How To Use Technical Analysis In Forex Markets

Charts are useful tools for investors and traders as they offer insight into herd behavior. In a book written in 2004, author James Surowiecki explained how crowds make better decisions than individuals. Markets are embodiments of Surowiecki’s thesis as the current price of an asset is the level where buyers and sellers meet in a transparent environment.

When it comes to the global foreign exchange market, buyers and sellers of currencies determine the rates of one foreign exchange instrument versus others on a real-time basis. At the same time, governments manage the level of currency volatility to maintain stability. Technical analysis can be particularly useful in the currency markets as technical levels can provide clues about levels where government intervention is likely to occur.

Technical analysis includes support and resistance levels where currency pairs tend to find lows and highs. At the same time, price momentum indicators often signal where exchange rates are running out of steam on the up and the downside.

Technical analysis can breakdown at times when black swan events occur.

Futures are a microcosm of the OTC market

In the world of foreign exchange, the over-the-counter market is the most liquid and actively traded arena. The OTC market is a global and decentralized venue for all aspects of exchanging the currency of one country for another; it is also the largest market in the world. In April 2019, the average trading volume was $6.6 trillion per day. The OTC market operates twenty-four hours per day, except for weekends.

Futures markets for currency pairs are smaller, but they reflect the price action in the OTC market. When it comes to technical analysis, the futures market provides a window into the price trends and overall state of the strength or weakness of one currency versus another.

Volume and open interest metrics provide clues for price direction

The dollar versus the euro currency pair is the most actively traded foreign exchange relationship as both foreign exchange instruments are reserve currencies.

Source: CQG

The weekly chart of the dollar versus the euro futures contract displays the price action in the currency pair since late 2017. The bar chart on the bottom reflects the weekly volume, which is the total number of transactions. The line above volume is the open interest or the total number of long and short positions.

When volume and open interest are rising or falling with the price, it tends to be a technical validation of a price trend in a futures market. When the metrics decline with rising or falling prices, it often signals that a trend is running out of steam, and a reversal could be on the horizon. Volume and open interest are two technical metrics that aid technical traders looking for signs that a trend will continue or change.

Momentum indicators are powerful technical tools at times

Stochastics and relative strength indices can provide a window into the overall power of a trend in a futures market.

Source: CQG

Beneath the weekly price chart, the slow stochastic is an oscillator that aims to quantify the momentum of a price rise or decline. Stochastics work by comparing closing prices with price ranges over time. The theory behind this technical tool is that prices tend to close near the highs in rising markets and near the lows in falling markets.

A reading below 20 indicates an oversold condition, while over 80 is a sign of an overbought condition. On the weekly chart of the euro versus the dollar currency pair, the reading of 31.42 indicated that the stochastic oscillator is falling towards oversold territory in a sign that the downtrend could be running out of steam.

The relative strength indicator compares recent gains and losses to establish a basis or the strength of a price trend. A reading below 30 is the sign of an oversold condition, while an overbought condition occurs with a reading above the 70 level. At 45.55 on the weekly dollar versus euro chart, the indicator points to a neutral condition in the currency pair.

Technical analysis can fail at times

Technical analysts look for areas of price support and resistance on charts. Support is a price on the downside where a market tends to find buying that prevents the price from falling further. Resistance is just the opposite, as it is the price on the upside where a market tends to experience selling that prevents it from rising further. When a price moves below support or above resistance, it often signals a reversal in a bullish or bearish price trend.

Technical analysis is not perfect, as the past is not always an ideal indicator of the future.

Source: CQG

The chart of the currency relationship between the US and Australian dollar shows that the price broke down below technical support and experienced a spike to the downside. The price movement turned out to be a “blow-off” low on the downside that reversed after reaching a significantly lower price.

Technical analysis provides a roadmap of the past in the quest for insight into the future. Many market participants use technical analysis to make trading and investing decisions, which often creates a self-fulfilling prophecy as a herd of transactional activity can create or impede a price trend. Technical analysis is a tool that foreign exchange traders use to project the path of least resistance of exchange rates.

Some of the most influential participants in the foreign exchange markets are governments. Historical price volatility in foreign exchange markets tends to be lower than in most other asset classes because governments work independently or together, at times, to provide stability for exchange rates. Therefore support and resistance levels tend to work well over time.

What Is A Forward Contract?

