Has the short covering begun?...Check the COT report

As discussed in one of my previous posts (http://qitrading.blogspot.co.uk/2012/05/watch-short-coveringsugar-now-in-play.html) the market was heavily overweight, as you can see from the recent strong directional moves in currencies against the greenback. Therefore, the small rallies we have seen this morning on the back of positive news coming out of Europe, has led to some short covering to bank some profits. Things to look out for: - Today is a France/Germany and US holiday - Check the COT report (http://www.cftc.gov/dea/futures/deacmelf.htm) to see what's happening in the bigger picture - Large specs are showing a 5:1 short ratio on Euro Currencies to look at: The commodity currencies and their crosses are always one to watch when trading risk sentiment (risk on/risk off) which is the current market condition considering the Eurozone issue. There have been technical setups on NZDUSD, EURAUD, GBPNZD which have all come to fruition. I will endeavour to post some charts up later this week.

A must read! - 'Hedge Fund Market Wizards' Jack D. Schwager's new book

'Market Wizards' and 'New Market Wizards' by Jack D. Schwager are probably the two best trading books ever written. They are a must read for any trader at any level. They are a collection of interviews of America's best traders, some have turned thousands of dollars into millions.&nbsp;<div>

Now, Jack D. Schwager is releasing his new book 'Hedge Fund Market Wizards' next week. Although, I'm reading five books right now, this is the first on my list to read and will be finished the first!!

Check it out now:

Watch the short covering/Sugar now in play...

Hi readers! So I'm back in the UK and what a period we've had in the markets!! If you are an intra-day trend based trader or a break out trader then you've probably done very well since the beginning of last week; if you are contrarian counter-trend trader then you should have been disciplined and patient whilst the markets broke out and ran. If you do both then well done!

Now the markets have broken out key support and resistance levels, look for re-tests of these levels. EURUSD, USDCHF, EURGBP, Gold Spot are some of the key ones to be looking at. However, this relief rally is more to do with short covering than any improved news. The Commitment of Traders report showed extreme shorts on risk based currencies on extreme longs on the greenback. Therefore, we may just be pulling back due to some profit taking. The obvious news announcements out this week - the informal European summit on Wednesday and the G8 meetings will be key.

It's best to be patient and wait for a strong theme to present itself. Last week we had negative data coming out of just about every single country, the US, EU, China, etc... However, there have been some decent trading opportunities and the trade discussed in my April post http://qitrading.blogspot.co.uk/2012/04/dollar-index-lacking-momentumwheres.html on Sugar is now in play.

Looking at the Japanese Yen...

The Japanese Yen futures market has pull backed to a resistance level that previously acted as as strong level of support. It is also sitting on the first test of the weekly 50ema since it broke through the moving average in the second week of February 2012. This may lead to further Yen weaknesses. Matching strengths and weaknesses will be a good trading approach. Commodity currencies such as CAD and AUD may benefit due to its historic seasonal strength. Considering, USDCAD looks weak on the current daily chart; if this triggers we may see further CAD strength. Coupled with the oversold readings on Crude Oil, CADJPY or AUDJPY doesn't seem like too bad a play.

As I'm currently away, posts may be a little light but I will endeavour to do my best.

Japanese Yen Futures:

AUDJPY:

CADJPY:

FTSE 100 Gartley pattern....but watch the US markets and NFP

The chart below of the FTSE 100 is setting up for a potential Gartley short at 5888-5900, this also coincides with a previous swing high and round number. This may be a trigger area for a short position into a potentially seasonally bearish period. However, the DJIA cash market has taken out its highest high point for the past 5 years, the S&P has yet to follow. Not many analysts have a strong and clear directional bias on the equity market, so any trading decision will be discretionary and according to your rule book. One thing is for sure, when investing it always pays to buy and hold rather than convert to cash. Many retail investors are being sent reports to bank profits of the rally we have had in April. This is down to positive US data but weak Chinese and Euro data. 

Happy trading on NFP week and the UK bank holiday :)

RBA cuts interest rates by 50bps to 3.75%

The RBA have cut interest rates in answer to a very weak domestic economy. Most of the growth in Australia and hence the AUD comes from sovereign demand. We've seen similar sell-offs in previous rate cuts but yet the trend has continued. With slightly positive data coming out of China, many fundamentalists are calling for the trend to continue to the upside in AUD. However technically, we need to wait for the correct price action to confirm this. As the currency is heavily traded on external factors, such as sovereign demand....a better way to play AUD will be looking at EURAUD. If sovereign demand is weak towards the AUD then we will likely see a rally in EURAUD as most sovereigns would rather have Euros than the US Dollar due to their QE3 policy and huge deficit. Also, most sovereign nations, currently, have a greater interest in European exports than the US.