Tuesday, December 16, 2008

---Wow!--- Up 10.9% in One Day! – IFCN Wk 54 –Tue- Equity: $2,185.61


That's all one can say after a day like today. After the Fed news came out this afternoon, markets bolted higher, from currencies to bonds, and commodities like natural gas and silver.

We finally got filled on our last FirstStrikePlus trade of the week, short the Usd/Jpy @ 89.21.

The Federal Reserve cut its target interest rate to a range from zero to 0.25 percent, making the U.S. dollar the lowest-yielding currency of all industrialized nations. This means that buying virtually any currency vs. the dollar is a “carry” trade. Even the Japanese yen, which has had lowest-interest-rate status for years, now has higher interest rates than the dollar.

In addition, the Fed declared that it will “employ all available tools” to stimulate economic growth.

The euro exceeded 11 week highs against the dollar as the central bank said it will expand debt purchases (like buying Treasury Bonds) to fight recessionary pressures, adopting a policy known as “quantitative easing”. The Wikipedia definition of that term is that, “... the central bank prints new money, in order to increase the supply of money.”

Can anyone spell I-N-F-L-A-T-I-O-N ?

A rule to tattoo in your brain:

Money once created never disappears.
It shows up eventually, and more money supply without a corresponding increae of goods decreases the value of what money you have.

One of the few places you can directly profit from inflation is through holding commodities, gold or silver, or owning currencies that are not inflating as quickly as the target currency.
Expect more moves like we saw today. Owning silver (XAG) is not a detriment when inflation appears.

The week's current FirstStrikePlus trades:
  • gbp/usd: Long @1.5173, stop 1.4993.. Trade in progress.
  • eur/usd: Long @ 1.3676, stop 1.3417. Trade in progress.
  • gbp/jpy: Long @139.23, stop 135.91. Trade in progress.
  • usd/chf: Short @ 1.1582, stop 1.1763. Trade in progress.
  • usd/jpy: Short @ 89.21, stop 91.51. Trade in progress.
FirstStrikePlus trades will be exited on Mondays at 00:00 CST if profitable. (First-Profitable-Open Exit) See complete rule-set for effective trade management.

Trading account equity: $1,827.61

Silver position equity: $358.00
(Current XAG price: $11.19 – 200 unit position average: $9.40)
TOTAL Equity: $2,185.61

Yet another new equity high! This will not continue forever, but the 337% increase to the Challenge account in 54 weeks – with hundreds of individual trades – suggests that volatility breakout methods still can work quite well.

Joel Rensink

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!

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