The Beautiful Thing About Forex…

The capture of Saddam
Hussein will likely give the markets
a shot in the arm. The effect
will be painful and pleasurable for players on both sides of the market.
However, it is likely that the initial move, most likely higher, will offer a
great opportunity for a Fade the Gap trade
on some of the liquid HVT stocks,
C, IBM,
TXN etc. How the market responds after the
initial euphoria is beyond my expertise, I will simply go back into trader mode
and the let the charts and price action take the lead. Gold stocks, which have
been under pressure lately will likely be active to the downside early on and
should offer some good HVT set-ups. Additionally, I see gold stocks offering
another good entry point for the long term in the next few days. The recent
sell-off seems to have abated and most are sitting on their 20 period ema’s,
however, look for a bit of consolidation before dipping in. For me, this will
be my third entry point on a whole handful of stocks,
NEM
, WHT,
CDE
, GSS.
I am firmly convinced that gold and gold stocks are in the early stages of a
bull market and I have positioned my portfolio accordingly. As a gesture to the
ever present tech bulls, gold stocks have smoked your performance this year with
far less risk.

As my colleague, Bo, pointed in Friday’s column,
ATR for the general market has been on the decline for some time, while
other sectors have quietly become far more active. So while some have viewed
the change in tact of this column as a wholesale shift, it is really more of an
adjustment in moving towards what is working using HVT techniques on the ever
important 1-minute chart as well as daily and 60-minute charts with FX. In
fact, as I was reading The High Tech Strategist this weekend, one of the
only objective commentaries of tech stock investing (not trading) available, the
editor, Fred Hickey, concluded with the following statement:

“Though it may seem odd that a
newsletter called The High Tech Strategist is currently more interested in the
gold and foreign currency sectors than in tech stocks, I must adjust to market
conditions.”

With that in mind, let’s use the following game
plan for today and the foreseeable future:

1. Implement HVT
techniques in the opening 90-minutes and to a lesser extent the closing hour
in sectors that are showing good range.

2. Maintain a focus on FX for swing and position
trades. My experience has proven that short-term trading of FX is a separate
game altogether, for me, I prefer a longer-time frame

This has been my game plan for several months
now. I have slowly indicated and introduced this plan in recent months, and am
again stating that that this is how I continue to make consistent money. So,
with that in mind, consider these potential trades in FX:

Short $/Yen (JPY)

Short $/Canadian (CAD)



I am also looking to go short the Euro
versus the Australian Dollar (EUR/AUD),
and will keep you posted in upcoming columns.

Note: You
will recall that I was short $/Yen from last Thursday, I had a stop loss in at
break-even. The beautiful thing about FX is that the stop losses are
guaranteed, no slippage. Needless to say I was stopped out at b/e on the heel
of the Saddam news. Without that fantastic feature I was looking at a minimum
loss of 45-50 pips on the opening print at 2 PM PST on Sunday.

Support/Resistance
Numbers for S&P and Nasdaq Futures

S&Ps
Nasdaq
1085 1440-1441*
1078-1080* 1431
1071-1072* 1422
1068 1407-1413
1064 1390-1391*
1059-1061 1368-1372*
1053

As always, feel free to send me your comments and
questions.

Dave
(aspendave@yahoo.com
)