This Is When Fundamentals And Technicals Can Be Ignored
After a long holiday
weekend, sometimes it is difficult to recall some of the dynamics
from the previous week. Additionally, I missed Friday’s action so my frame of
reference is not complete. However, with the exception of the FX market (more
below) I imagine the theme was consistent with what I had mentioned in my column
on Thursday, a greater degree of anticipation is required under current
conditions.
Gold mining stocks continue to get banged up
pretty good (although the daily charts are looking as though a pause in the
carnage may be at hand). This sector has been fantastic from a trading
standpoint over the last few months, and despite the recent action, I suspect it
will regain its former glory in the weeks to come. While I know that there may
be some other sectors that may be showing some better action presently, my
stance has always been to stick with what I am familiar with until such time
where it becomes obvious the “big money” has gone elsewhere. A colleague of
mine stated it this way:
“I did not spend the last
three months working my a*# off to figure this guy (specialist) out to simply
walk away now.”
As I have said several times, one day, even one
week, do not make trend, all things are cyclical.
Turning to FX, gee, where do I begin. Let’s just
say it this way, wow. The trend is your friend approach came under harsh
scrutiny over the last few sessions as the Euro, Swiss Franc, Pound and even the
Yen were simply punished. Despite this beating, these pull-backs are barely
even 38% retracements off the lows from the summer. Hardly what one would call
a technical break-down. Secondly, what has really changed? Has the Dollar
suddenly become that much more attractive? Have interest rates in the US
climbed to match rates elsewhere in the world? The answer is no. However, the
market has certainly got traders licking some wounds. Fundamentals, like
technicals can be ignored from time to time when the two biggest drivers of the
market take hold:
Fear & Greed
I can only imagine how many longs were shaken out
of positions last week which then caused more selling etc etc. Based on that,
it is safe to say that last week might be a bit of an exaggeration. Does that
mean I am looking to position long in these currencies at present? No.
However, a good solid approach to FX should always incorporate swing trading
positions in addition to long-term core positions. Right now with volatility
high, there are some solid set-ups that develop each day on the higher interval
intra-day charts. The Euro is the most liquid, and is probably the best
candidate for this type of trade.
When I swing trade FX, I rely on a combination
of:
1. Key Technical Levels
2. A healthy does of chart interpretation
So while the technical levels below are valid, I
may decide to initiate a trade before these levels are even tested if the
scenario comes together in such a way. Nonetheless, consider these resistance
levels as potential areas to re-establish swing shorts:
EUR:
1.2439 1.2561
GBP:
1.8093 1.8178
CHF:
1.2520
Over the next few weeks, I will begin to provide
a few more details on some of my FX strategies and more importantly some
introductory comments. If my emails are any indication, there is a quite a
curiosity out there regarding FX, I look forward to sharing some of my insights
with you.
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As always, feel free to send me your comments and
questions.
Dave (aspendave@yahoo.com)