Month: July 2010

By Russell Glaser – Spot gold prices continue to fall as risk appetite grows and traders seek out assets with higher yields. The commodity is approaching significant technical resistance in the long term trend.

Positive economic data from Europe along with varying data releases from the U.S. has created an environment ripe for risk taking. A rising euro, equity markets, and spot crude oil prices show just how traders are taking on more risk, while shunning safe haven assets. The recent price action of spot gold tells this story well.

Last week’s European industrial new orders surprised the market with a 3.8% rise on expectations of a decline of 0.1%.

British preliminary GDP came out stronger than expected, positing a 1.1% gain on expectations of only a rise of 0.6%.

Despite testimony from Fed Chairman Ben Bernanke that signaled an uncertain outlook for the U.S. economy, U.S. equities rose as the Dow Jones Industrials finished up for the week by 3.24%.

All of this positive info can be seen in the declining price action for spot gold.

The weekly chart shows an evening doji star candlestick pattern had formed, a warning that the long term bullish trend is changing. The top occurred at the record high price of spot gold at $1265. Confirmation of the pattern came the next week with the long red candlestick. Supporting the downward move is a doji candlestick that formed the following week after the evening star pattern.

The sharp downward movement in the price broke through the support level of $1224.70 and looks set to continue to head lower to the next support for the commodity which rests at $1169. This is close to the long term bullish trend line that began in October of 2008.

A close below this line would signal a shift in the long term trend to the downside and a target at the 23.6% Fibonacci retracement level at $1118, followed by the 32.8% Fibonacci level at $1026.

Should the downward price action fail to continue, the targets to the upside would be located at the resistance level of $1224, and the all time high for the price of spot gold at $1265.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By Yan Petters – Last week’s trading session ended with the publications of the Euro-Zone Bank Stress Tests results. The results were considered to be positive as they showed that most of the major banks within the Euro-Zone are able to sustain another economic turmoil.

The expected to reaction to this publication should have been a stronger Euro; however the Euro wasn’t supported as a result. The main reason that the Euro wasn’t boosted is the questionable methodology of the tests. Many analysts claim that the tests weren’t strict enough, and that they fail to represent the real situation of the major banks. The main question regarding the results is how it can be that banks from Greece and Portugal, who are known to have unusual difficulties, managed to pass the tests?

The discussion regarding the results of the stress tests results are likely to proceed during the next few days, and will probably have a large affect on the market. Traders are advised to remain updated on this issue.

Today’s leading publication will be the U.S. New Home Sales which is expected at 14:00 GMT. This report measured the number of new single-family homes that were sold during June. If the end result will beat expectations for 317,000 new homes, the Dollar is likely to be supported.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

After a long time waiting, the Euro-Zone’s famous Bank Stress Tests results were finally published on Friday evening. The results failed to reassure investors regarding the stability of the European banking system as analysts claimed that the test weren’t strict enough. As this week begins, the reliability of the tests will remain the main topic. Will it eventually boost the Euro?

Economic News

USD – The Dollar Ends A Volatile Trading Week Following Mixed Data from the U.S.

The Dollar saw mixed results against the major currencies during last week’s trading session. The Dollar had ups and downs vs. the Euro, and eventually the EUR/USD level closed at the 1.29 level. The Dollar also slightly strengthened against the Yen, while falling against the Pound.

The Dollar’s volatile session came as a result of the mixed data from the U.S. economy. On one hand, the housing sector provided positive data last week. The U.S. Building Permits report showed that 0.59M new residential buildings permits were issued during June. The meaning of the data is that the quantity of future construction will rise; obtaining a permit is among the first steps in constructing a new building.

However on the other hand, the unemployment reports delivered negative signals. The weekly Unemployment Claims report showed that jobless claims in the U.S. increased more than forecasted to 464,000. The number of individuals who filed for unemployment insurance for the first time during the past week rose from 427,000, and failed to reach expectations for 449,000.

As for the week ahead, many interesting economic reports are expected from the U.S. The most significant publications look to be the New Home Sales, the Consumer Confidence, Durable Goods Orders indices, the Unemployment Claims, and the Gross Domestic Product (GDP). All these reports have potential to impact global trading and the Dollar in particular, and traders are suggested to follow the end results.

EUR – Stress Tests Fail to Ease Investors’ Concerns from a Possible Debt Crisis

The Euro saw a volatile session during last week’s trading. The Euro began last week’s trading with a bullish trend vs. the Dollar and the Yen. However the Euro then saw sharp drops and by the end of the week, resumed to its previous levels.

