Month: April 2011

By CountingPips.com

The most recent Commitments of Traders (COT) report, released on Friday by the Commodity Futures Trading Commission (CFTC), showed that large futures speculators cut back their short positions of the US dollar against the other major currencies while increasing bets against the Japanese yen. Non-commercial futures positions, those taken by hedge funds and large speculators, were overall net short the US dollar by $25.18 billion against other major currencies as of April 5th. The data is a decline from the total short position of $27.77 billion on March 29th, according to the CFTC data and calculations by Reuters which calculates the dollar positions against the euro, British pound, Japanese yen, Australian dollar, Canadian dollar and the Swiss franc.

This week’s most notable change was Japanese yen positions declining sharply for a second straight week to their lowest level in almost a year. Australian dollar futures positions increased to the highest level of the year while euro positions advanced for a third straight week.

EuroFx: Currency speculators increased their net long positions for the euro against the U.S. dollar for a third consecutive week. Futures positions in the euro rose to a total of 59,857 long positions as of April 5th following a total of 56,630 long positions on March 29th.

The COT report is published every Friday by the Commodity Futures Trading Commission (CFTC) and shows futures positions as of the previous Tuesday. It can be a useful tool for traders to gauge investor sentiment and to look for potential changes in the direction of a currency or commodity. Each currency contract is a quote for that currency directly against the U.S. dollar, where as a net short amount of contracts means that more speculators are betting that currency to fall against the dollar and net long position expect that currency to rise versus the dollar. The graphs overlay the forex spot closing price of each Tuesday when COT trader positions are reported for each corresponding spot currency pair.

GBP: British pound sterling bets rebounded as of April 5th to a total of 32,414 net long positions after declining the week before to a total of 743 long contracts on March 29th.

JPY: The Japanese yen net contracts dropped sharply for a second straight week. Yen contracts dropped to a total of 43,231 short contracts following a total of 7,052 net long contracts reported on March 29th. This is the lowest level for yen contracts since May 2010.

CHF: Swiss franc long positions were lower for a third straight week as of April 5th. Franc positions declined to a total of 10,843 net long contracts following a net of 18,957 long contracts on March 29th.

CAD: The Canadian dollar positions increased higher for a second consecutive week. CAD positions rose to a total  of 65,030 contracts as of April 5th after CAD net contracts had edged higher to a total of 51,245 net long contracts as of March 29th.

AUD: The Australian dollar long positions rose higher last week to the highest level in over a year. AUD contracts totaled a net amount of 90,938 long contracts as of April 5th after AUD positions had totaled 85,565 net long contracts on March 29th.

NZD: New Zealand dollar futures positions edged slightly higher for a third consecutive week. NZD contracts increased to a total of 2,695 long positions as of April 5th from a total of 239 long contracts on March 29th.

MXN: Mexican peso long contracts rebounded higher to a total of 119,062 net long contracts on April 5th. MXN positions had been about unchanged the week before at a total of 88,075 long contracts as of March 29th.

COT Data Summary as of April 5, 2011
Large Speculators Net Positions vs. the US Dollar

EUR: +59,857
GBP: +32,414
JPY: -43,231
CHF: +10,843
CAD: +65,030
AUD: +90,938
NZD: +2,695
MXN: +119,062

Further COT Resources from around the web:

• Forecast The FX Market With The COT Report

• The Only Indicator You Will Ever Need

EURUSD Weekly Technical Analysis.

A tough week for the dollar has culminated in EURUSD hitting the 61.8 Fibonacci area coming from the major down wave 1.6035 – 1.1187.  This Fib retrace level comes just below the psychological round number 1.4500.

The weekly candle close is marginally above the level but this could yet prove to be major resistance as it is typically the strongest Fibonacci level in my opinion.   However,  the recent bullish price action necessitates a high quality price action reversal signal if a counter trend position is to be taken.

