Where #Fundamentals #Technicals Dictates Price Direction

The recent UK negative reports have sent #CABLE declining back towards the 1.4180 session low in the US session last Friday as a result of a price recovery for the #USD index @94.85 from the Jobs data that sent it down @93.42 low. The wide trading range as we made mention, as been the norm where price swings back and forth in both directions has been maintained.

Stretching towards the next couple of weeks ahead, both #FED and #UK_BREXIT will provide the increase in volatility. This will prove to be in part of the end of the 2nd quarter trading that would pave the way towards the opening of the 3rd quarter which likewise provide a glimpse of the true direction. As of CABLE, expectations of a +/-9% -to- +/-35% price swings are well within its wider range in the next two weeks to follow.

Although, MegaTrade101's primary outlook remains neutral to bearish for CABLE, the strategy for these event risks would be played along with Futures &  using Options as an indicator for Spot #GBPUSD; in sync with the US Dollar Index securely positioned from its previous low as a buffer for any adverse price action. With the rest of the portfolio would weigh heavy towards equity indices with the #SP500 more favored than the rest.

In essence, a three-currency play + one  both in #Spot, #Futures, #Options & #ETFs markets would be applied as a strategic plan of action in dealing with these risk events heading towards the end of the 2nd quarter. The advantage of knowing how to play the financial markets not only with Spot; with Futures & Options provides a distinct edge in spreading risk while netting a probable positive result only when done right and executed with the utmost market timing.

The market behavior and price action would be well monitored next week as it would provide a glimpse of the prelude sentiments in the market place before the start of the new quarter trading. We do hope that these market insight would be beneficial for other traders moving forward.

Recognize Market Behavior Relative to Price Action

Supplemental Market Brief POST ECB on EURO...
Confirmation from COT Report

At the time of actual rapid price action, recognizing the market's behavior relative to price action was a critical time. Since most speculative Euro traders were already well positioned on the short side of the market. And eventually reloaded upon learning what the ECB had decided to do. That led the decline of the EURUSD back to the 1.0860 levels and made a sudden turn-around thereafter until the closing of the week ending the 11th of March 2016.

Sure enough the volumes supporting the rapid price change that led the upsurge was substantial, 892K contracts. And this was 2X the open interest that ended the session with just about 436K +/-. Open Interest were 4392 contracts by speculative day traders mostly coming from the retail, non-commercial markets.

And base on the CFTC - Commitment of Traders Report - better known as the COT report that was just released late afternoon. Indeed the speculative shorts were in the area of 91.3K as of the closing date of Tuesday March 9. That already provided some glimpse that the market positions were in fact over loaded. This alone was that confirmation before the data where the principle of selling the rumor and buying the fact still plays a role in the old school of trading combined with new technology-driven base trading does matter with these volatile markets.

Knowing when a speculative outlook turns into a smart trade position for value investing is indeed a edge over the market. Utilizing the important information and data on Volumes and  Open Interest in Spot, Futures and Options markets can only help derive a favorable investors with the right trading decision most of the time. 

Therefore, recognizing the rally was certainly a market short-squeeze for speculative traders which we do not encourage especially for new retail day traders that would simply get stop-out of the market without a reasonable fight. This is were unnecessary losses can be avoided. Due diligence is always good as it pays to walk the extra mile!

Sequence of Trade Strategies 2

Original Trade Position 1

Investors Reality Check On Stocks & Currency Markets

Most retail stock picker investors that trade individual stock sectors would have no interest to carry an expensive Hedge strategy on top of their existing position even when major international stocks have made triple digit declines.

Although, individual stock picks vs. Beta Hedge to produce Alpha in Overall portfolio can create greater value for the amount invested in the market. But sometimes investor complacency that only pays attention to stock prices would have to go an extra mile beyond simply looking at disclosures and P/E ratio.

Investors Reality Check on Stocks & Currency Markets

Strategy Spread: Spot CCY vs. Crosses, Stock Futures as Indicator

While taking a que of the Stocks Indices Futures market, the price recovery in Europe has somehow provided a support at the opening prices for the 3 major indices. The Globex market including futures have provided the better alternative to implement strategies that can the least be used as an arbitrary trade either to position a trade in the European session before the US market opens.

