USD Correction Across the Market!

In a few hours the end of the month's trading activity has now been limited to the "Corrective Mode" which we have referred to in our recent market view particularly for the USD Index (DXY). As of this writing @96.68 for the DXY, @120.43 for USDJPY, and 1.1066 for the Euro seems to be just a mild corrective move nearing the closing. Boring as it may seem, but sure does gives us some space to kick-back and wait for the next round of news.

The same can be said across the major stock indices to no surprise. Though, the major trend is still intact with a healthy sign for such price pullback on the DJIA and the SP500. We do not expect to have any real action except at the weeks moving forward. For as long as the stock indices stands firm in these levels the contrary attempts to push them lower are slowly diminishing until such time a new round of fresh incentives would present itself before any price action continues.

Have a great weekend! Cheers!

The Challenge is On!

Nice to know, proud and been a part of! 

One of the trading highlights of our career is where we have learned and traded the US Dollar Index and its correlated financial instruments at the height of the US Dollar Index (DXY) in 1985 where its was trading at the 164.70 basis point levels.  

 

And with the Dow Jones Industrial Average breakout at the 7500 in 1997 then in 2002 and again in 2009. Good memories then and now after 3 decades of being in the market! Short of saying we've seen these prices more than three (3) full round turns! We must have been doing something right by asking the right questions before trading to have outlive these volatile markets till today!  

Chicago Challenges NY As Most Important Financial Market 

Or maybe in between trading breaks - 'am just a Chicago Bulls fan when MJ was still playing then while having a nice juicy piece of fine steak at Morton's and occasionally at Ruth Chris Steakhouse each and every game. (not an ad!)

In Focus: JPN225 Ave. & USDJPY

Unsurprisingly the major market's has been steadily digesting the recent moves the past week and entered in a corrective move as expected nearing the closing week of the month. Indeed, for October this year, had been proven to be a roller coaster ride that would end at a higher note for the USD and the major stock indices. And traders are now awaiting for the FOMC data to be release keeping a tight lid on price acceleration from the past week. 

JPN225 Average

Likewise the Japanese Nikkei 225 is not an exemption to this rule.  While making a dramatic price recovery seen @19182 high and is currently working back lower @18779 to this writing. A correlated move with the USDJPY regaining lost ground moving into the 121.47 high and trading at its current price level @120.82. The price alignment on both the YEN versus the USD and the JPN225 average marking their respective objectives reflects  the how markets are well guided by certain benchmarks that once aligned expect a temporary price pause and a steady flow of normality back into the market place. This is over and above the recent news of a rate cut in China which was over-shadowed by investors who have been more keen on the upcoming FOMC report and recent rally on the global markets.

On a Technical Angle:

Tools of the Trade applied is a complex cross section of overlay analysis that were significant in providing directional price swings even before they transpired. JPN225 have found a temporary resistance @19182 high and is on a corrective mode which may continue towards the closing of the month. It has fulfilled its initial price objective on the high. Note that price penetration on a trend would have to retreat back from its original levels. As the current levels has been a good 50% retracement of the previous HI/LO decline which started in August extending towards late September 2015. Click here to continue USDJPY Update

What are the Right Questions to Ask Before Trading?

ANC On The Money

In a recent TV interview conducted by the show host Edric Mendoza. Not in photo is Salve Duplito - is the Resident Financial Adviser of the show at ABS-CBN News Channel - On The Money. An ANC Finance talk show that features all aspects of finance, business, economy, insurance, a lot more from investing to trading in the financial markets.

The recent segment featured several important issues which were broadly discussed on the essential elements of trading these markets for traders and investors alike. We deemed it more fitting to support this interview with a more in- depth discussion of the questions asked. And due to other finer points that are relatively important, the supporting article and information shared for the benefit of traders & investors is made available to effectively drive other pertinent points of interest and issues which we may have fell short of delivering during the show. These discussions would have taken quite  a lengthy time-frame to really be able to understand the intricacies of trading the global financial markets today. A separate check-list can also be found on our website under the "Guidelines for Investors and Traders".

What are the Right Questions to Ask Before Trading?

INSIGHT: Trading Alpha - Beta on EUR & USD - 2nd Tier Analysis

Alpha is often used with beta, which measures volatility or risk even before trade position can be establish. Applying such strategy tool can be quite a meticulous process where the assumption of measuring the extent of price action would be at as against their respective benchmark would only be reflected more often post market risk event results.

However, it can still be done as a combination of Alpha / Beta Framework where certain tools of the trade can be applied into the data equation such as the linear regression to reflect Alpha. This is a 2nd tier market analysis applied on certain market conditions that can be identified prior to most risk events. This is one of those rare cases when it practically presents itself for the taking.

Tools of the Trade: Linear Regression, Relative Volatility Index, 

Price Action & Behavior Analysis

UPDATE ON TRADE: Identify Correlation on EUR & USD

While in the case and market condition of the USD and the Euro: it does have a diametrically opposing direction more often. We redefined this as a counter trend directional move to place it in simple terms. However, during the course of the trade; the Euro's behavior carried an identifiable level of idiosyncratic risk before the ECB rate decision, and was well supported by a fundamentally driven remark from ECB President Mario Draghi. 

