A little more than a dozen points, that is how much the cash S&P500 index fluctuated so far this week. It is stuck right in the zone that we marked as “potential resistance” last week. The lengthy lull is a pause, when the entire market waits for a breakout to show direction at the top … SPX Hiatus – Waiting for a Short Term Top
It’s not much, but it’s a start. That about sums up the ongoing counter trend rally in many USD pairs (EUR, GBP, AUD, NZD, CAD and CHF). We still believe that the longer term trend for the dollar is up, but a “reset” is needed to balance the market prior to the next bull wave. … Non-dollar Pairs Attempt to Lift
Radio Shack, the Partridge Family and God – All in Bankruptcy Court
Yes, it’s true…sort of: Radio Shack’s 95-year run has come to an end, David Cassidy of Partridge Family fame has filed BK (not the whole family) and while God isn’t in bankruptcy, one of God’s booksellers, Family Christian LLC, is.
We’ve been writing about the Junk Bond Bubble for some time now. In case you haven’t read our previous work, or seen The Wolf’s thousands of tweets about junk bonds, here’s the synopsis.
Central banks have left rates at 0% for so long, that the traditional discounting mechanisms used in finance have been turned on their heads. All of this monetary expansion is in an effort to combat over capacity (there’s too many burger shops, nail salons and auto dealers for the underlying economy to support) and over-indebtedness (people, corporations and governments).
Junk bond yields look attractive to investors at 6.5% today, when that was what 10-year Treasuries offered in 2007. So, companies have borrowed to the hilt in an attempt to make a buck for themselves. Unfortunately, when the economy slows even a little, coupon payments get missed and defaults start to happen. Follow along on our Junk Bond Bubble Dosimeter.
We often hear objections like, “It’s too complex,” or “It takes too much effort” with regard to Elliott’s wave theory. But, anything worthwhile usually takes effort, and is complex, and those that endure the learning process to undertake such endeavors are generally rewarded. We use Elliott because it is effective at classifying market moves, but … SPY (SPX) lines in play
You’ll notice a different look with this week’s “Wolf’s Prey” Elliott wave currency forecasts. As we get closer to publishing more than once per week, we’ve moved to the shorter 240-minute charts as our default time frame, which is ideal for The Wolf’s swing trading style. We’ll still publish our longer term charts from time-to-time … A Chink in the USD’s Armour
Many longer term investors, and traders, believe the stock market is unstoppable to the upside. And, over the past two years or so, they’ve been right. But, we have not seen resistance hold back bulls this firm for quite a long time. We can almost sense the lack of confidence in every bullish breakout attempt … Will the S&P top? How and When?
Despite the accepted mantra of central bankers and politicians everywhere, a weak currency doesn’t necessarily mean a country’s trade balance will improve. We’re seeing that first hand in Japan, for instance, where importers are declaring bankruptcy at a rapid rate, and the Japanese economy is suffering – even if a few exporters benefit.
Now, take the example of Turkish President Erdogan, who is complaining almost daily that interest rates aren’t low enough. According to our contacts, and analysis, rates in Turkey actually need to go up, not down. The fact that Turkey has the worst current account deficit/GDP doesn’t argue for lower rates, as we pointed out in Currency or Debt Crisis in Turkey.
But, instead of complaining about the economic illiteracy of Erdogan, we’ll simply say thank you. Because, our bearish lira bets are paying off handsomely.