No other than a futures strategist / trader has better understanding of how futures can best serve investors especially in Asia that can have access to better liquidity and execution when applied with while awaiting for the economic data. Again volumes increases in this volatile price action where a triple digit decline and a price pull back gives day traders the flexibility to move in & out on both directions by using these 3 major markets.

The relative trade strategy of utilizing Dow/ SP500 & Nasdaq futures for an expected price pullback is an excellent approach either timing an entry position within the trend or carry a short-term corrective move over a certain period of time. The extended decline has already been confirmed with the past two consecutive quarters now has reflected a negative bias for stocks. Which somehow was cemented by the contagion market from China. This includes Asian markets to the list. However, @megatrade101, we do not discount the probability although slightly that there could still be an attempt for a price recovery within the 4th quarter trading for the year. 

Meanwhile, in Asia the JPN225 (Nikkei Average) have taken the lead of decliners by breaking the 17k benchmark previously set on its way higher and reaching the 20932 high (July 2015) and continued to decline at its current levels @17150. A well defined major correction within a major trend has transpired and there is only one quarter left for an attempt to be positive but chances are quite slim at the moment.

As of the current market condition, the Euro has been quite supported with the cross rate currency pair primary with Cable and Yen. As the USDJPY has held well in a tight range while the EURGBP have remained in a positive tone for the past few sessions. 

Correlated Indices, ETFs and Currency Strategies

Cross trading with a touch of Arbitrary Hedging -

In the financial markets, the ideal approach that investors tend to diversify their respective investment portfolio to meet goals or at least achieve a higher degree of return nearest to their financial objectives over a specified period of time. However, at the course of market conditions, certain time frames of exposure does not necessary follow due to changes in market sentiments and a variety of globally interconnected fundamentals that will always drive price action.

Weighing in which among these factors would weigh heavier which would likewise dominate the market place. Whenever these market drivers are in play, wider price ranges in both market direction could be difficult to identify and even to anticipate the session's price changes due to volatility, especially when they are fundamentally driven instruments either in stocks, currency or commodity. Let alone in stocks and commodity, a certain degree of difficulty selecting the right correlated financial instrument would be hard to do. With over 1700 ETFs to choose from would be similar to a novice trader trying to find a needle in a haystack, without the assistance of an experienced mentor /
trading partner is just an example.

However, ETFs are only one of the alternatives investors can consider contrary to the fact that ETFs do have some trading flaws especially so when trading limits and halts certain stocks are concerned. Although, this maybe only be a concern for inexperienced trader / investors not knowing what to do when extreme volatility are present in the market, the likes of Black Monday. That is why, we do encourage to spread investment risk not by stock or currency choices alone but addressing the overall investment portfolio. And at the same time "Capitalizing on Liquidity" that the Foreign Exchange market provides on extreme market volatility only when properly / Timely executed. Without these guidelines the end-results could be financially dangerous.

Click to continue.
Correlated Indices, ETFs and Currency Strategies

Learn to Arbitrage Hedge - Avoid Unnecessary Losses When There Are Trade Solutions

In an online meeting with some of our constituents trading both currency and stocks in Asia and the US; we were asked how do we manage to find certain market conditions that has distinct trade setups in trading the market. Particularly now that skeptic traders have finally realized that a declining stock and US Dollar trend have made its point.

The first answer is why it takes too long to accept that certain market forces can change even before any turning point can be reflected on the chart formation. This can be attributed towards most technical trading orientation and practices traders tend to follow once a resistance / support price level would be broken through price action.

Market conditions in global stocks have followed a bearish contagion since the start of the 3rd quarter this 2015. The correlation of the Dow Jones, US Dollar directly and indirectly comparing the indices with the price action of the Philippine Stock Exchange Index which have been associated with is a strategic plan well worth checking especially for Asian / US Asian investors involved in the financial markets. Not all traders present during our online meeting have had the opportunity to arbitrage trade positions in Manila in other markets; so to speak, As most traders either tend to hold individual company stocks or run a day-trade which obviously are on the red by these current moves since touching the 8100 levels of the PSEI.

What we do emphasize is that to arbitrarily hedge their total portfolio amount or funds traded correspondingly by using available trade positions in the US markets through foreign affiliated and licensed broker firms that carries an indirect/ direct link to the Philippine stock exchange index. It maybe a complex process for most without the proper training and introduction to the right financial instruments including strategies correlated with the major stocks traded in the local stock market in the Philippines. But there are methods of doing so that will be an advantage or at least minimize unnecessary losses. With the current decline seen with the Dow nearing the 17K mark, the PSEI well below the 7500 is on its way lower below the 7000 support mark in the near term. With a market holiday expected traders would now have to wait for the following week to be able to cover long positions or simply exit their long waited positions at a loss.