The Euro had a rising trend with the beginning of the week as positive data from the Euro-Zone supported the 16-nations currency. The German Producer Price Index (PPI) rose by 0.6% in June, beating expectations for a 0.2% rise. The report suggested that inflation in Germany rose for the 4th consecutive time, reassuring investors that the German economy is recovering. The European Industrial New Orders report also provided an unexpected positive data. The report showed that industrial orders in the Euro-Zone rose by 2.8% in May, well above expectations for a 0.1% drop.

However, by the end of the trading week, the Euro erased its profits, as the European Bank Stress Tests failed to reassure investors concerns from a possible sovereign crisis. The tests showed that merely 7 banks have flunked the stress test, out of 91 major banks that were tested. The supposedly positive data failed to create an impact in the market as investors felt that the tests may not have been strict enough. However, traders should take under consideration that European governments are putting a lot of efforts in the attempt to convince investors regarding the reliability of the tests results.

As for the week ahead, a batch of data is expected from the Euro-Zone. Traders are advised to focus on the German Preliminary Consumer Price Index (CPI), which will prove if the German inflation is indeed rising as last week’s PPI data showed. Traders should also keep in mind the affects of the bank stress tests, as these results will continue to impact the market this week.

JPY – Yen Weakens Against the Majors

The Yen fell against most of the major currencies during last week’s trading session. The Yen dropped about 100 pips vs. the Dollar and about 300 pips against the Pound, and the GBP/JPY pair is now trading near the 135.50 level.

The Yen dropped last week due to speculations that Asia’s economic recovery is advancing. These speculations have increased risk-appetite in the market, and have turned investors to look for riskier assets. The Yen is considered to be a safe-haven currency, and tends to fall as risk aversion weakens. The speculations came following several reports which showed that South Korea’s economy grew faster than analysts forecasted, and Japanese exports rose more than expected.

As for this week, many interesting publications are expected from the Japanese economy. The main news events that traders are advised to follow are the Retail Sales on Monday and the Tokyo Core Consumer Price Index (CPI) on Thursday. If the reports will continue to provide positive signals, the Yen might weaken further as investors will continue to look for higher-yielding assets.

OIL – Crude Oil Prices Consolidates Around $79 a Barrel

Crude oil prices continued to climb during last week’s trading session. A barrel of crude oil was traded around $76 a barrel at the beginning of last week and as the week progressed, crude oil prices soared, and a barrel of crude oil is now trading around $79 a barrel.

Crude oil strengthened last week due to several positive economic reports from the U.S. and the Euro-Zone. The positive reports have created speculations that global energy demand will increase, and as a result, crude oil prices consistently rose. The bullish trend halted close to the weekend as concerns regarding tropical storm Bonnie have eased due to reports claiming that the storm has weakened.

As for this week, traders are advised to follow the main publications from the U.S. and the Euro-Zone, as they have significant affect on oil prices. Trades should also follow the U.S. Crude Oil Inventories report on Wednesday as this tends to have an instant impact on spot crude oil prices.

Technical News

EUR/USD

Last week’s trading has led to a doji candlestick formation on the weekly chart indicating a potential reversal lower for the pair. Traders will want to combine this signal with other technical indicators for confirmation before entering short. The next significant resistance level rests at the 38.2% Fibonacci retracement level at 1.3110. The next support level is found at last Wednesday’s low of 1.2730.

GBP/USD

The 2-month bullish correction has pushed the price above significant technical resistance levels, signaling a shift in the long term trend of the pair. The weekly chart shows the price broke the long term downward sloping trend line that began in July of 2008. The price has also moved above the 200-day simple moving average line. Traders will want to be long on the pair with the next resistance level coming in at 1.5520, April’s high.

USD/JPY

Last week the pair failed to break below the support level of 86.25. Momentum for the pair has reversed as the Momentum (10) is trending higher. The price is looking to break above the resistance at the 20-day simple moving average line. A breach above this line could take the pair to the resistance level at 89.15, close to the long term downward sloping trend line. The potential correction could lead to a good setup to enter short in the direction of the trend.

USD/CHF

The Relative Strength Index on the 4-hour chart shows the pair in overbought territory, indicating a downward correction could take place. That being said, according to most other technical indicators, the pair is trading in neutral territory with no clear direction. Traders may want to take a take a wait and see approach today, as a clearer picture may present itself later.

The Wild Card

AUD/USD

The Stochastic Slow on the 8-hour chart indicates that a bullish cross has formed, meaning a downward correction may occur today. This theory is supported by the Relative Strength Index on the 4-hour chart. Forex traders may want to go short in their positions for this pair today, as bearish movement will likely occur.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

USDJPY’s bounce from 86.26 extends to as high as 87.71. Further rally to 88.00-88.50 area to reach the next cycle top on 4-hour chart is still possible. Resistance is at the upper boundary of the falling price channel, now at 88.60, as long as the channel resistance holds, the price action from 86.96 is treated as consolidation of downtrend from 94.98 (May 5 high), and another fall towards 84.82 (2009 low) is still possible, only a clear break above the channel resistance could indicate that the fall from 94.98 is complete.

