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.
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.
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.
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.
This is currency war alright. This is a war by peddlers of paper currency the world over playing whack-a-mole against each other but most importantly, coordinating fire against a monetary anchor that has no role in this war except as refuge.
Ask why global CB’s are buying. Ask why developing nations are buying. Ask why Credit Suisse and Business Insider are putting out crap like this:
First off, this article does not make me furious. Quite the contrary, I am comforted to know that these are the arguments of a supposedly well-heeled bank and financial publication. Looking no further than chart one, it is not whether yields are going up or down (gold blew off with yields sky rocketing in 1980), but what long-term yields are doing vs. short-term yields. While the curve is not yet rising notably, it is constructive for bottoming and thus so is gold.
Exhibit 18 is a truism: “And so real rates have turned up again”. But if they continue to inflate to such point that the global economy actually does appear to gain a foothold, lagging ‘prices’ (see commodities) will rise and real rates will tank. If however, the economy remains stuck in the mud, this thing is going to fold in on itself into a deflationary liquidation of today’s excesses. So yes, gold could go down. But here we remember that gold is not about price, it is about value. It would retain value vs. other assets in a deflationary liquidation and it would do some catching up if the public becomes concerned about rising prices (the result of today’s bald faced inflationary policies) once again.
Let’s let it breathe for a few more months, however. Gold is subject to being flogged around over the near term.
The rest of the charts and conclusions look like garbage on balance, not standing up to even the most basic critical cross examination. But Business Insider is feeding some stuff to the public and they’ll lap it up.
Lee Quaintance and Paul Brodsky offer counter arguments to the above MSM silliness in their most recent report Locked & Loaded (pdf). You should read it.
Then there is MarketWatch, provider of so many side splitting headlines lately. I think they may have a new hire in the Headlines Department and this kid is a keeper. These things are just really funny and easily digested.
Ha ha ha… the old ‘gold benefits from geopolitical strife’ canard for the public to chew on.
After the public pile-drove into gold during the Euro crisis, it is almost as if the financial establishment got right to work on damage control and on mind control. The tin foil hat brigade feels it is coordinated, and surely it is. It is also desperate. But with the way the public has been coddled and tended by the massive financial services industry, they are probably well on their way to buying the story that says everything is under control. There is no further need for irrationally clinging to a hunk of metal that does nothing, pays no dividend and has no utility beyond jewelry.
‘Come back to us little public; invest with us in stocks and b… well, join the Great Rotation ™ out bonds and other safe havens and into stocks. We won’t #&$@ it up again dear little public. You can trust us.’ says the financial services Goliath and associated media.
Do you think this is bearish for gold? What was bearish for gold was that overly lustful global knee jerk into the metal. We’ll give it to or through spring just for the sake of sanity. But none of what you see today is bearish folks. That is the way the gold market works. We have seen this attempted mass mind control before and today is just the most intense phase yet. This is all just…