Monday, September 1, 2008

The Stories are Now All About the Pound! --IFCN Wk 39 -Mon- Equity: $1,014.23

Dollar bulls should start to worry a little.

All the news has been buffeting the Sterling and benefiting the Dollar, at least as far as the pundits will venture a comment.

Crowd behavior is a frightening thing. And fickle, obviously. Now the pound is the object of misery. The Euro isn't doing too great in the polls either .

A good rule to live by – whether in trading or just living: never rejoice at the misery of another. If you do, soon enough the misery may be yours. Moderation in thought goes far in trading. You are less likely to go to dangerous extremes in your behavior.

On a slightly different note, it is always good to have a decent perspective of where a market has been in the past to get an idea of where it might go. The pound is falling, so let's see where it could land.

One of the greatest market tendencies is for a market to retrace to its 50 percent point, recognized and written about at least a hundred years ago by various market researchers in the past, the most notable being W.D. Gann and R.N. Elliott of Elliott Wave fame.

Elliott hypothesized that because humans are themselves rhythmical, their activities and decisions could be predicted in rhythms and one of those rhythms involved prices and their equilibrium.

When any specific move takes place, all the prices bought and sold from the very bottom of the move to the very top of the move tend to average out at the very middle or 50% level. For this reason alone, the 50% level tends to draw any given market to it when that market goes into a corrective phase, such as seen in the Gbp/Usd right now.

Notice the Gbp/Usd chart below. You can see where the market has been since 1991 till now. The mid-point of the 17 year range (and the 50% retracement of the previous bull market) is 1.7425. We're not too far away any more.


Note the multi-year diagonal triangle that was broken to the downside, indicating a serious move down. We're in it now.

It does look like the pound could be under pressure for a while. No typical support areas have helped the market maintain even a bounce. It seems very likely the Gbp/Usd will get as low as the 1.6600 area before it has completed its full downleg. That could take some months.

-----

We finally got filled on all five of our week's FirstStrike trades and have already been stopped out of two of them, the Usd/Chf and the Gbp/Usd. Details are below-

This week's FirstStrike entries:
  • Eur/Usd: Short @ 1.4584, stop 1.4644. Trade in progress.
  • Gbp/Jpy: Short @ 194.93, stop 195.83. Trade in progress.
  • Gbp/Usd: Long @ 1.8080, stopped out at 1.8020.
  • Usd/Chf: Short @ 1.0979, stopped out at 1.1039. (Exactly the high of the day!)
  • Usd/Jpy: Short @ 108.03, stop 108.63. Trade in progress.
Any FirstStrike trade not stopped out before Friday-- exits on Friday just before 15:00 CST.

That Usd/Jpy trade still looks interesting. It worked last week despite all of the other currencies' weakness against the dollar. If the dollar starts giving up some of its gains it could likely benefit the yen the most percentage-wise. As always at this time, we have a long week ahead of us.

Last week's trading got a bit wearisome.

Have a good morning.

Current equity is $1,014.23.

Joel Rensink

www.infiniteyield.com

PS: To receive the FREE! trading rules for the Infiniteyield Forex Challenge ($499 value) and the semi-monthly newsletter about this challenge, send an email to: newsletter@infiniteyield.com and tell me to which address you would like it sent. Please do not use AOL, Hotmail or Yahoo addresses. They've been known to filter out more good mail than actual spam. Try a Gmail address. It's free, simple and perfect for traders!

3 comments:

MikeZhang said...

"The mid-point of the 17 year range"? Typo?

Hi, Joel:

Having been your blog for a long time, I am always amazed by your accuracy of the jugdement of the current market trends & sentiment. How can you do this? :) I mean if people can have this ability, it's very hard for him not make money, as long as he is not insane.

Any guidance even a little will be much appreciated.

Btw, have you considering any sort of mentor program? The last time you mentioned the seminar, I am very interested but it's not feasible for foreigners, online will be more popular.

Thanks and have a nice day
Mike

Joel said...

-MikeZhang-

Thanks for the comments.

The posted chart was for the last 17 years. The center price of all that action, AND simultaneously the 50% retracement of the Gbp/Usd upmove from 2001 is 1.7425.

I do occasionally train existing traders or private trading firms robust methods that they can use to capitalize on their abilities. Unless the client is a hedge fund I don't travel much, and I don't send sensitive materials over the internet for obvious reasons.

Trading is my first love and only occupation. Why spend time teaching others when it is so much more profitable to trade? (With much less hassle - no questions or answers to be made, just get in or out....)

That's why I continue to trade and only teach those that can fit into my schedule. Not being harsh, but that is reality.

Most of the Europeans that follow this site are hugely intelligent and have much valuable input. I wish you were closer geographically! It would be great to meet you.

Joel

MikeZhang said...

I see

Thank you sir, and I wish one day you will be my guest.

Have a nice day

Mike