A forward contract is an over-the-counter or exchange-traded financial transaction for the future delivery of a commodity or an asset. The buyer receives guaranteed access to the asset at an agreed-upon price. The seller receives a fixed price as well as a sales outlet from the buyer.

Forward contracts can call for payment upon delivery of the asset but may also include provisions for margin or other terms expressly agreed upon by the parties to the contract. A forward can be a useful hedging tool for both producers and consumers of commodities. However, they can also be fraught with pitfalls at times.

Forwards in the over-the-counter market

In the OTC market, a forward transaction occurs on a principal-to-principal basis between a buyer and a seller. The parties to the contract obligate themselves by contractual terms with the seller assuming the credit risk of the buyer and the buyer doing the same with the seller.

In the world of commodities, there are many derivations of the forward contract. A pre-export financial transaction is a forward where the buyer pays the seller a percentage of the value before delivery. Pre-export financial transactions require the buyer to take more risk than the seller. The price for the asset tends to reflect the higher risk undertaken by the buyer. Another form of a forward transaction is a swap, where a buyer and exchange a fixed for a floating price.

In the aftermath of the 2008 global financial crisis, changes in the regulatory environment caused many forward and swap transactions to move into clearinghouses where margin requirements lowered the potential for defaults.

Forwards are very popular in the highly liquid over-the-counter foreign exchange market. Forward transactions allow for the parties to negotiate all of the terms for the purchase and sale and they are non-standardized contracts.

Forwards on an exchange

Some exchanges offer products that are forwards rather than futures contracts. The London Metals Exchange, which is the oldest commodities exchange in the world, trades forwards on nonferrous metals, including copper, aluminum, nickel, lead, zinc, and tin. While each contract represents a standard amount of the metal in metric tons, the most actively traded product is the three-month forward. Producers and consumers favor the LME contracts as they allow for delivery of the metals each business day of the year. The LME also offers forward contracts for shorter and longer terms in all of the metals.

The difference between a forward and a futures contract

The most significant difference between a forward and a futures contract is that the forward is non-standardized. Futures have the following characteristics:

  • One stated asset or commodity
  • A physical or cash settlement
  • A fixed amount of the asset per contract
  • The currency in which the asset is quoted
  • The grade or quality of the asset that is deliverable
  • The delivery month and subsequent delivery months
  • The last day of trading
  • The minimum price fluctuation per contract, which is the tick value

Futures are subject to original and variation margin. In a non-standardized forward contract, the terms of margin when it comes to a good-faith deposit and payment of market differences are subject to negotiation.

A forward contract offers less liquidity than a futures contract as the future can be offset with any other party. Many forwards can only be offset by agreement of the original parties. In futures, the clearinghouse becomes the counterpart for all purchase and sale transactions. While both futures and forwards are derivative instruments, there are tradeoffs. Futures allow for far more liquidity, while forwards often meet the needs of those buyers and sellers looking for tailor-made solutions to financial risks.

Meta Trader 4: The Complete Guide

Most of these trading platforms are customized by MetaQuotes for a broker which is referred to as a White Label. The newest addition is MT5, but many traders like the tried and true Meta Trader 4, as it provides all the functionality you need in a forex trading platform.

Getting Started with Meta Trader 4

Meta Trader 4 is intuitive and relatively easy to use.  You can start by opening a demonstration account that allows you to test drive the system without making a deposit.  You simply need to provide a broker that uses Meta Trader Platforms, your personal information including your email and they will send you a login and password to open a demonstration account.

A demonstration account uses demonstration money and allows you to see how the platform works without risking real capital.  Don’t be afraid to place multiple trades so you understand how to execute and order and view your positions.

The first page you see when you open Meta Trader 4, can be customized as your default page. You might want to see forex quotes along with a chart as an example. On the left side is a quote sheet. It shows you a list of products that you can trade through the MT4 platform.

You can double-click on any of the items on the quote sheet and it will bring up an order page.  Here you can see a graph of a tick chart along with the asset you are planning to trade. You can fill in your volume and place a stop loss and take profit orders.  This allows you to set your risk management before you even place your trade.

Additionally, you can have a 1-click trading box in the upper left side that allows you to instantly place a trade. You can place your trade using market execution or pending order.  You also can determine the volume of your trade.  Below is the bid-offer spread. As a market taker, you buy on the offer (the blue) and sell on the bid (the red).

Navigating through Meta Trader 4 is intuitive and designed to give you easy access to all of the destinations available on the platform.  You can customize your home page to see any page, including seeing your positions.