Markets are constantly changing. Currencies in particular move from a “trending” status, to one of “ranging” status quite often. Recall 2013, when with the exception of the yen and Aussie, currency market volatility was extremely low, and it paid to buy dips and sell rallies, as markets made little net progress. That changed in 2014 … US Dollar Trend is Unanimous
Oversold and overbought are two technical analysis words that I’d like to ban! The phrases seem to suggest that a stock, currency or futures contract really should not decline, or advance, anymore. In an overextend wave, however, we should not attempt to expect anything rational from the highly emotional driven price trend. Wave extensions are … Oversold, Another Word for Downtrend
First, and foremost, we’re traders here at Trader Skillset. We don’t need stories, or narratives, about our trades – we use technical analysis. But, sometimes, if you get stories that back up your analysis, your conviction on a trade may lead to larger wins. Such as in USDCAD. We mentioned our USDCAD target of 1.1985 … Canadian Bankruptcies Begin, Not Only in Energy
On the back of Mario Draghi’s quantitative easing announcement, and a Canadian rate cut, the US dollar has become ever more popular, and the trend has become euphoric. A counter trend move is due, although it’s difficult to want to fight the trend without clear cut reversals. Wait for them to show up first. We … Dollar’s Run Turns Climactic
Tomorrow comes the most anticipated announcement from the ECB since Mario Draghi’s notorious, “Whatever it takes” monologue. Many are spending time attempting to guess at a “proper” level of QE, and what more or less than that “proper” number will mean for the euro, S&P 500 and every other asset. To me, it just doesn’t matter what the ECB does.
Right now, the EURUSD sits a full 250 pips away from its 20-day moving average, which means a snap-back rally is due. At the same time, we have yet to see an impulsive rally from the low, so the trend remains down. How about instead, we focus our attention on something actionable, rather than something ambiguous?!!!
How about the very clear three wave decline in USDTRY for instance.
Our previous mentions of the potential currency or debt crisis, the recent lowering of interest rates and our tweets regarding the pair all reinforce our objective up towards 2.80. Rather than take a guess on the ECB and how the market will react, take a setup that has Context, Momentum and a Signal already present.
Markets. The place for surprises beyond imagination. Anomalies, panics, hysterias, chaos, manias and other extremes that are almost inconceivable. They happen just because humans think that they are in control, or take something for granted, and they lull into a false sense of security. Illusion of control that is. They think that the probability of … Why I Love To Day Trade
What a week in currency land. The biggest story, of course, was the Swiss National Bank’s (SNB) realization that it’s not more powerful than the market. By removing the artificial peg versus the euro, it allowed the franc to strengthen, essentially admitting its mistake in creating the peg in the first place. Two items are … Swiss National Bank Cries Uncle
We’ve been talking for a while now about looking for evidence of a turn in the US dollar. Friday’s action was almost uniformly bearish for the buck. The NZDUSD in particular, along with the Aussie, appear to be bottoming according to our Elliott wave currency forecast. There’s still room for a final Elliott wave move … Dollar’s Rally Stalls
What is this bearish streak of five bars in the S&P500 and other US indexes? Is this just a correction or a new global financial meltdown? Some multi-timeframe momentum analysis might come handy in the understanding the nature and scale of the wave, which is how we arrive at our conclusion. “When a time frame produces … The S&P Momentum and the Ugly Bear Bars
Here are some long term charts that we feel will be a source of trading opportunities in 2015. It’s not a license to trade them blindly with no risk controls, but we do like these ideas. This piece is meant to highlight some technical, and fundamental, concepts we’ll focus on when looking for actual trades this year. We will apply … Four Ideas for 2015
Welcome to 2015. We’re going to provide our long-term, monthly Elliott wave counts along with our shorter term counts to start off the year. This will provide some perspective for some of the counter trend rallies being called for. In addition, we’re going to discuss the difference between analysis and trading. Last week we wrote: … Monthly Charts for Perspective, Daily Charts for Trading
Do your New Year’s resolutions include making more money? Possibly by improving your trading performance, or, perhaps, to transition your career towards trading? Good idea. The best advice we can give you to achieve those goals is to discover an “edge” in seven key areas. You might find these edges in a book, membership service, seminar or training course. Or you might not. You should be looking for an advantage, in the following areas, otherwise the system you follow is, quite frankly, inadequate…
There’s still no evidence the larger US dollar rally is complete, although we do see that in NZDUSD. We’re not going to ignore reversals, although maybe the market is waiting for the calendar to turn 2015 prior to that. Right now, the meme is “the world is weak, the US is strong,” economically, and the dollar … Dollar Extends Gains as “Levitation” Continues
While none of these firms were large enough to hit our Junk Bond Bubble Dosimeter, they are nonetheless endemic of the reason we created it.
