Tuesday, July 29, 2008

Dollar Recovery Obvious, but Obvious to Whom? --IFCN Wk 34 -Tue- Equity: $666.73.

In trading, perception tends to become reality only after a period of
time where there are no major conflicts to the new perception.

Any basic commodity group that is priced in dollars and is showing a
decline in prices, is giving the perception that the dollar is getting
stronger, at least in that sector. If it were just one sector, the old
perception of permanent dollar weakness might remain.

But, it isn't just one sector losing value to the dollar. Many sectors
are now paling in strength to the dollar.

Gold is providing an unflinching indication of the market’s perception
of risk and dollar sentiment. Gold prices have been consistently
falling on the back of troubling news in the Arab states and financial
blowups which would normally (in a “weak-dollar” perceptive world) cause
the metal to surge $25 per news shock. This suggests that the dollar
is likely to continue gaining in strength.

People understand that the US economy is not setting records, but it
isn't falling apart any more either. It was holding its own with
$147/barrel oil prices. It is inevitable that it should get better when
oil drops below $100/barrel..., just down the road.

Year ago, (when oil was $50/barrel) a veteran trader stated:
“$100/barrel oil is not the problem, it is the solution to high energy
prices”. That solution is working its magic, but not in a way that most
consumers appreciate.

The building of strength in the US economy will continue if oil prices
continue backing off. Crude oil is proving itself plentiful, and if the
world doesn't look out--- who's financial institutions and investors
have finally all gotten into energy based funds--- they will experience
a shocking drop in position prices as disinvestment pressures force them
to liquidate at serious losses.

Yin and Yang continue forever. Just when you thought it was safe to
expect permanent high energy prices....

As I've mentioned for many months, the weakness of the US economy has
already been priced into the market, but the deterioration in places
like the Eurozone and the UK is catching many financial units by
surprise. That too means the dollar will be the new strongarm on the
block for awhile.

The Challenge account finally got long the Usd/Chf. To bad the
Challenge account didn't have reverse trades entered in the Eur/Usd this
week. For those of you who did, good show. My personal accounts got
short the Eur/Usd and Gbp/Usd because of daily breakouts, so I'm very
glad the dollar is showing some strength now.

The following are this week's FirstStrike entries:
  • Eur/Usd: Long @ 1.5767, stopped out at .5707 for a 60 pip loss.
  • Gbp/Jpy: Short @ 213.75, stopped out at 214.65 for a 90 pip loss.
  • Gbp/Usd: Long @ 1.9946, stopped out at 1.9886 for a 60 pip loss.
  • Usd/Chf: Long @ 1.0407, stop 1.0347. Trade in progress.
  • Usd/Jpy: Short @ 107.31, stopped out at 107.91 for a 60 pip loss.
Note: Any FirstStrike trade not stopped out before Friday gets exited
on Friday just before 15:00 CST.

Current equity is $666.73.

Have a good morning.

Joel Rensink

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