The demo account has a tab system on the bottom left, that opens to the common tab, where you can see charts of the major currency pairs.  You can change that to see daily, weekly or any intra-day period.  You can create several tabs that provide a view that you want to see.

Above the tabs is a navigator that allows you to see technical indicators as well as expert advisors and scripts.  Technical indicators allow you to perform technical analysis of different assets. An expert advisor is a system that can be back-tested to understand the performance of an automated trading signal over time.  Scripts allow you to drive alerts and run automated trading scenarios.

If you double-click in indicators in the menu of the navigator, you will a plenty of technical indicators that can be customized. In the graph above, the MACD (moving average convergence divergence) indicator is shown, along with a pop up of a custom input that you can use to change the standard MACD.

You can change the number of units (days, weeks, months, etc…) as inputs along with the colors used to generate a MACD indicator. The MACD shows both the MACD lines as well as the MACD histogram. There are dozens of technical indicators. You can save your favorite indicators into a tab and name favorites.

Expert Advisor

Metal Trader 4, offer access to their expert advisor. An expert advisor is a system that places trades after they have been back-tested.  It will automatically execute your trades when specific criteria are met. The demo account gives you a choice of a couple of different sample expert advisors.  You can choose from a moving average crossover expert advisor or a MACD expert advisor.

You can choose the inputs you use for each of these advisors such as the number of days or hours that you want in the calculation of the signal as well as the risk management that you want to employ when trading.  Risk management is a key component of your trading. The use of a demonstration account in conjunction with an expert advisor is highly recommended.

Scripts

Within the scripts section, you will find a wide variety of trading mechanisms. This includes automated trading, along with trading signals. There is copy trading as well as specific risk-reward indicators.  You can use multiple scripts with reviews of these scripts on your demonstration account to determine if the trading performance is in tandem with your goals.

Summary

Meta Trader 4 is one of the most efficient and complete trading platforms available.  You can open a demonstration account to test drive Meta Trader 4, and determine if its right for you.  You can set up multiple pages, to see charts, quotes, along with your portfolio.  You can execute traders from the quote sheet or enter an order directly.

There is a navigator you can use to add indicators, as well as create an expert advisor.  The platform provides you with access to dozens of indicators. You also can program your indicator. MT4 also allows you to evaluate a plethora of scripts that allow you to copy other investor’s trades or set up a signal that has been reviewed by others who use meta trader to transact. This is one of the most widely used trading platforms and is the benchmark platform for retail forex traders globally.

The Benefits of Using Contracts for Differences

Contracts for differences (CFDs) are financial instruments that track many assets including forex, individual equity shares, commodities, indices, and cryptocurrencies. CFDs allow you to trade the capital markets using leverage.

What is a Contract for Differences (CFD)?

A contract for differences (CFD) is a financial instrument that tracks the movements of an underlying asset such as a stock, currency pair, commodity, cryptocurrency or index. It differs from the underlying instrument in that you do not have to post the entire amount of capital to buy the underlying instrument. Instead, you only need enough to cover the change in the price from where you plan to enter the trade, and where you will exit the trade.

This compares to a stockbroker who might require that you need to have nearly all the capital in your account to buy equity shares. In some cases, when you purchase a CFD, you might be entitled to the dividend that is granted by the company on the underlying shares. CFDs can be used to trade directionally, or you can buy one CFD and simultaneously sell a different CFD and capture the relative value change.

Do CFDs Provide Leverage?

A CFD has an imbedded leverage feature which will differ from broker to broker and asset to asset. Leverage is a feature that enhances your trading returns, as it allows you to increase the capital you control with borrowed capital.

For example, some brokers will allow you to purchase $4,000 of EUR/USD while only posting collateral of $10. To use leverage, you need to open a margin account. Each broker will have different criteria for opening a margin account. They will generally ask you questions about your trading experience as well as your investing knowledge.

It’s important to understand how leverage can impact your trading returns. If you can purchase $4,000 of EUR/USD using 400-1 leverage, it will only take a 0.25% ($4,000 * 0.0025 = $10) move to either double your money or wipe out your capital. So, while leverage is an attractive tool, it can be a double-edged sword.

When you open a margin account, your broker will require that you always have a specific amount of capital in your account.  Each time your place a new trade your broker will require that you post a specific amount of fund which is referred to as initial margin.  The margin required is the amount of capital needed if the price of the CFD moved against you by a larger than the normal amount.

