Month: August 2010

By Adam Hewison – In today’s video (see below) we share with you how to use one of the many features in MarketClub, our Smart Scan technology. Using Smart Scan, you can easily spot winning stocks, futures, precious metals, and currencies that meet one of 24 preset scanning criteria, including uptrends or downtrends.

As traders we have 3 potential positions we can take at all times: (1) We can be long the market (2) We can be short the market (3) We can be on the sidelines and out of the market (options allow you to do other things but I want to keep it simple today).

Using our Smart Scan technology and filtering out the noise can help find some of the real nuggets that are out there.

Enjoy.

Watch the New Video Now

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

To see more of Adam’s Videos click here or sign up for Adam’s Free 10-part Professional Trading Course.

By Elliott Wave International

Stress test results for the biggest European banks were recently released, while the largest U.S. banks took their first stress tests in May 2009. But most people don’t really care how much stress their banks are under; they are more worried about their own stress levels. One thing that adds to personal stress is worrying about whether their deposits are in a safe place. Bob Prechter has encouraged people to find the safest banks for their money since he originally wrote his New York Times best-selling book, Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression in 2002. This excerpt explains why banks of all sizes are riskier than they used to be (think about portfolios stuffed with derivatives, emerging market debt and non-performing commercial loans). You can also get a list of the Top 100 Safest U.S. Banks — two banks per state — that was just updated in late June with the latest available data by joining Club EWI and receiving EWI’s Safe Banks report.

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Excerpted from Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression, by Robert Prechter

Many major national and international banks around the world have huge portfolios of “emerging market” debt, mortgage debt, consumer debt and weak corporate debt. I cannot understand how a bank trusted with the custody of your money could ever even think of buying bonds issued by Russia or Argentina or any other unstable or spendthrift government. As At the Crest of the Tidal Wave put it in 1995, “Today’s emerging markets will soon be submerging markets.” That metamorphosis began two years later. The fact that banks and other investment companies can repeatedly ride such “investments” all the way down to write-offs is outrageous.

Many banks today also have a shockingly large exposure to leveraged derivatives such as futures, options and even more exotic instruments. The underlying value of assets represented by such financial derivatives at quite a few big banks is greater than the total value of all their deposits. The estimated representative value of all derivatives in the world today is $90 trillion, over half of which is held by U.S. banks. Many banks use derivatives to hedge against investment exposure, but that strategy works only if the speculator on the other side of the trade can pay off if he’s wrong.

Relying upon, or worse, speculating in, leveraged derivatives poses one of the greatest risks to banks that have succumbed to the lure. Leverage almost always causes massive losses eventually because of the psychological stress that owning them induces. You have already read of the tremendous debacles at Barings Bank, Long-Term [sic] Capital Management, Enron and other institutions due to speculating in leveraged derivatives. It is traditional to discount the representative value of derivatives because traders will presumably get out of losing positions well before they cost as much as what they represent. Well, maybe. It is at least as common a human reaction for speculators to double their bets when the market goes against a big position. At least, that’s what bankers might do with your money.

Today’s bank analysts assure us, as a headline from The Atlanta Journal-Constitution put it on December 29, 2001, that “Banks [Are] Well-Capitalized.” Banks today are indeed generally considered well capitalized compared to their situation in the 1980s. Unfortunately, that condition is mostly thanks to the great asset mania of the 1990s, which, as explained in Book One, is probably over. Much of the record amount of credit that banks have extended, such as that lent for productive enterprise or directly to strong governments, is relatively safe. Much of what has been lent to weak governments, real estate developers, government-sponsored enterprises, stock market speculators, venture capitalists, consumers (via credit cards and consumer-debt “investment” packages), and so on, is not. One expert advises, “The larger, more diversified banks at this point are the safer place to be.” That assertion will surely be severely tested in the coming depression.

There are five major conditions in place at many banks that pose a danger: (1) low liquidity levels, (2) dangerous exposure to leveraged derivatives, (3) the optimistic safety ratings of banks’ debt investments, (4) the inflated values of the property that borrowers have put up as collateral on loans and (5) the substantial size of the mortgages that their clients hold compared both to those property values and to the clients’ potential inability to pay under adverse circumstances. All of these conditions compound the risk to the banking system of deflation and depression.

