Month: July 2011

Last week proved to be an enigma for many professional traders. Many of us believed that a rally of that magnitude, in that period of time, with little positive economic or fundamental data, made about as much sense as running into a brick wall head first and not expecting to injure yourself.

The movements of the financial market last week tested most of our instincts and experience as professionals; I know that’s how I felt.

And after I talked with a good many friends over the weekend, I have to address what I see as the core problem that most investors face.

Psychological Control

You may think the average investor fails because he doesn’t have the inside knowledge or experience that professionals do. But that’s not true. In fact, most average investors have all the tools — more than most of us professional traders.

The fundamental difference between the average investor and the professional trader is how you think about an investment.

For many investors, fear and greed cause frustration and panic. Once these emotions take control, investment plans tend to break down, and investors become a detriment to their own investment portfolios.

Having an “insider” like one of us at Taipan to guide you can certainly help, but you also need to learn who YOU are as an investor and where your sensitivities lie…

Are You Aware of Yourself?

My good friend Mark Douglas, who is highly regarded on Wall Street and was kind enough to write the forward to my book, Your Options Handbook, has written two exceptional works on the mental aspects of trading. This past week, I thought a lot about his most recent work, Trading in the Zone.

The book is extremely detailed and takes you through a series of scenarios that focus on our belief systems. The goal is to be aware of your thought processes and conquer your hidden mental roadblocks to success. (He also explores the many paradoxes in the marketplace — and there are plenty of them!)

Through our friendship, experiences and projects together, I believe we both share this fundamental core belief about investing:

Even though the market can be extremely random in its outcomes, having an edge (which comes from a system, tool or method) combined with a sound and consistent mental approach will ultimately lead to success if executed with continuity and repetition over time.

Basically, if you follow a set of rules or an investment system that has made other people successful, you too should be able to succeed if you “don’t let your brain get in the way.” Be aware and have control over your belief systems. Keep following the rules of your system over and over again.

In his book, Mark makes several compelling statements. Here are two to think about:

• “Learning how to identify an opportunity to buy or sell does NOT mean that you have learned to think like a trader.”

Many investors develop a system to find opportunities and see some success through testing. But once they put it to use in the real market, they fail. Why? Because the system is only half of what makes you a good trader. Perhaps they jumped out of the trade in fear, because the pain of potentially losing all that money scared them.

The solution here is to look back on the trades you made and record your emotions. Why did you exit the trade? Was it your system? Tools (charts)? Did your reasoning change? Or were you “spooked” out of the trade?

Last week, many short sellers (investors going against the market) were spooked in this same way. Maybe they could have benefited from another of Mark’s ideas:

• “If you want to create consistency, you have to start from the premise that no matter what the outcome, you are completely responsible.”

Whatever your plan or system is, you must follow it without fail and realize that deviations from your plan or system creates another layer of randomness in your success. Let me explain what that means. The more you make decisions outside of your plan, method or system, the less you know why a trade was a success or a failure.

First You Need a System

Each of our trading services follows a system, incorporates a method and has a plan that we execute as consistently as possible. If a stock or option meets our criteria, we act. When that stock or option no longer fits our criteria, hits our stop-loss, or if we attain our profit target, we exit.

Just like the greatest teams in sports, there will sometimes be strings of many winning trades and even losing trades, but you cannot let the emotions of trading take you away from your method or belief system.

My colleagues and I strive for consistency. We will teach you that when the market throws a curveball, you must act as though you are the best hitter in baseball and simply execute what you have been trained to do: connect!

Success in the markets is a long-term goal. Don’t panic or make dramatic adjustments in your strategy if you are hitting a dry patch. Adjust one variable at a time and measure your results.

To help develop your system, I encourage you to learn more about what we do at Taipan. Here is a link to our different services.

Editor’s Note: Jared’s WaveStrength Options Weekly service has a system that consistently banks 15%, 20%, even 50% gains for his readers.

It is not a shady get-rich-quick program either. Jared’s faithful subscribers are getting rich with safe, reliable profits. To get his latest advice, click here.

Article brought to you by Taipan Publishing Group. Additional valuable content can be syndicated via our News RSS feed. Republish without charge. Required: Author attribution, links back to original content or www.taipanpublishinggroup.com.

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The good news is that with the approval of an 8.7 billion euro loan payment Greece will make its debt responsibilities later this month thereby avoiding an outright default. The bad news is that even with this rescue package, the intended debt relief plan may still be considered a default by the ratings agencies.

The European Union – with the tacit approval of the French banking system – has suggested a plan that would see financial institutions “roll over” the repayment of debt owed to many the region’s largest banks. Referred to as “re-profiling” it is hoped that deferring payment will give Greece the breathing room it needs to get its affairs in order without being considered an outright default. It appears however, that at lease one of the ratings agencies is not prepared to go along with the scheme.