Your broker wants to make sure that you have enough capital allocated to a trade that if there was a larger than normal change in the price, that you have the funds to cover the losses. As the market moves, the amount of margin that you need to hold against each trade will change. If the price of the asset that you are trading moves against you, your broker will take maintenance margin to cover additional losses in addition to your initial margin. If the price of the security you are trading moves in your favor, the initial margin will remain unchanged, but any maintenance margin that was collected will decline.

The margin calculation is in real-time, and it tells your broker the minimum amount of capital you must have in your account to continue to hold your position.  If your trade moves against you and you are unable to increase the capital you have in your account, your broker will have the right to begin to liquidate your position.  Make sure you completely understand the margin agreement you sign and your broker’s rights to liquidate your position before you start to trade CFDs.

Trading CFDs relative to Stocks

CFDs can be very efficient for investors who are looking to trade stocks. This is because the leverage that is used in CFD trading, is much higher than the leverage you can receive with a stockbroker. For example, Amazon shares are trading near $1800 per share.

This means that you would need $1,800 just to purchase one share of Amazon stock. Many CFD brokers offer leverage of 20-1 which would allow you to purchase 1 CFD of Amazon for as little as $90 per CFD. A 5% rise in Amazon shares will allow you to double your money. Additionally, for the same $1,800 that would allow you to purchase 1-share of Amazon stock, you could buy 20 Amazon CFDs. Lastly, CFDs allow you to short the stock without having to borrow the shares.

Managing Your Risk

CFD trading can be risky, especially if you use leverage, so you must have a plan in place before you make each trade. To avoid the risk of ruin, you should limit the amount of capital you place on each trade to 5-10% of your portfolio. For example, if you plan to trade a portfolio of $5,000 the maximum you should post for each trade should be $500. This will provide you with a strategy that will provide some forgiveness if you start slowly.

Another concept you should follow is to cut your losses and let your profits run.  If the market moves against you and hits your stop loss, you should exit and live to see another day. If the market moves in your favor, move your stop-loss up and let your gains compound as the market moves in your favor.

Summary

Contracts for differences (CFDs) are financial instruments that allow you to trade the capital markets without purchasing the underlying instrument. CFDs track underlying instruments and provide leverage to help you enhance your returns. This would include equity shares, commodities, indices, forex, and cryptocurrencies. To trade CFDs with your broker you will need to open a margin account. While leverage can significantly enhance your trading returns, it is a double edge sword and can also lead to robust loses. You must have a well thought out risk management plan that you can employ on each trade, before risking any of your hard-earned capital.

Decisive Action in the New Decade: How to Invest Wisely in the 2020’s

Sadly, we’re still having to cope with jittery markets and widespread instability due to a range of political, environmental and technological factors, but that’s not to say there won’t be some great investment opportunities which we can capitalize on in the coming years.

The previous decade gave us a taste of the almighty potential that disruptive technology possesses, and cryptocurrencies, in particular, taught us that the sky’s the limit if investors are shrewd, wise and, in many cases, lucky enough.

Of course, cryptocurrencies are way too volatile to consider as anything other than a gamble, but there are plenty of opportunities out there that hold potential for the coming decade. Though it’s important to note that there are lots of unforeseeable circumstances that could undermine the value of just about any investment in the future – so it’s advisable to keep on guard if you decide to buy specific assets.

Looking to the clouds

(Cloud robotics industry forecasts show that industry growth is expected in the 2020s. Image: EVA)

Hamish Douglass is the billionaire chairman of Magellan and is an expert when it comes to investing in tech companies in particular. Speaking to the Financial Review, Douglass is confident that cloud computing will be the star player of the 2020s. “Mobility, internet of things, edge computing, enables the whole cloud to come together and do things we can’t even imagine today and businesses we haven’t even thought of will be $100 billion businesses in ten years,” he explained.

The beauty of cloud computing is that it’s demonstrably effective already. As opposed to the industries of AI and Virtual Reality, which still rely on some degree of speculation, the cloud is already largely used for the storage of images, home entertainment, collaboration tools, and within a range of smart devices. Many speculate that it’s soon to infiltrate the world of gaming, too.

As technology becomes smarter, the necessity of communicating with other smart devices increases. Add to this the fact that wires are fast becoming redundant in a world that’s dependent on convenience and it leaves the Internet of Things and cloud computing as an essential development in everyday life. The massive processing power of the cloud will also be key for industries depending on the interpretation of big data and powerful calculations.