Financial companies are enjoying big advances in the current stock market rally. Depositors today trust their banks more than they trust government or business in general. For example, a recent poll asked web surfers which among a list of seven types of institutions they would most trust to operate a secure identity service. Banks got nearly 50 percent of the vote. General bank trustworthiness is yet another faith that will be shattered in a depression.

Well before a worldwide depression dominates our daily lives, you will need to deposit your capital into safe institutions. I suggest using two or more to spread the risk even further. They must be far better than the ones that today are too optimistically deemed “liquid” and “safe” by both rating services and banking officials.

By Adam Hewison

The massive move-up in crude oil on Monday created a new dynamic for this in-the-news market. The move to two-month highs completed one of our favorite major technical formations.

In this short video, I share with you two conflicting indicators and which one I am choosing to go with. I think you’ll find this video technically interesting as well as educational.

Please feel free to comment with your thoughts on this market.

As always our videos are free to watch and there are no registration requirements needed.

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

To see more of Adam’s Videos click here or sign up for Adam’s Free 10-part Professional Trading Course.

Good day FX maniacs! Here’s an update on the fiber or the EURUSD pair. As you can see, the pair has managed to bounce off the 1.3000 support and the uptrend line which I noted in my previous post (kindly see it here) to mark a new 3-month high. You see, the pair has been rising since it bottomed out back in June 7. And in the process of doing so, it also broke out from a inverted head and shoulders and escaped from its downtrend line, placing it back on the bullish track. If you look at its present chart, you will see that it has recently achieved its minimum upside target (gauged by projecting the height of the pattern from the point of breakout) which I mentioned way back when it had just broken out from the inverted head and shoulders. Still, the pair could be up for a retracement soon. For one, there is a resistance around 1.3270. Moreover, the stochastics is already indicating that conditions are overbought. In case it weakens, it could fall back down to 1.3000 or 1.2750. On the positive side, a break above 1.3270 could propel it higher towards 1.3750.

Fundamentally, the 1.99% jump in the Dow Jones Industrial Average (DJIA) yesterday led investors to dump the US dollar in favor of the higher yielding assets which consequently pushed the anti-dollar currencies like the EUR higher. Corporations in the US like the Coca Cola Company and Chevron topped the market’s second quarter earnings forecast, lifting the confidence of the general investors and the market as a whole. A bunch of second and third tier US forms are scheduled to release their financials this week. Now if most of them post some handsome profits for the same period again, then the equities markets together with the non-dollar currencies could still rise. Missed profits, on the other hand, coupled with some profit taking actions could, however, temporarily push the equities and the likes of the euro down.

More on LaidTrades.com …

Hiyo FX men and women! Welcome to another week and month of forex trading! On today’s canvas is the daily chart of the EURCHF pair. As you can see, the euro has rallied against the Swiss franc after it hit a new historical low at on July 1. Notice that the pair has since traded within a rising channel. However, it appears that it has met some resistance at the 1.3800 market and at the 50% Fibonacci retracement line the I drew. If the pair falls below the support of the rising channel, it could once again revisit its historical low. But if the euro buying continues and the pair clears 1.3800, the 1.4000 price could be its next target. Though with the stochastics in the overbought region, I would be very cautious in buying the pair at this point. But that’s just me.

Well, the rally in the euro was pretty much fueled by a combination of profit taking on short euro positions, good economic data from the euro zone, and better-than-expected second quarter earnings of firms in the US and Europe. But with the lack of positive catalyst coming from the euro zone this week, the euro’s run could be cut short. Switzerland, on the other hand, will publish its year-over-year retail sales figure for the month of June today at 7:15 am GMT. Switzerland’s sales are seen to have grown by another 4.1% which is better than the 3.8% gain that it had during the previous month. Such growth or better would reflect positive on the Swiss economy and the Swissy.

Let’s see how it goes. Stay tuned!

More on LaidTrades.com …

By Anton Eljwizat – The GBP/USD has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, as I demonstrate below, the 8 hour chart signals that a bearish reversal is imminent, and it might have the potential of reaching towards 1.5700 in the coming days. This might be a good opportunity for forex traders to enter the trend at a very early stage and a great entry price.

• Below is the 8-hour chart of the GBP/USD currency pair.