The Fed’s irresponsible monetary policy (six years of 0%) and a $4 trillion balance sheet, have sent false signals to business people, who created and expanded businesses, which means there’s now too much capacity in place. Much of that capacity has come to be on the back of loans which won’t be fully repaid should the economy slow. We’ll continue to update the Dosimeter, so check back often.
On Christmas Eve, we here at Trader Skillset wish you and yours a Happy Holiday Season, and we have some big things in store for 2015.
The US dollar rally is becoming a bit of a cliché, in part due to the Russian ruble’s collapse to start the week. However, by week’s end the Central Bank of Russia raised overnight interest rates from 10.5% to 17%, making it awfully expensive to bet against. Vladimir Putin told citizens to expect up to a 2-year … Running Flats Abound, Create Clear Wave Counts
I just completed the 10K Christmas Run in Santa Monica, CA last weekend. My personal ambition is to fight my way back into competitive (age group) running; but, in addition to fitness, this activity also serves me in another way as a trader. To be honest, I was not always aware how much exercising might be an important performance … How to Cope With Trader’s Stress
The week isn’t quite complete, but The Wolf will be traveling again this weekend, so this week’s Wolf’s Prey comes slightly prior to Friday’s close. EURUSD Prices saw a substantial bounce from the .618 expansion target from the wave (iv) correction. This is consistent action with our idea of a Terminal Set Up and larger corrective bounce … Signs of US Dollar Weakness
Six years of the Federal Reserve’s zero percent interest rate policy (ZIRP) has created a bubble in junk bonds. Investors can’t beat inflation in safe assets any longer, so some of that money has poured into junk bonds and floating rate notes. Those inflows pushed more, and more, money into businesses of marginal quality. Should … Junk Bond Bubble Dosimeter
Update: High yield bonds at new lows! We are on record suggesting that the Federal Reserve’s reckless 0% interest rate for the last six years has created a bubble in junk bonds:
Now, we’re about to see the defaults start coming from the energy sector, due to the collapse in oil prices as written about in a recent article from Bloomberg. According to Dealogic and Lawrence McDonald, author of A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, oil and gas exploration companies issued $70 billion in junk bonds in 2014 alone.
So, is it any surprise that the junk bond ETF JNK hit a 52-week low today?
Just like subprime imploded in late ’06/early ’07, and the S&P continued to party on, were seeing stocks do the same today. But, even a few defaults could cause a cascade of liquidations which will have follow on effects. It’s time to exit junk and up your quality, if you haven’t already.