In a jittery financial landscape, it’s fair to say that shares in the cloud technology companies could be one of the safest investments of the coming decade. This isn’t to say it’s completely immune from extraneous circumstances, but it’s one of the best shots to build a healthy portfolio.

Safety in real estate

Writing for Market Watch, Mark Hulbert believes that real estate is set to offer value investments over the next 10 years.

Hulbert highlights a Bankrate survey that asked investors which type of investment they would pick if they were using money that wouldn’t be needed for 10 years. The choices were stocks, bonds, real estate, cash, gold or metals, or cryptocurrencies.

The winner by some margin was real estate, which goes some way in showing that the best investments can come from more traditional places. Nearly one-third of respondents chose the housing market, and given that the stock markets as a whole face an uncertain short-term future, it could be one of the wisest decisions.

Hulbert believes that the performance of real estate during bear markets – with the notable exception of the 2008 market crash – shows that homes are safer than equities should an economic downturn occur. “In every other stock market bear market since the 1950s, the Case-Shiller Home Price Index rose in all but one. And in that lone bear market prior to 2007 in which the index did fall, it did so by just 0.4%.”

There’s also the added perk of the housing market being much less prone to the level of volatility shown by the world stock markets, meaning that over a 10-year period, your investments are likely to fluctuate less.

Geographic diversity

(Image: Visual Capitalist)

Interconnectivity has been making the world a smaller place for some time, and when looking for future investments it’s vital to look beyond the western world.

Tobias van Gils, of Countach Research believes that the fastest GDP growth of the 2020s will come from Asia. Furthermore, Van Gils highlights neglected economies surrounding both China and India as possessing great potential for growth.

The driving force behind Asian growth in the 2020s will be China’s multi-trillion dollar Silk Road Economic Belt, as well as the 21st Century Maritime Silk Road – two infrastructure investments that are designed to bring unprecedented levels of trade across the eastern hemisphere and beyond.

(Old and new: The new Silk Road infrastructure. Image: Benzinga)

Of course, such an ambitious project comes with more caveats. Firstly, much of the GDP forecast for Asia will be influenced by the successful arrival of the Silk Road. Secondly, with so many nations working together, it’s reasonable to expect some hitches in the development of such a large project.

Relationships with the US and China have been frosty to say the least, and the decade has arrived with fresh tensions in the Middle East. While China’s emerging economy still seems like a wise investment, its level of progress will depend on a more optimistic political climate.

Capitalising on disruption

Another safe set of investment options stem from the growing range of disruptive technologies set to become available in the coming decade.

There are five key areas where disruptive technologies are ripe for the future, and they include:

Green-tech and energy

Helping to propose solutions to the growing climate emergency comes renewable energy sources like wind power and fuel cells, as well as green buildings and carbon capture and storage solutions.

Advanced materials

Including nanomaterials, graphene and solid-state batteries.

Digital technology

Relating to both 5G and 6G, AI, quantum computing, blockchain and both augmented and virtual reality.

Smart machines

Involving exoskeletons, service robots, medical robots, 3D printing, driverless vehicles and industrial robots.

Biotechnology

Potentially disrupting healthcare could come technology like personalised medicine, gene therapy, nanobiosensors, cell therapy and 3D bioprinting.

Given the important role each piece of technology can play, it’s fair to assume that the future will see widespread implementation of many disruptive solutions. However, in the next 10 years, it could come down to which governments are more willing to spend money on developing the tech.

Once again, China could play a significant role in developing disruptive technology, and may focus on sectors that carry the most economic importance.

While investments in these sectors would appear generally safe, the issue is that most disruptive technology requires significant levels of funding, and in an economically unstable environment, it can be tricky to find a government or organisation willing to invest heavily in the implementation of such tech.

However, in a world that’s beginning to wake up to climate change, it’s worth taking a look at disruptive technologies in the field of sustainability and renewable energy as an area that could develop comfortably as the new decade rumbles on.

It’s Going to Take More Than the ” Surgical Face Mask Hedge”

Perusing the ASEAN market increasingly tilted landscape, it’s going to take more the “surgical face mask” hedge to reverse the trend, which is trading at 10 X premium in my neck of the woods (Bangkok), incidentally.

Fears are increasing again and should continue to weigh on global markets with Asian equities suffering harder knockdowns. I am skeptical investors will be as quick to jump into trades fading these moves until the transitory period sets in.