Daily Forex Forecast

AT&T Incorporated, the largest telecommunications company in the US, or T in the New York Stock Exchange topped the market’s earnings estimate due to the increased demand in iPhones. Thanks to its exclusive contract to sell the iPhone, the company was able to sell 3.2 million units of the phone and gained a net 496,000 contract subscribers. As a result, the company’s EPS upped the market’s $0.57 forecast with $0.61. Now, will AT&T be able to sustain its market share with the newly rolled out iPhone G4?

The company’s surprise upside in its second quarter earnings caused its stock to gap up. I’m even more bullish in the stock now since it also broke free from a double bottom pattern. Moreover, it was able to move above the 50-day and 200-day moving averages as well. An RSI of more than 50 likewise indicates that its upward momentum is gaining speed. Given yesterday’s price action, the stock could aim for its previous high just above $26.25. But if it weakens, the bottom of the gap or the neckline should still keep it afloat.

More on LaidTrades.com …

The shares of United Parcel Service, the world’s largest package delivery company, or simply UPS in the New York Stock Exchange reversed for the better following yesterday’s price action. As you can see from the chart, the stock has gapped up and in the process also broke out from an inverted head and shoulders formation. At the same time, it likewise cut through both the resistances at the 50-day and 200-day moving averages. At present, the the stock is sitting just above 63.00 support. It could range for a while between this level and 65.00 before moving higher. A break above 65.00 could send it up all the way to 69.00 or at its previous high just above 70.00. On the flip side, a move below the neckline could pull its price back to the bottom of the gap.

What caused the UPS’ rise was the company’s better-than-expected second quarter earnings. During the 2nd leg of this year, the company reported a 71% jump in its earnings from a year earlier. Revenue likewise rose by 13% during the period. What contributed to this upside were the 7% increase in its US domestic package business, 23% expansion in international packages, and 10 leap in its supply chain and freight operations. And as the global markets stabilize, the global trade business would only get better which would in turn be beneficial for the company.

More on LaidTrades.com …

EURUSD remains in uptrend from 1.1876 and the fall from 1.3028 is treated as consolidation of uptrend. Support is now at 1.2732, as long as this level holds, another rise to 1.3200-1.3300 is still possible next week, and a break above 1.3028 will signal resumption of uptrend. However, below 1.2732 will suggest that lengthier consolidation of uptrend is underway, then pullback toward the uptrend line from 1.1876 to 1.2150 is expected.

For long term analysis, EURUSD formed a cycle bottom at 1.1876 level on weekly chart. Bounce towards 1.4000 is expected in next several months.

Weekly Forex Forecast

The Number One Reason You Should Learn How to Short

By Justice Litle, Editorial Director, Taipan Publishing Group

There are many good reasons to learn how to go short. One of the best ones is maintaining objectivity.

The vast majority of investors will never short a stock (or an index, a commodity or a currency for that matter). A modest contingent will experiment with options and inverse ETFs. But very few will ever take the time and effort to truly explore the “dark side” of financial markets.

That’s a shame, because the dark side has much to recommend it. Not from a perma-bear standpoint, mind you, but an opportunistic one.

From your humble editor’s point of view, the best stance is a flexible stance. Or perhaps think of it like tennis. The ability to go long is like having a good forehand; the ability to go short is like having a good backhand. Can you imagine a tennis player with no backhand? He would be vulnerable in half the positions on the court.

Having the ability to go long or short expands your horizons greatly. It increases the number of opportunities you can take advantage of, which in turn increases your odds of long-run success.

Comparing the Risks

“But shorting [stocks] can be incredibly tough,” some will argue. As if long-side investing is all that much different?

“When you go short your potential risk is unlimited,” the conventional wisdom warns. What an asinine statement! (Technically true, but still asinine. Technically the sun might not come up tomorrow.)

Imagine that XYZ is a dog of a stock with poor earnings quality, a richly valued multiple, a bearish chart, and heavy insider selling – in other words, an ideal short candidate. Is it likely to imagine a stock like this tripling in less than a week? In this age of accounting shenanigans, a sudden drop to zero seems far more probable. Yet nobody goes around saying, “Long-side investing is dangerous because the stock could be a zero.”

And who are these hypothetical people trading without risk points? If I go short at $50 with a risk point at $55 in case I’m wrong, why would it matter if the stock goes to $200? I cut my losses back at $55, remember?

