Monday, August 4, 2008

Build a Higher Return, They will Come! --IFCN Wk 35 -Mon- Equity: $705.30.

Former Fed chairman, Alan Greenspan drew an intense picture of
the current financial market challenges in a recent interview.
Greenspan stated that it was a "once or twice a century event
deeply rooted in fears of insolvency of major financial
institutions". He also felt that it was increasingly likely that
more bank and financial institution bail outs would take place
in future months. He said that he was convinced that the entire
situation would not go away until the housing market starts to

I don't think we have to wait too long. A lot of things are
beginning to happen, and this week's action is looking like a
potential tipping point.

Gasoline purchasing now burns up 11.5% of the average
household's income, up from 8.4% last year, and 4.8% in 2003.
Look for that to change downward. People's behavior changes
when costs for a utilitarian item doubles quickly.

We are beginning to see dramatic drops in oil prices. Already,
people in America are beginning to feel a collective sigh of
relief and are beginning to revert to previous behaviors...,
consuming. Something the US does very well. Which heats up the
economy quickly.

The stage is getting set for a major move in the FX markets, and
professional currency traders are starting to see great risk to
the previous status quo. That is, selling the dollar anytime
you felt like it and then seeing it fall.

The Dollar just doesn't want to drop that much anymore, and if
it does, it is for just a few hours, not days.

There are four banks meeting this week. Another bank started
lowered interest rates two weeks ago, the New Zealand Reserve
Bank. That was the highest yielding industrialized nation's
currency, and according to their statement of intent, will go
much lower. If some of the other important banks start taking a
similar tack, which is my strong belief--- and the Fed takes a
tour towards higher interest rates, big changes can and will

The result? A flood of interest in the dollar for a carry trade
vehicle. And a vehicle for investment for dollar related
markets, like the stock and real estate markets, both very
undervalued assets.

If you have all the major industrial central banks in the world
lowering interest rates, while simultaneously the Fed is
hawkishly about to raise rates, that will feed the flow of
money. Funds will flow into the U.S. from the rest of the
world. That could further encourage the central banks around
the world to continue lowering interest rates, locking in a new
trend towards the dollar for a significant period.

This could be a very key week. We're already involved via

The Gbp/Usd fell strongly today, filling our short at 1.9686
which continues with good profits at the time of writing.

Seven hours later, the “turtle” short signal mentioned last
week @ 1.9648 was executed for those who follow it.. Once the
market hit that price, it didn't even pause. It dropped through
the area like a hailstone on a mission.

Also filled was a Eur/Usd long trade that was marked for death--
executed only due to a fund stop-running spike and subsequently
stopped out. Also filled were a short Gbp/Jpy and a long
Usd/Jpy trade. No trade in the Usd/Chf yet.

The following are this week's FirstStrike entries:
  • Eur/Usd: Long @ 1.5627, stopped out @ 1.5571 for a 56 pip loss.
  • Gbp/Jpy: Short @ 211.98, stop 212.88. Trade in progress.
  • Gbp/Usd: Short @ 1.9686, stop 1.9746. Trade in progress.
  • Usd/Jpy: Long @ 108.30, stop 107.70. Trade in progress.
Note: Any FirstStrike trade not stopped out before Friday gets
exited on Friday just before 15:00 CST.

Current equity is $705.30

Have a good morning.

Joel Rensink

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Anonymous said...

How come some of your losses are for less than the stop loss. Example today is the eur/usd stopped out for a 56 pip loss. Would it not be stopped out at a 60 pip loss like the others?

Joel said...

I just couldn't stand holding a trade that I knew was going to lose anyway, one minute longer.

Would it make you feel better if I took a full 60 pip loss? It wouldn't make me feel better.