Wednesday, November 25, 2009

EURUSD Breakout

Yes we had anticipated this on Friday and it did a perfect breakout above the trendline, retest of the trendline and a STRONG move higher. It seems we are seeing ourselves in a w3 that may complete today which should follow with some sideways action above the previous high (though I expect we break to go a bit lower) and then possibly resolve this around the 1.52 range that many had been calling for.

There was an interesting topic on evil speculator about this as well. One of the arguments presented is that the carry trade is almost over. It now takes a lot more for a drop in the USD currency to move up the markets and the tight co-relation is distancing itself more and more. Looking at the parabolic move in gold and xtrends (sol) calling a top in gold here as well is even more of a sign that whatever correlations the market had are starting to break up.

Take a look at financials (XLF), real estate (IYR) - remember those are the ones that got us into this mess - and where are they today? far away from previous highs without any sign of retesting them in the future.

Based on the disconnect in many sectors and the crazed parabolic moves, breakouts and other we are nearing an important turning point - either melt up higher and go into a parabolic equities move or start of larger retracement that may turn into something more. At this point we have too many important lagging sectors that need to be rotated into or brought back higher to give this up trend more confidence.

Its still a holiday week and I am forcing myself not to take any trades - I am still in wait and see mode as we continue to be range bound and burn off time. If we do make a break for 1120 this week of course expect me to leg into more shorts.


  1. the more and more I am looking at this gold chart - the more I want to give it a try for a short position. May play this one via futures - was trying to find the right option combination for this one and really did not get anything I liked in terms of risk/reward.

    At the same time, I once told myself no short gold ever =)

    What do you guys think here?

  2. wow @ eurusd ... what the heck is going on there ...

  3. ok did take a position today =) USDJPY (nice double bottom forming there) ... 2 different sizes and 2 different stops. Will update positions on the weekend for that one.

  4. also shorted a small gold position here via futures.

  5. Chris, i have never traded dollar or gold in futures. what are the risk, i.e. similar to ES points I mean. What are other options to short gold and long dollar? thanks for any advice on the vehicles to trade

  6. YGZ09 is the mini contract for dec gold. Spread is decent but its the same concept as ES. You may have to enable your account for this data. 1 contract is around $1500 I think and it moves around $100 for $4 in gold change.

    Now for longing the dollar. I prefer doing all the grunt work myself and compare the different currency pairs. I would love to short EURUSD here but I am a bit concerned - however I can still be a dollar bull by longing USDJPY as we have a better technical pattern there.

    Dollar I trade via forex though, not futures, I think you can do it via futures too but not 100% sure. I think the leverage is quite high there as well.

  7. short eurusd as well. smaller position though.

  8. entered jan puts via spread here 112/111

    will keep the short leg until monday and then scale out.

  9. I am questioning what is going to happen the last 2 days this week. If this was not a holiday week I would be short on ES via futures with a stop at 1114. Its a great risk reward ratio here.

  10. sorry ... keeping puts here as straight jan puts. Wanted to do spread but there is not much premium drop in those until monday. So keeping it as straight puts for now.

  11. Jan puts fro what? spy?

    what about UUP? does it have option for the leverage?

    thanks for the info

  12. ok my position entries for today. Since I am not home not able to add them to open positions till weekend.

    Jan 112 SPY puts
    Long USDJPY (forex)
    Short EURUSD (forex)
    Short ES (futures)
    Short Gold (futures)

  13. sam, instead of trading the dollar etfs I trade the currency directly. In this case I am a dollar bull by shorting EURUSD and longing USDJPY.

    Its a bit more precise and I have the option to trade 24/7 again which is nice. When dealing with ETFs its never quite as easy to pin point the right entry/exit.

    When looking at forex you can start very small. Check with your broker and setup a small account (even a play money account) and start trading EURUSD (small size contract) by trading 1 at a time. 1 costs your around $150 and can move quite a bit =)

  14. 12 days for ES in a 25 point range. Quite incredible to be honest. As we are on the edge of the range here we have a great lower risk type of trade - however this lower risk type trade may turn against us due to holiday shenanigans.

    As mentioned I tried not to enter any positions during this holiday week - so lets see if entering some today was the right move or not. Stops are in place so lets see if I come out unharmed here by monday.