Dollar rally? Watch precious metals

The past few weeks has seen the dollar rise as stocks and Treasury yields moved higher. However, recently the dollar appreciated even though equities and Treasury yield moved lower. Many traders and investors will now be bullish on the dollar based on its strengthening in a pessimistic and optimistic market. Even PIMCO, one of the world's largest bond holders and asset management companies, is now a short term bull of the dollar. Interestingly, they were bearish only 3 months ago. Maybe they want us to go long on the dollar so they can offload some of their positions? How else do the big boys offload decent size at a decent price? Nonetheless, we are technical based traders by nature and follow what price action is telling.

 If the dollar does continue to rally and there are strong reasons why (Greece may be out of the spotlight but what about Portugal, Italy, Ireland and Spain?, China has experienced a significant slowdown which has already had an effect on AUD and NZD, JPY and CHF are weakening due to its high appreciation), so where would you go for growth?

One chart that looks interesting is Platinum: The base chart is Platinum futures and the red line is the Dollar Index, you can see the inverse correlation it has. As the dollar rises, Platinum falls. What is also interesting is that we are in a head and shoulders pattern, therefore many traders will be looking for a break of the neckline to the downside at 1606.4. A potential target could be the 61.8% retracement at 1496.9 which coincides with the heigh of the head [of the head and shoulders pattern].

Trader Psychology New Post - Cognitive Theory & Frustration

NZDCHF - Whilst we are technically in a head and shoulders pattern, which may indicate some further downside, we are also trading at a strong level of support. So what do we do? Wait for the break or trade the bounce? It's all about the entry you get. My entry was based on the 60m chart, so I have already scaled out at 2:1 and moved stop to break even. This is a method I like to employ when uncertain about overall trend.....it will only effect the management of my trade. So now I have a small stake running which I will leave over the 2 weeks as it is essentially a risk free trade and I've banked my profit already.

Crude Oil - Still looking for longs on retracements

EURJPY - Are we potentially beginning a wave 5 according to Elliott Wave Theory? If so, look for a run up  towards last October's high around 111.60

RISK WARNING: FX trading carries a high level of risk that may not be suitable for all investors. Leverage creates additional risk and loss exposure. Beware you could lose some or all of your initial investment. 

What's the driver behind the recent sell off in Equities?


Whilst all the headlines are focusing on Greece, there seems to be a bigger problem in the background. Global growth is weakening: Brazil, the sixth largest economy is slowing; Australia's economy is slowing (which relies heavily on China, 50% of Oz exports go to China), China have a vast amount of problems itself; Europe is contracting and Greece are holding its bondholders to ransom. This 'risk off' mentality was clearly seen at the beginning of the week with money flowing out of speculative assets such as Equities, AUD and EUR.

As I discussed in previous posts, Oil, is the one to be watching right now. This time last year light crude was at $90, now even with the recent sell off it is $105. Whilst the sell off has been down to reopened negotiations with Tehran, how long will this last? The question from Israel and USA is not if they will invade Iran but when, after the elections or before?

So how does this help us as traders? Whilst I am a predominantly technical based trader it's important to understand some of the major economic themes as this how you can potentially get into strong moves early on as well as capture a strong trend. All we've seen so far, is just short covering based on investors coming out of risky assets due to concerning global growth. This provides us with decent opportunities to trade retracements, but of course you need to follow your OWN trading plan and style.

I will post up some charts in the next post on things I am looking at or are in. As I am away for 2 weeks, you won't be receiving any updates (I'm sure you don't want to know about me in 35degree Jamaican and Mexican weather!).

All the best traders....

Reality check: I am good at what I do, I work hard and am doing everything right. So, WHERE IS THE MONEY?

Let's face it most people are interesting in dreaming than working. The truth is you need to manage your own expectations about what you can achieve now, in 3 months, 6 months, 1 year and so on. Nothing is impossible, however, people start to live the life because they're doing something to change their life. Get the results first, be the best you can be and the rewards will follow to those who persevere with a single-minded, focused attitude.

The reality is you're probably not working hard enough or you're spending time working on the wrong things, or maybe both. I did this a lot during my beginning days of trading and trying to set up new businesses. Everything was planned to perfection and I had everything ready but the execution was poor. You need to have a plan (trading, business, life) but execution of that plan is the most important factor.

"Vision without execution is hallucination" - Thomas Edison

Execution comes down to being inspired, motivated, hard working and a commitment to never ever stop to reach what you want.

As we are coming into March, the last part to the end of the first quarter it's always good to look back at what you have achieved in that quarter, we only get 4 a year remember!

Crude Oil has finally broken out of its 3 month consolidated pattern. Seasonally this is a bullish period for crude which further supports the price action on this chart. The break gapped away as most likely many traders were eyeing this trade. Bullish re-tests and retracements are the only ways to now get in to this trade. If this momentum continues we will see crude around 2010 highs of $114, this also coincides with a 2.0 fib extension of the consolidation breakout. Watch out for news announcements on CNN on the price of oil, the Iranian sanctions on UK and France oil exports will also have a major bearing on this continuing to the upside.

Greenback rallies against all major currencies on back of Bernanke's testimony. Precious metals also fell of aggressively. Fed Chairman Ben Bernanke's comments appeared to be less dovish than the market expected, suggesting no QE3. 

The technical picture of the US Dollar Index also provided a level of support around it's 50% retracement level from November's low to January's high, 200dma and most indicators diverging showing lack of momentum to the downside. 

Is this the beginning the downslide in Euro? Well the technical picture and fundamental picture supports the case but it relies on risk appetite from investors and their search for ROI. Look for clear direction and be patient. 

Patience is one of the most important traits for a trader. If the market is telling you to wait and do nothing, then you must listen and sit on your hands, prepare yourself for the next trading opportunity and maintain a focus on what to do next. 

Whilst the FX markets have been ranging, waiting for some clear trend direction now that the Eurozone news isn't in the limelight, the commodity markets have been the one to watch. As you see from the chart of spot Silver below, it is potentially ready for a clear breakout out of its range. Given that price action made such a shallow retracement before the level of upper resistance, the market looks ready to breakout of that resistance level.

However, watch for key news announcements out later in the week.