Plus the fact, that the Relative Volatility Index have already provided the first clear signal of a turning price point. Again, knowing what, when and how to apply appropriate tech tools would be very useful. As the end-result on the USD measured by the DXY and EURUSD was a diametric price swing which measured to their extreme levels, on top of the spill over in all three major trading sessions. 

"MegaTrade101 starts with the trader / investors experience and work backwards to the trading methodology applied while identifying what traders didn't or failed to do while trading to achieve Alpha trade results in moving forward".

Market Spill Over - What to Expect!

This market rally on Stocks would spill over to Asia after the overlapping movements in European & US markets have been made. We have to see how the Asian currency pairs through the price action of the Asian Dollar Index (ADXY) which has ten (10) major Asian currency components and stocks would fair the whole trading sessions being the last trading day for the week.

For obvious reasons other analyst may tend to say that today's move  was overdone. With the USD touching off at the 96.05 levels, the Dow moving 300+ points and with both the SP500 & Nasdaq maintaining their respective higher levels.

Meanwhile, on the currency market, the Euro have reacted more reaching further down @1.1106 low after ECB Mario Draghi's comments and hinting more QE measures up its sleeves have together increased volatility in the market. Which likewise prompted the USDJPY back above the 120.50 levels which sustained towards the US closing session.

Just how well these market price swings would remain at its present levels is the next question to be answered tomorrow. This is where the typical trader and investor would have to brace themselves with only one trading day left. Do expect wider price swings as institutional players are deemed to take part of it in the next 24 hours.

ONLY THE BEST FOR YOUR TRADES!

Reference to: Stock Indices Positive Tone

DXY RVI Tech Divergence Backed by Fundamental

An Effective Combination Properly Timed can result into a good trade!

 

Justified by the fundamental comments by Mario Draghi and the Jobless data: applying an appropriate technical analysis prior to the reports have made it more encouraging that volatility defined through a divergent trend before it occurs has proven to be an effective strategy.

The higher probability can best be seen after the fact as prices for the DXY have already moved slightly above the 96.05 levels as the figure shows. Whenever no session pullbacks happen and with a sustaining bullish sentiment remains, then the next probable move for a follow through is more likely to occur. Of course, it is how we perceive the market direction, but respect for what the market would do will still prevail as it dictates its direction based on the flow of dominating market players.  

Technical Perspective Backed by Fundamental Reports

Euro & USD Reacts In Counter Trend Direction

At the back of ECB President Mario Draghi's comments that the ECB is flexible enough to sufficiently address QE whenever necessary has provided the initial market move for the EURO back below the 1.1300 and currently @1.1245 to this writing.

Likewise, supporting the actual session high for the USD has been the lower than expected Jobless claims that has been favoring job sustainability. An easy way for a double whammy for a USD rally has had bull traders adding increased interest in moving the USD price recovery at a pace contrary to its recent decline at the middle of the month ending the 14th of October. However, a cautious approach should always be in check as the monthly configuration on the USD could change as we move forward to the end of the month's trading.

This price recovery of the US Dollar Index (DXY) is the start of a renewed recovery for as long as momentum can be maintained: backed by an increase in volumes near the closing of the week. The 96.05 - 96.50 basis point range levels would be the first line of resistance to hurdle for as long as no major pullbacks would occur towards the end of the week's trading session.

And with that said, whenever the trade set-up plays within this conditions, and with the EURUSD failing to make a stronger come back towards its previous high nearest to 1.1515/20 levels, the probability of a near term decline called dated 9.30.2015 is in the making. As the market volatility turns direction for now closer on a weekly basis as reflected by its price action. Current low for the session is @1.1180 and hawkish market sentiments on the Euro prevails.

The market will always be there for the taking!

 Its a Friday everyone! Do expect a slow down at the end of the week's trading. Have a great weekend. We're off for a much deserved & delayed 3rd quarter  trading break for the year. A bit extended due to the market conditions.

Remember, that the market will always be there for the taking. Discipline is key for every successful trader and investor.

ONLY THE BEST FOR YOUR TRADES! CHEERS!

VIX TURNS MARKET DIRECTION

 

The stock market indices' ability to recover reflected better from price action behavior which have been proven to show how bulls have retaken the price levels back to where it started. Both the Dow, USD (DXY) and the SP500 above their respective benchmarks @17000, @93.80 basis point and @2000 clearly shows the reflection of the Volatility Index as a useful trading gauge for trend direction.

US DOLLAR INDEX & DOW JONES

Although, the USD price recovery came late into the picture, both the DOW and SP500 had an excellent run staying above these marked levels turning into positive territory. Sentiments have similar reactions from positive fundamentals on jobless claims towards the middle of the European trading session. 