Short-side players are usually very diligent in their use of risk points: “If the position goes against me by X, I am out.” Long side investors, ironically, are much more willing to ride a stock into the dirt.

Yet the short side is consistently portrayed as more risky? Ironic, that.

If I Had a Hammer

There are times when making money on the bearish side of the market is like shooting fish in a barrel. At other times, one will hardly wish to be short stocks at all.

It’s just the same as the long side: Sometimes the money comes flying in through the window. Other times the window is nailed shut. A key task, then, is getting a handle on what type of market environment one is in.

The trouble with only going long is encapsulated in that old saying: “To a man with a hammer, everything looks like a nail.” If bullishness is the auto-default option, then everything looks like a reason to buy.

Learning to go short adds another tool to the toolbox. That doesn’t mean one has to be bearish all the time. It merely enables the option of taking a proactive bearish stance when market conditions call for it.

(Want more investment advice like this? Sign up for Taipan Daily to receive my investment commentary.)

Maintaining Objectivity

And so now we get round to the top reason for learning how to go short: It helps you maintain objectivity. If you can go both ways with ease, you will be less susceptible to unchecked emotions, confirmation bias or wishful thinking.

A low-to-no-growth economic environment – one that will likely be with us for years – means increased volatility as the average investor struggles. It also means stock valuations can be compressed for months, quarters, or even years at a time.

The way to deal with this is by assessing general conditions. When price to earnings multiples are expanding like an accordion – thus creating visible strength that shows up on the charts – it makes sense to participate in the bullish upside of the market. But when P/E multiples are contracting as investor capital flees – again showing up via bearish primary trends – it make mores sense to “go with the flow,” focusing on potential short candidates setting up for decline.

Publisher’s Note: If you want to learn more investment strategies like this, be sure to join us at the Taipan Publishing Group Global Opportunities Summit. Justice will be joining a distinguished team of global financial experts, including all of the Taipan editors and analysts, to show you how you can arm yourself with today’s most sophisticated wealth-protecting and wealth-building “weapons.” You’ll find out how to emerge victorious… instead of becoming the next casualty. And you’ll have a great time doing it.

The summit is September 23-25 at the luxurious Venetian hotel on the Las Vegas Strip, and we’re extending a special invitation just to you. But please hurry. Space is extremely limited… and spots are already filling up fast. Learn all the details here.

Don’t forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

About the Author:

Justice Litle is the Editorial Director of Taipan Publishing Group, Editor of Justice Litle’s Macro Trader and Managing Editor to the free investing and trading e-letter Taipan Daily. Justice began his career by pursuing a Ph.D. in literature and philosophy at Oxford University in England, and continued his education at Pulacki University in Olomouc, Czech Republic, and Macquarie University in Sydney, Australia.

By Adam Hewison – The battle between the bulls and the bears continues in the
S&P 500 with neither side able to gain the upper hand. This
choppy trading action will eventually lead to a large move
one way or the other. The bulls are betting that we are
headed higher and the bears are betting that the economy is
going to tank.

In my latest video, I share with you some of the key technical
points that are still in play and where the market needs to go
in order to break out of the current logjam that it’s in.

As always our videos are free to watch and there is no need
for registration.

Please let us know your thoughts.

Watch the Video Now…

All the best,
Adam Hewison
President of INO.com
Co-founder of MarketClub

By Russell Glaser – It looks like markets are gearing up for a move higher. Most risky assets jumped yesterday despite negative news. The S&P 500 is testing the big round number of 1100, the EUR/USD is approaching a key Fibonacci retracement level, and crude oil is pushing towards the $80 level. Today’s stress tests release is the key event. Wisdom says that it’s not how what the news says; it’s how the market reacts to the news.

Financial markets the past two weeks have been choppy, with risk going on and off again. Much of the movements have been tied to recent economic data releases. Yesterday’s economic data was mixed across the board, divided between the two continents. European industrial orders and British retail sales were stronger, along with U.S. housing data and strong earnings from U.S. corporations which helped to increase trader’s risk appetite. But higher U.S. weekly employment claims, and a warning from Ben Bernanke on the U.S. economy, countered this positive attitude.

But yesterday’s trading struck a chord: despite the negative outlook for the U.S., risky assets were trading higher. This shows a convergence and a red flag; when risky assets rise in spite of negative news, a shift is occurring in the markets.

Despite the uncertain outlook the Fed has regarding the U.S. economy, the S&P 500 was up 2.25% yesterday. The index made a close above the recent downward sloping trend line, indicating a potential reversal of the bearish trend to a bullish trend. Now the index has the big round number of 1100 in its sights.

Forex Market Analysis provided by Forex Yard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.