Strategies are open to all who simply try to do their due diligence in market research. Where and how to implement these trade plans are within reach is of course is the next step in keeping pace with portfolio / investment modernization.

For more information, email us at info@megatrade101.com

FX Price Action Defines DXY Direction

Fundamental v. Technical Market Movers:

DXY v. DXM15

The ‘Devil is in the Details’ sure does have quite an effect; as the ADP employment report have missed expectations which showed a 169k growth in the private sector jobs in April, well below the expectation of 190k. And the prior month's figure has also been revised lower from 189k to 175k. The initial catalyst to a bear reaction move for the USD which re-affirms the market call signifying a near-term corrective move for the US Dollar effectively a more positive and direct move that would affect CABLE, EURO and the EURO/GBP Cross rate.

Technical Perspective: DXY v. DXM15 Futures
FX Price Action Defines DXY Direction

Is Hedging an Asian Stock Portfolio Equally important knowing the US DOW declines Triple Digits?

Every time the US Dow Jones Industrial Average (DJIA) declines equivalent to or more than 1.26% considered to a triple digit decline, would definitely be another blow for Asian stock markets by the time it opens. 

Under these circumstances; what can main-street investors in Asia do to take pre-cautionary measures and strategies knowing that the day markets open that a huge decline would be expected? As we know that Asian stocks do mimic or does follow the major US markets. And by having access to both primary and secondary markets should be made available for investors to at least be able to arbitrary hedge and/or be advice by their respective fund managers as to how their portfolio investments could be protected whenever such movements are made while their respective markets are closed.

      Access to primary Markets for Asian Main-Street Investors

Behavioral Trading Insight: AUD JPY AUDJPY

A relief recovery where market conditions for equities in Asia followed suit as continued optimism over an impending US budget resolution may actually take place and avert a possible debt default. On the other hand, is it just a quick fix-patch for an extension that would buy more time to come up with a real working agreement that would have a real serious effect for a slow-growth US economic recovery?

Weighing these news have provided investors a timely easing from tension, fear and uncertainty clouding the market place coming from all directions. However it maybe, the initial talks would probably be acceptable for both parties simply to reach the end of the year's quarter ending of 2013 would be perceived as a near-term USD positive.

With that said, how does one prepare or create an effective trade strategy in the Foreign exchange market for any eventuality of a default or a resolution in the making given a limited time period? Obviously, there would be a lot of in case-scenarios that can be conceptualize before then. And the most common for a doom & gloom market reaction is a decline of the USD and the global catastrophic effects of a US debt default that could ripple in the entire financial markets. And that is where almost all investors and traders alike would come in together to sell-off the US Dollar.

MegaTrade101.com - Behavioral Trading Insight:

Price Action & Market Behavior: DXY GBP EUR JPY & Crosses

In our recent market vew analysis dated the 1st of October we have defined the heavier fundamental factors influencing the foreign exchange market. The price action and market behavior reaction to these issues surrounding the market were carefully studied before and after the fact.

The recent lower opening gap for the USD as measured by its DXY equivalent resulted with a slight corrective move and followed through with a decline reaching @79.62 basis point to this writing. And a similar reacton from the Euro after the ECB remarks have added to the USD decline that pushed the EURUSD @1.3630. The contrary move by Cable pushing back to 1.6160 have finally supported the EURGBP cross price reaction from its support slightly lower @0.8330 and is currently @0.8438 recovery price levels. The closing prices of the DXY and majors are critical as they would provide a glimpse of how the market would move in the weeks ahead. Especially a delay on the NFP report would spark a sudden unexpected move within the market contrary to its present sentiments.

Price Action & Market Behavior

On GOLD & FOREX

MEGATRADE101 Aligned with PAULSON Insight

The recent interview with the legendary Hedge Funds Manager John Paulson on CNBC have remained undauntedly and determined with his outlook on Gold. The fact that the demand in owning a piece of the precious metal have undoubtedly remained strong specially at these current price levels.
Trade with Confidence - On GOLD & FOREX...