Volatility Index (VIX)

A keen observation and price market behavior comparing the VIX and the two major indexes have shown the probable turning point where prices would turn. Noting that such increase in volatility on a rapid downward price direction can be seen as compared with the inverse of such direction higher with a considerable lower price volatility, as shown on the two images above.

Each point of reference on the VIX has to coincide with the projected price target of the indices. An example of which shows where the low of the DXY, DOW prices corresponds to the high of the Volatility Index after coming from the market consolidation (Trading range) and would eventually turn into a break-out then a directional trend in the making. 

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Post Dovish FED Validates 2nd Price Call

DOW JONES POST FED 10.08.15

With the FED minutes keeping the rates at its current levels have been the catalyst to drive the major stock indices higher, while meeting our 2nd price target for the DJIA above the 17040 price call stated last Oct 01, 2015. 

While the SP500 and the JP Nikkei Average worked towards their respective price levels @2013.43 and 18210 accordingly. This gave bull traders and investors quite a reason to celebrate contrary to the 3rd quarter 2015 poor performance on stocks.

The early trading session also were keen to see a relative lower USD touching a well technically supported price level @95.05 that reflected a rebound while still working at the session corrective price @95.30 levels. For as along as these prices hold above the USD's equilibrium levels, the currency market would continue to experience volatility where price pullbacks would be a norm. Particularly with the European single currency the Euro briefly touching the 1.1315 session high and drifting lower back to where it came from @1.1223 and again recovering post FED minutes release.

On the tech angle, the EURGBP & EURJPY cross rates respectively provided the relative support as made mention.  With Cable and USDJPY held stead fast while trading in a tight range where Cable is @1.5352 and the USDJPY @119.95. The currency market's price consolidation is getting tight as a breakout is just a matter of time. Although, the first clear signal has already been provided by the FED, yet alone do we need to see a break. Most chart patterns have been identified, all we have to find out is how volumes and market behavior plays out current market conditions.

With that said, by keeping a close monitor of the US DJIA, SP500, NASDAQ and Asia's JPN225, China's Hang Seng including Bloomberg's JP Morgan Asian Dollar and the US Dollar Index would traders be more in the loop of keeping at proximity as to how all these relatively correlated markets ca best suit thier respective market analysis where it all starts before properly executing their trades in the market.

USD & Stock Indices: Stirred Not Shaken

The lower than expected 142K Jobs vs. 201K data on the NFP figures posted a sudden decline of the USD, measured by the DXY registered a 95.20 low upon the release of the report. The natural reaction of the market were felt across the board on the European majors. Where the Euro rose to the 1.1318 levels and Cable's similar reaction towards 1.5237 in a similar fashion. Meanwhile, the Dow Jones touched 16k and with the SP500 @1893 levels respectively was likewise the initial price swing we've seen that held well for a few hours since then, while Gold had an excellent rally leading to the 1141.15 high from an 1104.00 low just before the news report.

With an early reaction from the US trading session, the next six hours of trading had a different tune towards the closing session. The stocks have recovered from the previous lows just to come up positive at the end of the week's trading activity. Where bull traders have simply gained back their footing and worked thru the market's lower prices realizing the fact that the economy was not as bad as others have thought, so they say! Yet, this has led a corrective price adjustments to be a good time to re-position in the near term as there were still no real signs of a heavy turn over or hands changing except for those who have maintained to the sidelines when the declined occurred.

These are the classic & correlated pullbacks mentioned; where sudden price movements are made post risk events that can make or break positions for traders and investors. As the much anticipated higher jobs figure were contradicted by the actual figure was a blow for bulls. However, post NFP, technical perspective came into play after getting back to the drawing board and found that the USD decline has not even pierced through the 95.05 1st support levels. This was an encouraging signal while comparing its corresponding price equivalents on the Euro and Cable.

The price recovery towards the closing was not a surprise, but the momentum of the price pullback had enough momentum to hold through the closing session. This just shows how investors and traders on the bull side of the trade have gained back some relief from the decline pushing the Dow, SP500 and USD into positive territory.    

NOT JUST FOREX: Stock Indices Positive Tone

ON 4TH QUARTER ENTRY

Anticipating a corrective move on the indices have paid off from the price recovery not only for stocks but for the USD as well. This may turn out to be supported with a slight increase in volatility against a backdrop of recent declines. And with Friday's data above expectations would provide the eminent push for a USD run as against several resistance area seen on a technical angle.

This 4th quarter would be an attempt for a new found price recovery among the major indices with the DOW JONES nearing a 16920 - 17040 range recovery may well take the market by surprise as the USD would increase the likelihood of a synchronize price direction contrary to the norm would be ideal. For a gradual and well pace price recovery would probably be a case when market conditions would occur on the first month of the 4th quarter. A retest of these market high conditions can be seen when prices starts to move towards the North combined with a variable decline on volatility nearing the November month.

For now, expectations of a better jobs data well above would trigger a push for the USD. Any sudden changes on volumes and momentum driven price action may tend to fizzle down towards the closing week. In other words watch for the pull backs on every risk events in the near future.