounts. These traders often receive an annual salary and a bonus at the end of the year base upon their performance.
The Parable of the Ten Minas paints a remarkably similar picture. In Luke 19:12 13 (NIV) we read, He [Jesus] said, ‘A man of noble birth went into a distant country to have himself appointed king and then to return. So he called ten of his servants and gave them ten minas. The king tells them, Buy and sell with these while I go and return (Amplified). When the king returned he called for the servants in order to find out what they had gained with it (verse 15). The first one came forth and said, ‘Sir, your mina has earned ten more'. This servant was commended for his work and put in charge of 10 cities. The second came and said, ‘Sir, your mina has earned five more'. This servant was commended for his work as well and put in charge of five cities. Just like today's proprietary account traders, both the first and the second servant received a bonus based upon their trading performance. Let's be clear, this is not a parable teaching us that we should all be traders. For the purposes of our discussion, I am highlighting the fact that:
(1) these servants were told to actively buy and sell to generate profits and
(2) that the trading of what we now call proprietary accounts was understood by those Jesus was speaking to. Jesus felt that the crowd understood the concept of people trading other peoples' money well enough to use it as the subject matter of his allegory.
Are you called to trade?
So does the Bible oppose trading? I can't come to that conclusion given all that the Bible has to say about trading. But the Apostle Paul points us to an even more important question. In Romans 14:14, the Apostle Paul is addressing the debate about particular foods being clean and unclean. He says, As one who is in the Lord Jesus, I am fully convinced that no food is unclean in itself. But if anyone regards something as unclean, then for him it is unclean. Are you fully convinced that God does not oppose trading? Do you regard trading as unclean ? Do you have hesitations in your spirit about the matter? Blessed is the man who does not condemn himself by what he approves. But the man who has doubts is condemned if he eats, because his eating is not from faith; and everything that does not come from faith is sin (Romans 14:22 23, NIV).
The question you need to ask is, Is it settled in my heart that God has released me to be a trader? If you doubt but still trade, you are not trading from a position of faith, and without faith it is impossible to please God (Hebrews 11:6).
If you are unsure if God has released you to trade, take some time to settle the matter with God. When you sit down to trade, you don't want to hear, Son, you're on your own. Better that you should hear, Well done good and faithful servant.
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The U.S. Dollar index has broken down again after the Fed Chairman Ben Bernanke's speech. The DXY is now at new lows for the day and for the year. The market obviously does not believe the Treasury or the Federal Reserve Banks's tough talk on a strong dollar policy.
The U.S. dollar rallied against the euro rallied on the heels of Ben Bernanke's comments as the Fed Chairman pledges to use Fed policy to "ensure that the dollar is strong." He indicated that the central bank will monitor the dollar closely which implies that other nations may be pressuring the U.S. government to stop the dollar from falling. Coming on the heels of President Obama's trip to Asia, the timing of the Federal Reserve's support for the dollar suggests that this may be move to reassure their Asian partners. Consider this verbal intervention by the Obama Administration, which is one of the few things that could actually lead to a more significant rally in the U.S. dollar. We have previously said that the only thing that could stop the dollar from falling would be coordinated verbal intervention by G20 nations but now the Fed is preempting that by throwing their support behind the greenback.
Also, talk about currencies is typically relegated to the Treasury Secretary and therefore traders should be particularly worried by the fact that these comments are coming from the mouth of a central banker. There is a good chance that Bernanke ran these comments by Obama and Geithner and so this should represent the Administration's official support for the dollar. If it was up to the Federal Reserve, they would probably prefer to see further dollar weakness as it was only last week that we heard a Fed President say that the move in the dollar is not disorderly.
However Bernanke's comments on the economy do not support a recovery in the dollar and may be part of the reason why the dollar has not strengthened against all of the major currencies. The Fed Chairman's tone was relatively pessimistic. He sees headwinds and believes that future setbacks are possible. According to Bernanke, unemployment is much too high, credit is constrained and demand has fallen significantly. Economic activity remains weak and significant economic challenges remain but moderate economic growth is still expected for next year. Based upon Bernanke's tone, the central bank has more reasons to keep monetary stimulus in place for as long as they can. Therefore from an interest rate perspective, the dollar carry trade should remain in place. Yet, the U.S. government is trying to trigger some two-way action in the dollar by suggesting that they could take measures to stem the currency's decline but we believe that these are nothing more than open threats. Therefore the relief rally in the dollar may be temporary.