• The technical indicators that are used are the Slow Stochastic and Relative Strength Index (RSI).

• Point 1: There is a “doji” candlestick formed in the chart, indicating that a reversal should take place.

• Point 2: The Slow Stochastic indicates a bearish cross, signaling that the next move may be in a downward direction.

• Point 3: The Relative Strength Index (RSI) indicates that the price of this cross currently floats in the overbought territory, signaling downward pressure.

GBP/USD 8-Hour Chart

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: Forex Yard

Yesterday’s trading was characterized with high optimism regarding global recovery. This optimism has boosted the European currencies, such as the euro and the pound, and weakened the relatively safer currencies – the US dollar and Japanese yen. As long as the leading economies continue to provide positive data, this trend has potential to remain. Today’s publications, especially from the US, are likely to determine whether the trend can continue today as well.

Economic News

USD – US Dollar Tumbles as Risk Appetite Rises

The US dollar fell against most of the major currencies during yesterday’s trading session. The greenback dropped about 120 pips against the euro and about 150 pips vs. the British pound. The EUR/USD pair is now trading near the 1.3180 level.

The dollar fell yesterday after a better-than-expected result was published about the US Manufacturing Purchasing Managers’ Index (PMI) report. The survey showed that manufacturing in the US expended to 55.5 in July, beating expectations for a reading of 54.2 points.

This has provided another signal that the US economy continues to recover and that global recovery may follow. As a result, investors turned to riskier assets such as the euro and the pound. For now it seems that positive data from the US is likely to depreciate the dollar, as it is interpreted as an indication for global recovery, and thus boosts risk appetite in the market.

As for today, a batch of data is expected from the US economy. The publication that looks to have the largest impact on the market is the Pending Home Sales figure. This report measures the change in the number of homes under contract to be sold that are awaiting the closing transaction. Analysts have forecast a 0.5% rise in July. If the end result will provide a positive figure, the greenback may weaken further. Traders are also advised to follow the Personal Spending and the Factory Orders publications.

EUR – Euro Traded Near 3-Month High against Dollar

The euro soared against most of the major currencies on Monday, gaining about 120 pips vs. the US dollar. The EUR/USD pair is trading near a 3-month high as a result. The euro gained about 100 pips against the Japanese yen as well.

The euro strengthened yesterday as positive signs regarding global recovery has boosted demand for riskier assets. The euro rose as global equity markets continued to advance.

In general, the recent positive data from the major economies such as the US, Japan and the European nations, is boosting optimism for global recovery. As a result, investors are looking for relatively riskier assets, such as the euro and the British pound. Both of these currencies rose significantly yesterday, and are likely to rise further as long as risk appetite remains strong in the market.

Looking ahead to today, many interesting economic publications are expected from the euro zone. Traders are advised to follow the European Producer Price Index (PPI) report. This PPI figure measures the change in the price of finished goods and services sold by producers. Analysts have forecasted that the indicator has risen by 0.4% in July. Such a result is likely to have a positive impact on the euro by further boosting risk appetite.

JPY – Yen Drops against Majors as Risk Aversion Decreases

The Japanese yen fell against most of the major currencies during yesterday’s trading session. The JPY fell to nearly an 11-month low vs. the euro and also dropped about 150 pips against the British pound.

The yen dropped against most of the major currencies following a report that measures the cost of insuring against losses in the Standard & Poor’s 500 Index fell to its lowest level since May. In addition, the recent positive data from the US and euro zone have boosted risk appetite in the market, and turned investors to look for riskier assets, such as the euro and the pound.

While the Yen is considered to be a relatively safe investment, in times of market optimism, the Japanese currency tends to weaken against the major currencies.

As for today, traders are advised to follow the Japanese equity markets. Traders should notice that the yen tends to drop while Japanese equities rises, as such rises usually indicate that the economy is recovering, and boosts demand for riskier assets as a result.

Crude Oil – Crude Oil Reaches $81.70 a Barrel

A barrel of crude oil was traded at $81.70 during yesterday’s trading. Crude oil breached the $80.00 level for the first time in 3 months, following a 300 pips gain on Monday.