Standard & Poor’s advised EU officials that a debt rollover is simply another form of default and would be reflected in a downgrading of Greece’s credit rating. A default designation would also make it impossible for the European Central Bank to accept Greek government debt as collateral essentially banish the rescue plan to the trash heap.

French Banks Argue in Favor of Deferment

For several weeks talk of deferring payment as an acceptable workaround have gathered in intensity. Last week French banks which collectively hold US$93 billion in Greek debt were the first to agree to a plan that would see much of the debt rolled over. German banks have an estimated US$23 billion invested in Greece, and are less enthusiastic about deferring the payments claiming more information is needed before they can endorse the plan.

Ultimately, the German Banks are expected to come onside but the real issue remains; is a roll over an actual default event? And if it is, will it activate the corresponding credit default swaps?

Credit default swaps are used extensively by large financial institutions as a form of insurance to protect themselves from losses arising from non-payment due to default. The entity buying the swap pays a fee for the protection against a default while the seller assumes the risk of in exchange for the fee. If a default does occur, the seller is responsible for paying the full amount of the loan to the buyer.

While rating agencies such as Standard & Poor’s obviously carry weight with respect to lending spreads, it is the determination of the International Swaps & Derivatives Association (ISDA) that determines if a default has taken place for the purposes of triggering credit default swaps. According to a statement from the ISDA’s General Counsel on Monday, a voluntary roll over where banks agree to defer payment, is not likely to result in the paying of default insurance. This would change however, if a haircut in any form were forced on lenders and it is this distinction upon which the ISDA is basing its assessment.

Scott Boyd is a currency analyst and a regular contributor to the OANDA MarketPulse FX blog

A busy European trading session has had a few central bank decisions, comments from Moody’s, and mixed economic data. Despite the eventful morning the majors remain consolidating in their current ranges.

The euro sold-off this morning but the EUR/USD found support just above 1.4440. Uncertainties remain over the next Greek bailout as Moody’s commented on potential impairment charges for banks that hold Greek debt though the rating agency has not given its opinion if the French rollover plan for Greek debt would constitute a default. Should the 1.4440 level hold the euro could move higher in the New York trading session but would face resistance above the current consolidation pattern off of the May and June highs which comes in today at 1.4520.

Sterling rebounded after a better than expected services PMI reading surprised the market with the index rising to 53.9 from 53.8. It appears that the data could have been leaked early as sterling was seen appreciating minutes ahead of the data release as some punters may have been looking to get ahead of the data. The rally in the GBP/USD held near the mid-May lows at 1.6120. A break here and sterling could tack on an additional 1.5 cents. Support is found at the bottom of the bearish flat pattern of 1.6040.

As expected the Australian central bank kept interest rates steady citing growth concerns and the influence of a strong AUD keeping inflation under control. This kept the AUD on the decline as traders largely ignored the strong trade balance numbers. The AUD/USD fell but found support at its 50-day moving average at 1.6060. Further support may be found at the broken downtrend from the May high which comes in today at 1.0590.

Asian equities were even with the Nikkei just finishing in the black after Moody’s soured market sentiment after warning on Chinese banking concerns. According to Moody’s, local Chinese governments may have larger than previously reported debt levels. This warning could damper the “risk-on” trade that began last week, thus a potential catalyst for the dollar.

Read more forex trading news on our forex blog.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By CentralBankNews.Info

This article reviews the monetary policy interest rate activity of the world’s central banks during the first half of 2011.  The key takeaway is that monetary policy tightening has been the dominant game for most emerging market central banks in the first half of the year, however the majority of central banks are still in the no-change camp.  Indeed of the 79 central banks that Central Bank News monitors, 33 made net increases to their interest rates, while 40 held their rates net unchanged, and only 6 made net reductions to their policy interest rates.

Of the central banks that net increased their interest rates, the average increase was 111 basis points, but with many opting for 25 (8), or 50 (7) basis points.  Meanwhile the outliers were Vietnam (600bps) and Belarus (550bps); the former dealing with hyperinflation, and the latter dealing with a number of economic worries.  And it wasn’t only emerging markets that were net tighteners in the first half; Denmark, Norway, the EU, and Sweden were among those to tighten monetary policy settings.

As for those that loosened interest rates, it was much a case of being the outlier.  New Zealand dropped its official cash rate earlier this year after an earthquake hit one of its cities.  Meanwhile Iceland dropped rates in response to low inflation and continued economic challenges.  Qatar dropped its policy rate to help the non-energy part of its economy, and Ghana dropped rates due to easing in domestic inflation pressures.