A more favourable strategy, for trend traders,  could be to wait for price action confirmation on any suitable pull back to the 1.4250 area. This is previous resistance and could potentially become support.  In terms of correlations the dollar index has broken through recent support which also suggests more upside potential for EURUSD.

For further Forex market analysis visit my Forex trading blog.

The Interior Department yesterday granted a deepwater drilling permit to Murphy Oil (MUR) for a sidetrack well, according to a press release issued by the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement. A sidetrack well is drilled to a new geologic target or a new location within the original target from the existing wellbore. The company had a rig on location when drilling preparation activities were halted due to the temporary drilling suspensions imposed following the Deepwater Horizon oil spill. In early afternoon trading, Murphy gained $2.41, or 3.21%, to $77.48.

The Department of Justice said it had approved Google’s (GOOG) acquisition of travel software maker ITA Software with a number of conditions. The department will require Google to develop and license travel software, to establish internal firewall procedures and to continue software research and development. The department said that Google will also be required to provide mandatory arbitration under certain circumstances and provide for a formal reporting mechanism for complainants if Google acts in an unfair manner.

Monster Worldwide (MWW) rises after theStreet.com’s Jim Cramer said late Thursday he sees a bullish trend for MWW. The company trades at just 20 times earnings, but has a 20% long-term growth rate, he said. He said shares will likely snap back soon, and he’d be a buyer.

Google Inc. (GOOG) has shed most of its opening bell gain and is near even, up 0.09%, amid an executive shake up launched by Chief Executive Larry Page. Page wants to create clearer lines of responsibility. The changes include the promotion of six executives, including the heads of YouTube and the Android mobile device software, according to the Wall Street Journal.

Adam Hewison’s 1pm Afternoon Update on the Forex, Stocks, Commodities, ETF Markets

See the video archive on our blog or leave a comment

By Sara Nunnally, Editor, Smart Investing Daily, taipanpublishinggroup.com

Yesterday, we received a letter from Smart Investing Daily reader L.D. This question was different from other questions we’ve fielded so far…

I have been a Professor of Business Law in New Orleans, Louisiana for a number of years and have been fortunate to meet many people here in the business community.

Recently, I was asked by one of my foreign students if I ever considered becoming an intermediary or third party marketer for hedge funds. I understand that these professionals find accredited investors for hedge funds and their compensation is negotiable.

My question for you is: how does one go about finding accredited investors outside of his business, family, and social circle? If you can provide some advice on this, I will pass it on to my class.

I hope to put together a lecture on this for my three business law classes. It sounds like fascinating work to me.

This question took a fair amount of research, and I started at my favorite resource for investment questions, Investopedia.com. I found a couple articles to get me started.

This is by no means an exhaustive research, but it will certainly help point you in the right direction.

First off, I found that accredited investors are also called angel investors. Before the global financial crisis (in 2006), there were about 234,000 active angel investors in the United States, according to the University of New Hampshire’s Center for Venture Research.

The Center for Venture Research also found that 728 companies obtained initial investments from venture funds in 2009 — to the tune of $3.3 billion. But 259,480 angel investors contributed $17.6 billion to 57,225 businesses.

That’s a fair amount of money, and as you can see, angel investors are much more likely to lend startup money.

You should also note that the number of angel investors has grown since 2006.

(Investing doesn’t have to be complicated. Sign up for Smart Investing Daily and let me and my fellow editor Jared Levy simplify the stock market for you with our easy-to-understand investment articles.)

Angel Investors

So what is an angel investor, and how do you find them?

There are standards. Accredited investors must have a net worth (or joint net worth with their spouse) of $1,000,000, or have income above $200,000 a year ($300,000 jointly).

(Of course, you can widen your sponsor pool by inviting investors of other income levels, but you would have to meet the disclosure requirements of the Securities Act.)

These angel investors form groups all across the country. The Angel Capital Association helps keep track of them, and provide a central forum for investment resources and other member services. Visit the Entrepreneurs page for how this organization can help you, or point you to a local angel investors group that could be more likely to invest with a locally grown business.