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NEW YORK (MarketWatch) -- The U.S. economy still faces considerable challenges, but the most likely outcome is moderate economic growth with subdued inflation, Federal Reserve Chairman Ben Bernanke said Monday.
"I expect moderate economic growth to continue next year," Bernanke said in remarks prepared for delivery to the Economic Club of New York. "Final demand shows signs of strengthening, supported by the broad improvement in financial conditions."
However, "significant economic challenges remain," the head of the central bank said. "The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible."
Unfortunately, economic growth probably won't be strong enough to significantly reduce the unemployment rate. A jobless recovery is possible, at least at the beginning.
The outlook for inflation is similarly mixed, he said. "Inflation seems likely to remain subdued for some time," he said, despite the recent increases in commodity prices.
In a departure from normal practice that no official except the Treasury secretary comment on the dollar, Bernanke said the Fed is committed to a strong dollar. "We are attentive to the implications of changes in the value of the dollar," he said, adding that Fed policy would "help ensure that the dollar is strong and a source of global financial stability
Bernanke's remarks on the economy were more detailed than recent statements by the policy-setting Federal Open Market Committee, but were similar in nature.
He repeated that the FOMC anticipates that "exceptionally low" interest rates are likely to persist for "an extended period." But he cautioned that the FOMC's forecast is only a forecast, and that "significant changes in economic conditions or the economic outlook would change the outlook for policy as well."
Bernanke's tone was cautiously upbeat. He recognized that some analysts see the recent improvement in U.S. growth as being mostly the result of temporary factors -- such as the boost from inventory reduction or the stimulus from the government's "cash-for-clunkers" program -- that will leave the economy gasping.
"My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely," Bernanke said. Growth reflects some fundamental improvements in consumer spending, home building, credit conditions and export markets, he said.
Two major factors will temper growth in the next year, he said: constrained bank lending and the weak job market.
The extraordinary actions taken last year by the Fed and other central banks "were instrumental in bring our financial system and economy back from the brink," he said.
Big firms and those with access to equity and other highly liquid markets have access to credit, but small companies and households that rely on bank lending are still facing a credit squeeze.
"Reduced bank lending may well slow the recovery by damping consumer spending, especially on durable goods, and by restricting the ability of some firms to finance their operations," he said. In addition, "limited credit could hinder job growth."
Businesses remain very cautious. They cut even more jobs than would be expected from the large decline in output, he said. Once demand begins to strengthen, companies will increase the hours of their current staff before hiring new workers, he predicted.
"Jobs are likely to remain scarce for some time, keeping households cautious about spending," Bernanke said. Payrolls should begin to grow again, as demand rises and companies increasingly find their work force stretched too thin to meet their customers' needs.
But with 100,000 new jobs needed each month just to absorb population growth, "the unemployment rate likely will decline only slowly if economic growth remains moderate, as I expect."
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Wall Street posted a largely successful week leveraged off the persistent declines in the dollar, as market averages climbed to records despite some unevenness in the trends, but the durability of the advance figured to face a stiff challenge next week:
Ben Bernanke, the dollar’s chief pallbearer and the source of easy money, is slated to talk economy at the start of the week.
His comments certainly don’t have to be any kind of gamebreaker, not by any means. One of the reasons that Bernanke and his colleagues on the Federal Reserve have been so insistent about talking down rates, which has been the locus of pressure on the U.S. currency, has been their concern about the fragility of the economic recovery.
Even though some skeptics have been campaigning to learn when the Fed planned to lift rates off their record lows, and start to mop up some of the liquidity that’s slopped around the U.S. economy, Bernanke has maintained his dubiousness about saying anything that could be interpreted as an intention to back off cheap rates, or raise any worry about even a whiff of inflation.
Meanwhile, heading into the final stretch of the earnings season, the results turned in by corporate America remained stalwart, at least relative to expectations. The measure of outperformance versus the estimates that analysts had been anticipating is likely to go down as the healthiest since anybody started keeping records of such measures more than 15 years ago.
A big measure of the outperformance has come from the companies that generate half or more of their sales from international customers. With the weak dollar helping stoke the appetite for those American products around the globe, many companies have been able to make up for the slow-to-recover domestic demand on the part of tapped-out or unemployment U.S. consumers.