The US dollar pushed to new highs versus most major pairs on Friday, leaving a lasting top elusive. It seems people are of the belief that the economy is improving in the US, and so rate hikes can’t be far off, and maybe they aren’t. Of course, according to the Federal Reserve, the economy isn’t … Dollar Rally “Topping Process” Continues
It can be worthwhile to step away from markets for a time as a way to refresh the mind, and come back with an objective viewpoint. The Wolf is on vacation, but thought a quick comment on the EURUSD was worth making. We’ve been talking about looking for a bottom in EURUSD, but the bounce from … Elliott Wave Currency Review
We set price targets because they are one of the three essential variables of a setup; target (reward), point of ruin (risk) and probability. We do the math to make sure that the price level we choose as target is attainable with a probability that’s high enough. We also check whether the entry levels provide enough of a ride … The “Point of Profit” Reference
“…the problems in the subprime market seems likely to be contained.” Ben Bernanke March 28, 2007 “Bear Stearns is fine.” Jim Cramer Tuesday March 11, 2008 (Four days before its insolvency) “…the likelihood of a severe financial panic has diminished…” Janet Yellen April 29, 2008 (Global Financial Crisis was well underway.) In late November 2006 … Junk Debt & Auto Loans Reminiscent of Subprime in ’07
Most articles that are about S&P 500 forecasts will start with that upfront. But, we’re different here at Trader Skillset, because we want to share the thought process, in addition to the forecast. It’s the equivalent of “teaching one to fish” rather than “providing a free meal.” So, we’re going to bury the lede, and … A Nasty Grind – S&P500 Update
We are now seeing US dollar strength wane, and in some cases, reverse. Individual pair analysis now becomes more important than simply saying “the dollar will strengthen.” The dollar seems likely to weaken further versus NZD and AUD, so as we pointed out a few weeks ago, the “China slowing” meme is being reversed (see AUDUSD … US Dollar Rally Fractures
Before boarding a recent flight to Amsterdam, I grabbed the October 24-26 weekend edition of The Wall Street Journal (WSJ). Reading the news is quite out of the ordinary for me, a full time trader who relies almost exclusively on price action. The only reason I got my hands on the paper was solely to … Price is the Ultimate Source, WSJ is entertainment
The US dollar has strengthened, pushing into new highs for the move, new lows for EURUSD. Friday’s reversal action shouldn’t be ignored though, since we’re looking for the largest countertrend rally to develop since the summer’s rally in USD began. Recall a couple of weeks ago, when we highlighted the “USD rally just beginning argument.” In … Dollar Reaches Targets, Reverses
A market analyst is a bit like a detective. In order for a homicide detective to make an arrest, he needs a body, a murder weapon, motive, physical and testimonial evidence. Just like a detective, making market forecasts is all about building a solid case based on multiple types of evidence. Trader Skillset uses Elliott wave analysis as our primary … Sherlock Holmes the Great Trader
Our post FOMC update mid-week shined a light on our thinking, and not much has changed. Look for strength in the USD to complete impulse waves over the next couple of weeks in some of our major pairs. Sentiment should reach extremes, as is the case AFTER extended moves have already been seen. Don’t fall … USD Strength Part of a Terminal Set Up?
Today’s expected announcement, that the Federal Reserve thinks the US economy is in good enough shape to allow Quantitative Easing (QE) to come to an end, has many calling for extended USD gains. And, while we do indeed expect some near term gains, we think many newfound US dollar bulls are likely to be disappointed … FOMC Ends QE3, and That’s Bearish for USD?
Recall a couple of weeks ago when a mainstream business news reporter and a “famous” newsletter writer proclaimed, “The beginning of the USD bull market.” We mentioned at the time that it was ironic that someone could state that a bull market was “beginning,” considering the USD had been up for 12 weeks in a row (The “beginning” … Dollar Strength Will Complete Impulse
Every trader might have a different answer based on their personality and process, but we do see many common traits. Many might think that it’s an ability to analyze a chart, and while that skill is important, it might only be 10-20% of the answer. Today, we will share our evaluation checklist that defines the areas where successful traders get the edge day-by-day, setup-after-setup.
Clearly corrective action has developed in both USDCHF and last week’s favorite USDCAD. Other pairs suggest dollar strength ahead too, but some of that may be “terminal action.” USDCHF and USDCAD remain our favorite major pairs; could the Swiss National Bank (SNB’s foolish EUR/CHF floor) and oil price weakness (leading to USDCAD strength) come into traders’ focus coming up? USDCHF … USDCHF at Support, SNB Foolishness Ahead?