Crude oil soared yesterday as expectations for an economic recovery have boosted global equities. Oil rose for the third day following a better-than-expected release of the US Manufacturing Purchasing Managers’ Index (PMI) survey. The survey reached 55.5 points, beating expectations for a reading of 54.2. In addition, companies such as HSBC Holdings Plc have reported higher than expected earnings.

The world-wide positive data creates speculations that global demand for energy will increase, and as a result boosts crude oil prices. It seems that for as long that the US and euro zone will continue to deliver positive data, crude oil might rise further as the dollar weakens.

Looking ahead to today, traders are advised to follow the leading publications from the US and the euro zone as these tend to have the largest impact on crude oil prices. Special attention should be given to the US Pending Home Sales report, which seems to be today’s leading publication. A positive figure is likely to support crude oil prices further.

Technical News

EUR/USD

The pair has recorded much bullish behavior in the past several days. However, the technical data indicates that this trend may reverse anytime soon. For example, the daily chart’s Stochastic (slow) signals that a bearish reversal is imminent. A downward trend today is also supported by the 4-hour chart’s Stochastic (slow) indicator. Going short with tight stops may pay off today.

GBP/USD

The price of this pair appears to be floating in the over-bought territory on the daily chart’s RSI, indicating a downward correction may be imminent. The downward direction on the 4-hour chart’s Momentum oscillator also supports this notion. When the downward breach occurs, going short with tight stops appears to be the preferable strategy.

USD/JPY

The pair has been range-trading for a while now, with no specific direction. The daily chart’s Stochastic (slow) is providing us with mixed signals. All oscillators on the 4-hour chart do not provide a clear direction either. Waiting for a clearer sign on the hourlies might be a good strategy today.

USD/CHF

The 4-hour chart is showing mixed signals with its RSI fluctuating in neutral territory. However, there is a fresh bullish cross forming on the daily chart’s Stochastic (slow) indicating a bullish correction might take place in the nearest future. Going long might be a wise choice today.

The Wild Card

Crude Oil

Crude Oil prices rose significantly yesterday and peaked at $81.70 a barrel. However, the 8-hour chart’s RSI is floating in the over-bought territory suggesting that the recent upward trend is losing steam and a bearish correction may be impending. This might be a good opportunity for forex traders to enter the correction at a very early stage.

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.

Forex Market Review & Analysis by Finexo.com

EUR/USD

The Euro eased slipped from a 3-month high against the Dollar this morning, as concerns eased over the strength of the U.S. economic recovery.  Yesterday, Federal Reserve Chairman Ben S. Bernanke stated that the economy “is now expanding at a moderate pace.” The Fed Chairman went on to say, at the Southern Legislative Conference, that while the U.S. has “a considerable way to go” for a full recovery, “rising demand from households and businesses should help sustain growth” and that rising wages will most likely propel household spending in the next few quarters. The single European fell to $1.3149 during the late Asian session, a daily low.

Up ahead today, the U.S National Association of Realtors will release the number pending home sales. Last month, the number plunged by 30%, after a government homebuyer tax credit expired. This time around, a correction is expected – which could provide a boost to the weakened Dollar.

AUD/USD

The Australian Dollar fell against all its major currency counterparts after the Australian central bank opted to hold interest rates steady for a third consecutive month. RBA Governor Glenn Stevens held the overnight cash rate at 4.5%, in line with market expectations, after slower inflation and reduced financial risks abroad left the central bank with little need to further tighten its monetary policy. Following the announcement, the Aussie slipped to $0.9112, down 0.1% from the day’s opening price, but up from $0.9095 before the decision. Two government reports, released before the rate announcement, showed that building approvals unexpectedly fell in June and retail sales rose less than predicted.

Forex Market Review & Analysis by Finexo.com

Disclaimer: Trading the foreign exchange (Forex) carries a high level of risk, and may not be suitable for all investors.

By eToro – A solid European PMI, combined with strong US economic numbers pushed the Euro above 1.3150, above 1.3090 resistance.  The Euro is likely to test the 1.3300. Click here to read the full daily Review

Forex Market Analysis provided by eToro

Disclaimer: Trading in the Foreign Exchange market might carry potential rewards, but also potential risks. You must be aware of the risks and are willing to accept them in order to trade in the foreign exchange market. Don’t trade with money you can’t afford to lose.