Gold – sharply higher
Silver – sharply higher
Treasury bonds – sharply higher
Stocks – sharply higher
Currencies – sharply higher
See the important trend change on the daily Eur/Usd chart. Notice the parallel trendlines crossed.Tuesday I mentioned that there was “Quite a showdown situation building.” and that “Maybe something spectacular will happen later in the week.” I'm glad it did.
Even I was surprised by the scope of the Fed's announcement. Not by the actions themselves, but by making it so completely clear that they will weaken the dollar by any means they have at their disposal and that no one is going to be able to keep up. That my good traders is a throw-down of a gauntlet .
In a move that some have referred to as greater in importance than the Plaza Accord (http://en.wikipedia.org/wiki/Plaza_Accord), the Fed told everyone in terms impossible to ignore..., they “guarantee” to the weaken the Dollar.
I'm just amazed at how many in the financial world haven't been listening to Bernanke and his constant prose (and actions) that he is going to keep things going if he has to drop money from helicopters. With the unlimited powers bestowed on him by whomever you can count on him pushing the big red cash button anytime he feels the vapors.
Interestingly, I had forgotten that an announcement was to be made Wednesday afternoon. (CST)
3 minutes before the announcement I calmly bought a particularly large add of Eur/Usd at 1.3109 with a 10 pip stop. (Golden Pip Method) God only knows what my fill would have been on the stop if it had been elected with an equally intense surprise move downward!
All of a sudden I saw the Euro streaking up the 1 minute chart like a emergency signal flare. I thought my data feed had misfired and was giving me faulty data. I checked the Usd/Chf and gold and silver and sure enough- something huge was underway.
I speed-dialed my trading accomplice in Regina, Sask. with, “What the hell just happened?” As I said it, I remembered that there was a 2 day Fed meeting this week and was confirmed when my buddy's news feed was spewing the details of the news release.
It was amazing to see again..., how powerful one's beliefs of what is really going on in the markets can make or break you. Having a plan of action based on reality, letting the markets own action dictate your positions is the only prudent one. It is much more effective than taking clues from the socialist-leaning homilies of the non-traders at CNN.
To complete the story of my Eur/Usd trade mentioned above, I exited 355 points higher an hour later. Not bad for a 10 pip risk. Needless to say, this was a particularly profitable day, only possible because market action tends to anticipate capital flow.
If a trader, because of some fundamental reason, steadfastly believed that the dollar is going to remain strong indefinitely and bet accordingly in the markets-- he could lose an unlimited amount of money if this peak in the dollar remains the high for the next few years. Having positions based on real, immediate capital flows enables you to be right or get right as quickly as the market moves.
FirstStrikePlus got us into the last 3 positions this week and overall the look very good. If the Euro and Swiss franc keep gaining on the dollar there could be much greater profits over the coming months.
Tuesday's action gave the Challenge account another bonus. Before the Fed announcement I had an XAG resting buy order for 100 units @ 12.00 which also got filled before the Fed announcement. So I have a total position size of 400 units of XAG with an average price of $10.95. With the snapback in XAG (silver) the addition has helped the XAG portion of the Challenge account.
The week's current FirstStrikePlus trades:
eur/usd: Long @ 1.3020, stop 1.2859. Trade in progress.
gbp/jpy: Short @ 135.48, stop 138.54. Trade in progress.
gbp/usd: Long @ 1.4171, stopped at 1.3980 for 191 pip loss.
usd/chf: Short @ 1.1713, stop 1.1928. Trade in progress.
usd/jpy: Short @ 97.16, stop 98.57. Trade in progress.
FirstStrikePlus trades will be exited on Mondays at 00:00 CST if profitable. (First-Profitable-Open Exit)
Trading account equity: $1,892.49
Silver position equity: $756.00
(Current XAG price: $12.84 – 400 unit position average: $10.95)
TOTAL Equity: $2,648.49
It is good to see some decent trades in FirstStrikePlus again. It is one thing to expect moves, but another to actually take the trades.
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!
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