In Part I of “Trading the Google earnings report” we covered Step 1, the short term overall market picture by analyzing the Nasdaq 100 index chart. We still have 3 more steps to discuss, but before that, a catch up on Wednesday’s trading session. The strong reversal of the last two hours of trading is … Trading the Google Earnings Report – Part II
Last week we pointed out that sentiment, and our counts, suggested a pause in the 12-week-in-a-row dollar rally. Specifically, we wrote, “there might be some further follow through to the upside early next week, but I’d bet against the US Dollar Index closing out the week with another gain.” That’s not to say we’re now dollar … US Dollar Breaks 12-Week Rally
The Wolf met with a very well respected team of London-based emerging market debt/currency managers in New York on Thursday who confirmed our suspicions about trouble ahead for emerging market currencies. At Trader Skillset, we use technical analysis above all else to determine Context, but sometimes understanding fundamentals can clarify and strengthen a previously held opinion*. According to The … Currency or Debt Crisis in Turkey
We often see sideways corrections being somewhat skewed in the direction of the preceding trend leg. For example, in a bull trend the market suddenly turns down for a couple of bars (wave A) then forms a marginal higher high above the peak (wave B) and when many expect price to return at least to the … How Running Corrections are Born?
“The bond bubble is going to pop. But the bond bubble I’m talking about is in junk bonds, not Treasury bonds.” -The Wolf Today brought an absolute shocker to the mainstream news media. GT Advanced Technologies, a component supplier to Apple (and junk bond issuer), filed for bankruptcy protection. On Friday, the stock closed with … The Bond Bubble is in Junk Bonds, Not Treasuries
Over the summer, it’s been a nice run for the US Dollar. Last week, I noticed two mainstream commentators in particular calling for further dollar strength – one was a Bubblevision reporter, saying, “It’s not too late” to buy dollars (King Dollar Rules) , and the other a popular newsletter writer saying the USD was at … Is the US Dollar Rally, Just “Beginning?”
Today we’ll take a closer look at our Elliott wave count for light sweet crude. Again, we do this to provide the Context of what a market “might do” or is likely to do. But, once we’ve gained some perspective, and formed an opinion, it’s time to do an analysis of Momentum, in Trader Skillset’s … Oil Due to Bounce, Should Be Corrective
Elliott waves are powerful, but they don’t make one omnipotent. For instance the S&P500 quarterly bar chart’s trend is bullish and the monthly is bullish; but, the weekly bull trend is ripe for a pullback based on RSI trend analysis. The daily on the other hand got stuck at 62 on the RSI which suggest … One Wave at a Time on the S&P 500
FOCUS CHART OF THE WEEK: USDCAD Last week we wrote, “A pullback would be welcomed now, since the larger corrective pattern, wave 4, is complete, and new highs above 1.1300 should be seen.” A pullback is what we saw this week, and with Friday’s upside reversal, it’s possible that we’re about to push higher in … CAD in Trouble – The Wolf’s Prey Currency Review
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In the weekend edition of the Wolf’s Prey we detailed the longer term Context for the major currency pairs. This time, in the special interim edition we’re going to go through our weekly charts for some of the euro crosses, yen crosses and exotics; EURJPY, GBPJPY, AUDJPY, EURGBP, EURAUD, USDNOK, USDMXN, USDZAR, USDTRY is in discussion.
The article is available with TraderSkillset Free Membership. Sign up today.
Last week we covered Trader Skillset’s longer term views in the majors, which are basically unchanged this week. Now we’ll begin to drill down to the daily charts where we can identify more swing trading opportunities. EUR/USD Prices found support this week, arguably at the wave (iii) bottom. It’s entirely possible that the current bounce is … Major Forex Pairs’ Daily Context
Now that the S&P 500 has reached the 2000 level, investors and traders are becoming more comfortable with the idea that prices will simply continue higher, for years. On the bear side we hear the argument about the extreme levels of optimism which should reverse the market big time. Who is right? For sure, a trader pays attention to something else.
We’ve talked about the bigger picture yen count before. Mainly that a major bull market in yen (bear market in USDJPY) was completed at the 2011 low. Now, I think that the new bull market is headed to the 125-150, and beyond. A portfolio manager friend of mine has a target of “infinity” for yen … Yen Weakens Again, More to Come