Another resource is Hedgefund Conferences (HC).

In real estate the adage is, “Location, location, location.” In finding funding, it’s, “Network, network, network.” Conferences can provide a wealth of new contacts you can tap for sponsors, and better yet, you can learn from some of the best hedge fund managers in the business.

Some new hedge funds have trouble attracting investors, however. There’s a dizzying amount of paper work and registration requirements that I won’t pretend I have any significant knowledge of… but it’s enough to turn some new funds off.

There’s an alternative, according to Hannah Terhune from the Capital Management Services Group.

An “Incubator” can be created by breaking down the hedge fund development process into two stages and isolating the first. The first stage sets up the fund and management company entities, as well as pertinent operating agreements and resolutions. This is enough to allow the hedge fund to begin trading, usually with the manager’s own funds. By trading under this structure, the manager can develop a track record, which can be marketed legally to potential investors in the offering documents. Then, in the second stage, the PPM [private placement memorandum spelling out subscription and operating agreements] is developed with the performance information included. The Incubator method affords the opportunity for those with a skill for trading (often in their personal accounts) to break down the hedge fund development process into a manageable undertaking.

Once the hedge fund has a history of successfully making money, investors will be a lot more willing to sit down and look at a proposal.

In general, this is how the money flows for a start-up company, and can be applied to hedge fund startups too. From Investopedia.com:

“Alphabet Rounds” are when a company of fund is ready to approach venture capital firms. These guys — though they’ve made billions upon billions from taking risks on new companies — probably won’t touch a new company without a significant amount of money already invested from angel investors.

This level is different for every company, but considering that venture capitalist typically plop down several millions of dollars at a time, this can give you an idea of what you should aim for before approaching a venture capital firm.

The Center for Venture Research has a state-by-state listing of venture capital resources for when you’re ready for this stage.

Another thing to keep in mind is that funds with under $25 million under management should follow their individual state’s requirements for registering the fund. If the fund has more than $30 million, it will need to be registered with the SEC as an investment advisor, according to Terhune.

I hope this article gives you a good place to start your own research, L.D. Best of luck to you, and let us know what you find and how you do!

Editor’s Note: I stole these winners from billionaire hedge fund managers. Here’s why Uncle Sam helped me do it. Steal from the funds like they stole from American investors. You could turn $5,000 into as much as $500,000 with this gem. I’ll tell you all the details in this exclusive investment report.

About the Author

Sara is Managing Editor of Smart Investing Daily. As Senior Research Director and global correspondent, Sara Nunnally’s diverse resume includes studies in art history, computer science and financial research. She has appeared on news media such as Forbes on Fox, Fox News Live, and CNBC’s Squawk Box, as well as numerous radio shows around the country. Most recently, Sara co-authored a book with Sandy Franks called, Barbarians of Wealth.

As Senior Research Director, global correspondent and managing editor of Smart Investing Daily, Sara has traveled all over the world in search of the best investment opportunities to recommend to her readers, be they in developed economies like France and Italy, in emerging markets like the Czech Republic and Poland, or in frontier terrain like Vietnam and Morocco. Her unique “holistic” approach of boots-on-the-ground research has given her an edge in today’s financial marketplace as she searches for the next investment opportunities in hot sectors like alternative energy, currency markets and commodities.

Light crude for May delivery approached the $112 a barrel level, while Brent crude futures rose $1.74 to $124 a barrel. Buying momentum has continued as hopes fade for a quick resolution of conflicts in Libya. Last week, crude-oil futures traded at $106 a barrel and prices have only climbed since then. The weakening of the U.S. dollar and uncertainty over a possible U.S. government shutdown helped crude-oil prices increase. Tudor Pickering Holt analysts said, “Middle East tensions driving further crude-oil gains from these elevated levels will make us incrementally more nervous about energy demand, the economy and inflation.”

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