I continue to believe that the Swiss National Bank’s action on January 15 opened a “release valve” of sorts inside the world of the global “dollar.” Prior to that day, heightened bearishness all throughout dollar-denominated credit dominated trading. That included funding markets, especially eurodollars. The eurodollar curve itself ignored almost everything else, including the FOMC switch to “patience” in December, running quite dramatically and contrarily to any idea of an end to ZIRP.
NFTRH 323 ends the year in the same fashion as we began, calmly portraying what is in play within the market’s swings, laying out probabilities and honestly interpreting what the bigger trends are, without bias or emotion. NFTRH 323, out now!
Check out a subscription to start the new year. It promises to be rewarding.
Guest Post by EWI
Forex vs. stocks: What’s “better” to trade?
As of 2013, the daily trading volume in foreign exchange was more than $5 TRILLION a day. EWI’s currencies expert, Jim Martens, discusses the pros and cons of trading forex vs. trading stocks.
Who is Jim Martens?
Jim is one of the very few forex Elliott wave instructors in the world, and a long-time editor of EWI’s forex-focused Currency Pro Service. A sought-after speaker, Jim has been successfully applying Elliott since the mid-1980s, including two years at the George Soros-affiliated hedge fund, Nexus Capital, Ltd.
Vadim Pokhlebkin: Jim, many readers of elliottwave.com tell us that they want to make money trading the markets. Would-be speculators have lots of options. Your area is forex — the market which has been growning by leaps and bounds. Can you explain why I’d want to look at forex and not, say, the more “traditional” stock trading?
Jim Martens: A few reasons are immediately obvious.
1. Liquidity. Currency markets are much larger than equity markets. By most estimates, the daily volume in forex is as much as 10 times larger than the combined volume of ALL of the world’s stock markets. That makes it a very liquid market.
Copper is bad and the XAD (a ‘commodity and resource’ currency) is worse. We have been following XAD’s test and loss of support in NFTRH for weeks. It is not a good sign for commodities.
XAD tried to bounce but the breakdown over the last couple of days dropped it to new lows. This is another chart that is similar to the HUI’s loss of the 375 neck line.
A Canadian subscriber requested a look at the ratio of CDW to USD due to a trip he is planning to the US. After doing the chart I thought I’d pop it up here as well.
Nominal Uncle Buck was in a clear Reverse Symmetrical Triangle from which it has turned down as expected. But I would say CDW-USD remains bearish pending the USD’s continuing correction as the intersection of the green and red dotted lines looks like a risk area, especially considering that it is in a confirmed downtrend.
What CDW-USD has going for it is a falling wedge, which can be watched as price gets to the 1.21 area. If it breaks the wedge, the commodity area and ‘inflation’ trade could get interesting. But right now, the CDW is in a downtrend vs. Uncle Buck.
While gold continues to offer no price protection (people who bought in say… 2003 or so might beg to differ ;-)) for weary casino refugees, it remains the value alternative to a gang of tramped out, played out and frankly, comical paper and digital notes issued by various governments.
These governments have been peddling little more than ‘trust’ since the macro play turned from productivity to a racket of ‘debt and confidence’ somewhere over the last couple or three decades.
For those who care, here is Uncle Buck’s latest status by daily chart.
A Reverse Symmetrical Triangle has formed, which is normally a reversal pattern, which would mean from up to down. But USD is at a strong support area and is over sold.
The weekly view shows Uncle Buck still on a bull signal by the cross of the EMA 10 (green) over the EMA 35. But the Euro broke out of a little topping pattern. Ultimate upside for the Euro is 142 if it remains bullish.
The rest of the motley crew is self-explanatory as shown on the chart. Per the chart breakout I bought the Yen via FXY on Monday’s hard pullback, which means I own something that is inverse to the speculative playground that stock bulls have enjoyed for too long now.
As for the commodity currencies of Australia and Canada, the chart says it all. Aussie especially must find support here or else.
Lots to talk about and talk about it we shall – in depth in the letter – and as the mood strikes out here. We are grinding out a change of character in the markets. I want you to remember the bull wise guys that were touting at the exact wrong time with their “it’s a new secular bull market!” and “it’s a GREAT ROTATION out of bonds and into stocks!” (well, they got it half right) bullshit.
Going forward, understand who the promoters are (incl. in the gold “community”) and who the ‘just want to get it right’ people are. These are difficult markets and anyone touting dogma or pretending to be a genius is going to get ground up. We are all subject to screw ups (my hand is raised) but it is a clear attitude and a willingness to admit you don’t know it all that will see you through the current environment where everything it seems, is in motion in a frenetic way.
US dollar analysis-turned-screed over.
(e) = external link
Short But Sour Michael Ashton 3.12.13
Fortress of Lies James Howard Kunstler 3.12.13
The Freedom of Money Bill Bonner 3.12.13
The US Economy: Afloat on Cheap Money Investment Contrarians 3.12.13
Gold Chart of the Week Brian Booth 3.12.13 (e)
Fantasyland for Policymakers Steve Saville 3.12.13 (pdf)
Gold & Silver Traders Reduce Long Positions Again GoldCore 3.12.13
Food Stamps Hit Record Alongside Record Dow Jones… Zero Hedge 3.12.13 (e)
Historical S&P 500 Sector Weightings B.I.G. 3.12.13 (e)
e = external link
Gross Monetary Irresponsibility Sean Corrigan 2.28.13
Trading a Random Number Generator Michael Ashton 2.28.13
The Persistence of Paper Currency Faith Greg Canavan 2.28.13
What Makes a Hero Bill Bonner 2.28.13
Singapore a Wise Owl Among Currency Snakes John Browne 2.28.13
Beward the March Effect on the Stock Market David Goodboy 2.28.13 e
2013 Global Stock Market Performance B.I.G. 2.28.13 e
European (and US?) Banker Bonuses Capped… Zero Hedge 2.28.13 e
Well at least things are getting interesting. We have managed risk in the precious metals and will continue to do that, but there will be opportunity arriving sooner or later in that sad state of affairs. More importantly, gold is de-risking against the global ‘RISK ON’ trade.
The stock market is coming due for an interim correction, but bears and gold bugs may not get the big turn for some months yet. At least that is what current analysis continues to indicate. It’s always subject to revision of course in dynamic markets being driven by hedgies, black boxes and various momo’s chasing trends.