So overall the first half of the year in monetary policy interest rates was characterised by inaction for most, tightening by many, with a few outliers reducing interest rates.  Much of the policy tightening went on in emerging markets where inflation has been pushed above inflation targets due to rising global commodity prices and strong economic growth and activity levels (i.e. both demand pull and cost push).

Going into the second half of the year the outlook is less certain, which in part explains inaction being the main stance for most of the monetary policy setters.  On commodities, there has been a recent correction in broad commodity prices, and many commodities finished the past quarter with price falls. A stable or falling global commodity price environment could see less tightening, and perhaps pockets of loosening.

Meanwhile the global economic growth outlook continues to be uncertain, with some economies e.g. the US making slow progress, and tail risks e.g. Greek sovereign debt default, having the potential to pull back the aggregate demand impulse.  So out next review could well see more banks opting for no change or even net policy loosening.  In any case, keep checking the website for monetary policy updates.

Source: www.CentralBankNews.info

Article source: http://www.centralbanknews.info/2011/07/global-interest-rate-movements-half.html

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

By ForexYard

The US dollar is stronger against the majors in the Asian trading session as the shortened week will be critical for the continuation of the “risk-on” mode that was sparked last week by the passage of the Greek austerity measures and the better than expected ISM performance. Headwinds are already apparent with the rejection of the Greek debt rollover plan by S&P and a drop in some commodity prices according to a Financial Times article.

Economic News

USD – Dollar could be Bid on Safe-Haven Appeal

The US holiday celebrations are ending and US debt talks are set to begin between Democrats and Republicans. The two parties are at odds over how to raise the $14.3T debt ceiling. Republicans are steadfast in their refusal to raise taxes unless an increase in spending cuts accompanies the raising of the debt ceiling. A temporary solution may be reached with an increase to the debt ceiling but at a smaller amount than previously hoped for and with spending cuts the two parties have previously agreed upon. This will enable Congress to kick the can down the road and address the issue at a later date. Fitch ratings has already pre-committed to cutting the AAA US credit rating should the US miss a payment on its debt given the August 2nd deadline.

Last Friday’s stronger than expected ISM survey helped to boost risk appetite in the FX market while reducing the appeal for the USD. However, markets are facing headwinds in Greek debt crisis, a quick decline in commodity prices such as corn and wheat, as well as last week’s US equity market rally that had significantly lighter volumes. This may make the USD more appealing to traders on a safe-haven bid. With the EUR/USD rally stalling at the top of the recent consolidation pattern during today’s Asian trading, one has to wonder if the dollar has made a bottom.

EUR – S&P Says No to Greek Debt Rollover

Just as quickly as EU officials thought they were out in the clear of the Greek debt crisis, the rating agencies pull them back in. Early in the morning S&P announced that the French led Greek debt rollover plan in its current form would be considered a credit event, sending EU officials back to the drawing board.

In a release yesterday morning S&P announced it would view both French banking proposals as a “selective default.” The view by S&P is discouraging as it is the first of the three major rating agencies to comment on the proposed rollover plan. S&P cited both proposals would return a reduced value to the holders of Greek debt than previously expected under the original debt agreement. Under ECB guidelines the European Central Bank will not accept Greek debt as collateral in exchange for ECB liquidity after a default. While the decision by S&P is certainly a negative for the euro, the 17-nation currency was off its early highs versus the dollar but has been able to maintain its position above the 1.4500 level, perhaps due to expectations of an interest rate hike by the ECB this week. Initial resistance is found at the top of the consolidation pattern at 1.4520 and a solid close above here would likely target 1.4700. To the downside 1.4440 from the June 22nd high is the initial support followed by the bottom of the consolidation pattern at 1.4130.

AUD – RBA Holds Rates Steady as AUD falls

The Reserve Bank of Australia held interest Rates steady at 4.75%, in line with consensus forecasts but the Aussie dollar dropped after the RBA was more negative than expected on the Australian economy and makes for a rate hike in the near-term less certain. The AUD fell versus both the dollar and the yen after the rate decision. The downbeat forecast of the Aussie economy is not such a surprise given yesterday’s -0.6% contraction in May retail sales. The interest rate decision largely overshadowed the better than expected trade balance data which showed a widening trade surplus in the month of May due to a 3% increase in exports.

Rumors of a potential Chinese interest rate increase also weighed on the AUD. Comments yesterday from the Peoples Bank of China signaled inflationary pressures are still growing as the Chinese economy continues to expand. Though last Friday’s weaker than expected manufacturing PMI did not derail growth expectations, it did increase the chatter of a possible hard landing for the Chinese economy.

Oil – CFTC Data Hints at Crude Oil Price Declines

Spot crude oil prices were relatively unchanged from Friday’s price as many market participants were away from their trading desks due to the 4th of July holiday in the US. However, this week will have important data releases that could determine the next move in spot crude oil prices. Friday’s non-farm payrolls report will be the key report for crude oil traders as the US unemployment picture remains bleak and is not expected to show a dramatic improvement from previous reports.

