Just another doomsday rant

China has been tanking hard lately.

This is quite obviously the product of a ludicrous monetary policy coupled with falsified information.  When you build houses of cards, they eventually collapse. China will continue to have a series of such collapses as long as they maintain the peg.

Surely the US will have its moment as well soon enough. Debt cannot be infinitely refinanced at these levels unless we find a larger pool of fools.

Patience, patience is key

Closed NZD/USD today 200+ pips in the money as it stretches further into oversold territory.  I'd like to see a little consolidation and look for opportunities to re-enter the trade as they present itself.  Rinse and repeat.

Still holding GBP/EUR short.  All other trades on hold, patience is key.

EUR/GBP, NZD/USD

My USD/JPY position poked up through the aforementioned stop in my last post but I didn't have any entry orders in to take advantage and re-open a sell order.  Since then its been oscillating a bit and I re-assert that USD/JPY in the short term is a sell above 124 with a key point of resistance being 124.5, so i'm sticking to my guns and selling at the upper ranges of the oscillation as opportunities permit. It should be noted that in the long term USD/JPY fundamentals remain bullish as the Japanese economic policy continues the attempt to stop an immovable object (deflation) with an unstoppable train (inflationary economic policy).

As far as open positions go, I'm holding short NZD/USD and EUR/GBP.  Both of these trades are fundamentally driven and i'm looking to hold them for the medium to long term. Current expectations aside, there is a very chilling reason why we can rest assured that being short NZD is a wise decision in the long run. It is not that we necessarily expect them to cut interest rates, it is merely that they can.  Their rate (3.25%) is much higher than any other major central banks', and very importantly more than 125 basis points higher than Australia's rate. New Zealand is without a doubt losing the currency war among major central banks and the pressure is increasingly on for them to get back in the race to the bottom. This has been the driver behind the current downtrend and I would expect it to continue until other major central banks begin to reverse policy and a balance returns to the force, so to speak.

Looking to sell EUR/CAD, holding short USD/JPY

I opened a short UY position a day ago just in time to catch koruda's early 6/10/15 remarks that sent it crashing.  Now 100 pips in the money i've moved my stop to lie in the money between the .382 and and .236 Fibonacci levels of the larger retracement from 125.8 down to 122.5, which incidentally lies between the 0.5 and 0.382 Fibonacci levels of the smaller retracement that began overnight.

One might ask: why would I put a stop in between resistance levels instead of just above resistance? Simply put, its a position I would re-enter if it reversed back up towards the upper resistance band. Strategically a good point to cut the losses on this position is where there is little resistance, somewhere in between pivot points and other heavy resistance levels, so that if I get stopped out it blows through the stop instead of meandering around it. I then can re-enter the position at a better level, essentially saving myself the difference between my stop and new entry position.

In other pairs, EUR/CAD looks technically and fundamentally like a sell right now, so i'm hoping for a small rebound to give me a good entry point, somewhere into the yellow area below:

FX thoughts

Settled all positions, its looking like a decent month.  For the coming week i'm looking to enter the following as opportunity permits:

NZD/USD: Short

EUR/USD: Short

USD/JPY: Short

AUD/NZD: Long

EUR/USD

Nice pull back from the euro into resistance around 1.109.  Looks like a good short term buy setup, i'll be eyeing in closely for the next few days...


Edit: Entered trade and quickly was forced to exit once the economic data blew through my stop!

Pressing passed pivot points I took a short postion in EUR/USD and a long position in GBP/JPY, both in the money by ~100 pips currently.

The Fundamentals of Technicals

I've often found myself questioning practical knowledge on what defines resistance and support in trading. Surely if there is formula for determination of technical levels then the market is more than beatable, and the few winners with the technical understanding stand to profit immensely. However the reality is that these winners can never continue profiting with the same formula week after week. What we call "technicals" is the ever changing science of figuring out the majority perception. In the end it is traders that move the market, fundamentally via supply and demand for an asset. Strong resistance and support levels are merely points at which a high volume of traders determine the asset is likely to reverse course. To complicate matters, what one knows of the market's perception changes one's own strategy for entering or exiting a trade.  This is to say that if the market perceives strong resistance at a level, say 1.002, most traders would opt to sell prior to 1.002 as opposed to exactly at 1.002.  This provides some cushion and leaves room to mitigate errors in judgement. In itself this drives the resistance level lower as more and more traders determine selling prior to 1.002 is the best course of action. It's a recursive, ever evolving loop that intrinsically muddles with any technical levels that are predictable and unchallenged.

Lay Low

Just closed EUR/USD postition for a moderate gain. My entry was well timed and and the pair may have even "over-corrected" in the short term. Thus I think its best to take profit and exit on the technical outlook and re-evaluate as it plays out in the next week.