More data about the state of both the state of trade and the sentiment of the consumer cropped up Friday. The trade deficit widened more than had been expected in September, according to the government, as imports of energy products more than offset any bulge in exports. Meanwhile, consumer confidence slumped badly in the first reading for November.
However, the data didn’t provide an obstacle for the bulls in the session, as the Dow Jones Industrial Average (DJI) closed 73 points higher, wiping out most of the ground lost in Thursday’s 93-point setback, to finish at 10270, just off the record reached with Wednesday’s close. The Dow posted gains in seven of the last eight trading sessions.
Among the winners: stocks that put up constructive earnings statements, including Walt Disney (DIS), which gained 5%, Abercrombie & Fitch (ANF), which jumped 11% and reached a high for the year, and J.C. Penney (JCP), ahead 4%.
The campaign of earnings releases slows measurably next week - just a smattering of companies remain, mostly retailers, including Home Depot (HD) and Target (TGT). That could prove to be a headwind for the bulls, as the conclusion of the earnings-release season has, in the two preceding turns, seen the market slip into a modest correction.
The course of the dollar, though, has played an increasingly important role as gatekeeper lately, and may be the ultimate determinant of just how stocks fare over the next several weeks.
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Weaker than expected US Oct retail sales fail to dampen risk appetite as markets expect Bernankes speech (17:30 GMT) to once again prove negative for the greenback confirming the Feds broadening shift to dovishness (similar to this months FOMC statement and most recent FOMC speeches). Gold surges to 1134. As the Dow tests above the key 10,345 level and S&P attempts to stay above 1,100, USD weakness deepens across the board. GBPUSD still struggles to regain $1.6750s, a break of which to recall $1.6760. Oil regains $78.30, eyeing the 21-day MA of $78.94. USDCAD eyes 1.0380 support, while CADJPY and EURJPY seen retesting last weeks 86.00 and 134.30.
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Weakness beneath the headlines is the story behind this morning's U.S. economic reports and the reason why the dollar is not responding to the pick up in consumer spending. Retail sales increased 1.4 percent in the month of October, but excluding autos, sales grew by only 0.2 percent, half the pace of the previous month. Car purchases single handedly drove up spending. Even though Americans ate out more and bought clothing and general merchandise, the increase in discretionary spending was modest. Instead, we saw a large drop in spending on building materials, electronics, sporting goods and furniture. The September data was also revised down materially (from -1.5 to -2.3 percent for advance retail sales) and discounts the optimism in the headline release.
The good thing is that spending is increasing and not decreasing but besides that, the guts of the report are weak. The stronger results reported by individual clothing retailers earlier this month appears to be reflected in the headline release, but the details suggest the sector as a whole is still suffering. Looking ahead the big question is whether consumers will deliver during the last 2 months of the year. Retailers started to promote holiday shopping before Halloween and every year they seem to be sending out their holiday brochures earlier and earlier. If it was up to retailers, we would be celebrating Christmas in the beginning of November. Given the sentiment in America and the forecasts by retailers, we do not believe that consumers will come through over the next 6 weeks.
The Empire State Manufacturing Survey also fell short of expectations with the index falling from its 5 year high of 34.57 to 23.51. As one of the first manufacturing sector releases for November, it certainly paints an ugly picture. However unlike the retail sales report, the underlying components of the manufacturing sector survey provide some relief. Half of the components are still in positive territory and most importantly, the outlook component increased from 55.69 to 57 which means that manufacturers in the NY region believe that business conditions will still improve 6 months from now.
The outcome retail sales report and the Empire State Manufacturing Survey weigh on the dollar today, but keep an eye out of Fed Chairman Ben Bernanke's speech which could trigger additional volatility in the U.S. dollar.
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There was no surprise that APEC and China played failed to agree with US demands of revaluing the Chinese yuan. FX markets interpreted the news as a continuation of the status quo and more dollar weakness. US Oct retail sales due at 13:30 expected +1.0% from -1.5% and ex autos seen +0.4% from +0.5%. A return to positive territory would further boost selling of USD and JPY, but GBPUSD remains capped at $1.6740s and EURUSD still unable to regain $1.50. Keep a close watch on oil prices for the general stance in the USD, as the fuel eyes a possible recovery towards the 21-day MA of 78.94. The case of LOWER HIGHS has been an integral part of oils prci patterns over the 8 trading sessions as well as the 4 weeks. EURGBP proves once again to hold above 0.8900, now eyeing 0.8990,
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