Crude oil traders should be aware of the continued drop in managed money long positions in the NYMEX crude oil futures contract as shown by the most recent CFTC Commitment of Traders report. While the market continues to be net long, the shorts increased their position while open interest has steadily declined since reaching a peak in late May. This data hints at declines for spot crude oil prices.

Technical News

EUR/USD

A bullish engulfing pattern on the weekly chart does not bode well for further declines in the pair. Combined with rising weekly and daily stochastics, a case can be made for additional gains in the EUR/USD. The first resistance level the pair should face is 1.4700 off of the June high and a move above here and the pair would encounter selling pressure at the May high of 1.4940. Should the pair fail to move outside the upper line of the triangle consolidation pattern at 1.4515 the EUR/USD would encounter support at 1.4440 and the lower leg of the triangle which comes in at 1.4130.

GBP/USD

The monthly chart shows potential declines for sterling. Falling stochastics point to additional losses in the pair. Traders could be looking for the GBP/USD to decline to 1.5650, a level that offers long term support. Both the 20-month moving average comes in near this area but more importantly this is where the falling trend line from the 2007/2008 highs comes in and sterling could see a technical bounce in this area. This level has further significance as it coincides with the October 2010 lows on the daily. To the upside resistance is found at 1.6150, the top of the current consolidation pattern as well as the previous trend line from the May 2010 low at 1.6280.

USD/JPY

A triangle consolidation pattern has formed on the daily chart with the legs forming from the May high and the June low. Judging from the long term trend the USD/JPY would be expected to break lower where support comes in at 80.25. A break here would likely test 79.70 and 79.55. However, a move higher may also be in the cards and a break above the initial 81.10 resistance would target 81.75.

USD/CHF

After forming a base near the 0.8300, the pair has risen to test its falling trend line from the February high which comes in at 0.8535, not far from the resistance level at 0.8550. Further resistance awaits the pair as the 50-day moving average. A breach here and the pair could unravel to the mid-May low at 0.8750.

The Wild Card

Oil

After retracing 38% of the move from mid-April 2009 to April 2011, spot crude oil prices received a bounce at this technical level which comes in at $88.75. However, falling weekly and daily stochastics point at additional declines in the commodity. forex traders may want to target the mid-February low near $84 as the next target. This would be in line with a 38% retracement from the 2009 low as well as the rising trend line from the 2010 low.

Forex Market Analysis provided by ForexYard.

© 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.

The Risksbank increased the repo rate by 25 bps earlier today while raising both its growth and inflation forecasts. Immediately following the announcement the SEK surged versus the euro to a Fibonacci retracement level.

Citing strong economic growth and increased inflation expectations the Risksbank hiked interest rates to 2.0% from 1.75%. In the accompanying rate statement the Swedish central bank said it expects the economy to grow this year by 4.6% in contrast to its previous forecast of 4.4%. Next year the Risksbank forecasts increased growth of 2.3% from 2.2% expected growth. CPI expectations were also increased to 3.2% from 3.1% in 2011 and next year inflationary forces should moderate to 2.8%.

Given the higher expectations for GDP and CPI, the SEK could make further inroads against the euro on expectations of higher Swedish rates. Comparing the euro zone’s growth prospects with the background of the peripheral debt crisis and the Swedish krona looks to be much better growth play.

Turning to the charts the EUR/SEK appears to have made a top in its rebound and the move has retraced to 9.0530, near the 38% Fibonacci level from the March to June move. A close below this level would go a long way to shifting momentum to the downside back in line with the long term trend. The next target would be the 61.8% Fib at 8.9170, followed by the June 1st low at 8.8770. Should the pair bounce higher from its current support the EUR/SEK would encounter resistance at 9.1250 and the June high at 9.2725.

Read more forex trading news on our forex blog.

The Reserve Bank of Australia (RBA) maintained the cash rate unchanged at 4.75%.  The RBA said: "the Board judged that the current mildly restrictive stance of monetary policy remained appropriate".  The RBA also noted: "Year-ended CPI inflation is likely to remain elevated in the near term due to the extreme weather events earlier in the year.  However, as the temporary price shocks dissipate, CPI inflation is expected to be close to target over the next 12 months."

USDJPY remains in short term uptrend from 79.69. The price action from 81.26 is treated as consolidation of uptrend. Key support is at the uptrend line on 4-hour chart, as long as the trend line support holds, uptrend could be expected to continue, and next target would be at 81.60-81.80 area. Only a clear break below the trend line support will indicate that the rise from 79.69 is complete, then the another fall towards 78.00 could be seen.

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