Japanese Debt

I used to think numbers as high as quadrillion were made up merely for the sake of convention, since its nearly impossible to quantify anything at a non-microscopic level in the quadrillions...and lets face it, microscopic level quantities are better suited for expression in scientific notation.

Today we have a reason to use the term, because something quantifiable of importance has just surpassed 1 quadrillion: Japanese debt.  I use the word importance with a bit of sarcasm, because at this level the currency's demise is a foregone conclusion and an increase in the number of 0's is hardly important. The worst part is that the farce has life; this has not been and will not be a fast meltdown.  It's a smoked brisket, which can get infinitely more tender until someone decides that its time to take it off the grill.

That all being said I have no doubt I will be long USD/JPY again... although I feel no rush to enter the trade as this will be a long, dreadful, winding road which I am sure will present many opportunities along the way.

AUD/NZD

Going up!

After hovering around my price target most of yesterday AUD/NZD opened up with a screaming start today blowing through my target and continuing for another 100 pips. Economic data and a seeming reflation of commodity prices seems to be the culprit. With 0 open positions now I'll sit sidelined and peruse the next opportunity.

Edit: Expected rate cuts from RBNZ driving this thing, economic data just a catalyst. 

FX Update

My AUD/NZD long (entry at 1.008) is approaching my initial price target of 1.051.  While I can see this pair reaching for 1.08 in the coming months, I think it may be best to book some profit and re-evaluate short term before re-entering the trade.  

In equities...

Gazprom continues to be the best buy of the year: the Russian titan of a stock has been soaring since the media frenzy over Russian geopolitics mostly subsided over spring. I am long VIRT, because HFT futures  manipulation is a very profitable game and as long as the Navinder Sarao trial is ongoing I find it difficult to believe the crackdown will escalate; looking forward to the first earnings report.

I remain long a couple gold/metals stocks and miners, specifically NEM & NGD.  Both of which were beaten to a pulp going into 2015 but are showing signs of normalcy as of recent. I believe both of these remain outstanding value buys and as long as Jim Grant remains bullish, I too will remain bullish.

Happy tuesday.

Mostly Waiting

Last week I expressed an interest in getting involved in the massively oversold AUD/NZD pair.  I've kept my initial long position rather small for the time being as the pair is in a fairly distinct downtrend. As opportunities present I will add to the pair on negative news and technical resistance areas.  The ultimate goal is to build up a large position as cheaply as possible and look for a recovery of about 300 pips before taking profit.

That being said the majority of my equity is sitting on the sidelines, its a waiting game.

VIRT IPO

So we've got the VIRT IPO this week... and it makes a very entertaining prospect for my investment portfolio.


VIRT, or Virtu Financial, is "a leading technology-enabled market maker and liquidity provider to the global financial markets." who has had "only 1 unprofitable trading day in the last 6 years".  

Take minute to understand what it means to be a "technology-enabled market maker and liquidity provider".  They use high frequency trading to take small gains in arbitrage over millions of trades a day, a fundamentally neutral market strategy that, logically, allows them to turn very reliable and consistent profits. Where does that money come from? Me, you, and everyone else trading stocks and losing a penny when we hit the "market" trade button instead of "limit".... or when the market breaks during large news releases and liquidity dissapears..... or those times when markets ramp for seemingly no reason at open or close.  Yes, Virtu is a pro in these situations and takes advantage of anyone trading in an illiquid market with lighting speed.  Predatory and unethical? Ya I would say so, but man what a hell of a business.

If we can safely assume that this practice will stay legal for the next few years (not sure how safe this assumption is... if things really go south HFT will be largely under the gun) I think we are looking at a valuable prospect. Yes the risk is there because of the inherent sketchiness of the income source, but this company cannot lose until regulation steps in to stop them. So with that being said I think this is a strong buy for the short to mid term, adding it to my portfolio @ price: $22.29.

Come and Gone

I've won, i've lost.

That would be my sentiment after getting accidentally caught on the wrong side of the EUR/CHF a bit after my last post. I've had a lot of time to reflect on my risk aversion... the move that single handedly wiped out fx brokers also bankrupted my successful trading from 2014.

Regardless, i'm back in the game and always will be.

In identifying similar risks in the market today I think we don't need to look any further than the USD. Current USD sentiment is so incredibly bullish that it is difficult to imagine how it could be derailed. Of course we all know how it can be derailed.... but it will take a major reversal of the fed policy (or someone else to step up with some balls and give the whole austerity thing a try).

Regardless, this seems to be the most immediate black swan in sight. So without further excuses, my trades for the month are going to be:

Long AUD/NZD, technically and fundamentally a good setup, very oversold.

Short USD. Trade on hold until a setup presents itself, but it could be the trade of the year with the way it has positioned itself like a coiled spring.