But the market is so finely tuned these days, and in a matter of days, its self-correcting mechanism takes hold without the need for central bank policy. One of the more undervalued market self-correcting mechanisms is how quickly financial conditions loosen. From last Friday’s tops to peak fear yesterday, the bond markets shaved off a whopping 15 basis points on ten-year US yields, which offset the stronger dollar and decline in the equity market and accomplishes much of the central bank heavy lifting. But I’m not sure that itself will be enough to paper over all the cracks.

To be sure, the weakness in underlying ASEAN bourses and soon to be global is transcending the usual suspects, luxury, travel, and tourism.
Investors could be forgiven for thinking that markets have it in for them at the moment. Just as the market puts phase one trade deal to bed, then we get hit with geopolitical concerns around a potential US-Iran war, and just as those fears died down, they were replaced by WARS of another kind (Wuhan Acute Respiratory Syndrome)

The market was able to shrug things off quickly in the past, but the other risk here is that all the bandwidth is being taken up by the virus, and is taking focus away from other issues.

Frankly, I’m surprised there was very little attention paid to the progress Bernie Sanders had made towards the Democratic nomination.

FX Foreign outflows from SETi continued.  YTD outflows from Thailand approached $400mil, the highest outflows among Asian markets this year.  THB broke 31 as of this morning, and USDTHB continued to grind higher.

I’ve been a bit narrowly focused on THB and CNH for obvious reasons. Still, I think the ASEAN basket, and especially the Malaysia Ringgit will remain extremely vulnerable over the next few sessions on potential outflows as what supported the Ringgit entering the Year of the Rat is gradually evaporating. As discussions on the expected market fallout from the Novel coronavirus continue to send waves of negative across the bow and the market reaction is shifting from a knee-jerk USD adjustment to a full hedge buy-in as Asia’ key bellwether proxy nudges towards 6.99 (USDCNH). The Ringgit remain prone beyond the CNH correlation basis.

Traders Still Fear The Virus

Uncertainty is coming from the Coronavirus as we do not really know the real scale of the outbreak. The thing that it originated in China make it even more complicated. Traders did not really believe if the official GDP data is legitimate, so we should not be surprised that they are also suspicious about the numbers of the deaths or people affected.

SP500 ended last week and starts a new one in the same manner – with a huge drop. The heads and shoulders that we mentioned on Thursday, works. Price managed to break the dynamic support connecting higher lows since the beginning of December. Now, we are aiming one connecting lows since October. Buyers should not worry too much though. We still have many major supports that can stop the decline. Remember that American indices love V-shape reversals and for the past 10 years, every stronger drop was rapidly turned into a buying bonanza.

On Thursday we also warned about the correction od DAX. There was no surprise here and German Index also declined. Here, we also have a Head and Shoulders formation and currently, the price is breaking the neckline. As for now, it is nothing serious and European Bulls remain strong.

Risk OFF mode usually means stronger gold. It is not different now. On Gold, I can see a small Inverse Head and Shoulders pattern. It is not the prettiest one but trading is not a beauty contest. Principle is here: the price made a double bottom formation, then tried to go down again and failed breaking the neckline. As long as we are above the neckline and the orange support, sentiment seems positive.

This article is written by Tomasz Wisniewski, Director of Research and Education at Axiory

Asia Update: A Risk-Off Sprint For The Exits

In lockstep, USDCNH has been in demand and is trading above 6.96 as traders begin to price in the unavoidable China GDP knockdown. All the while traders are waiting with fingers crossed for a signal of PBoC policy deluge, which could provide a suitable band-aid to stop the bleeding.

Japan’s Chief Cabinet Secretary Sugga has already hinted at policy measures this morning to buttress the coronavirus impact on Japan’s tourism. so there could be some consorted regional policy  measure in the works

But with a risk-off sprint for the exits at the open this morning, gold traded to a high of $1589.00 and silver to $18.3800. The market has retraced since the initial clamber, but demand remains firm on dips.

Liquidity is at a premium with Lunar New Year holidays in China, Singapore, Hong Kong, Korea, Taiwan as well as Australia Day which may have exacerbated moves

Oil prices got hammered to the tune of 2 % at the open as the market continues to move into full bear mode and price in worse case scenarios. This despite Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud performing his best Hans Brinker routine, suggesting the sell-off is “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite its very limited impact on global oil demand,” ( Reuters). But upticks continue to get sold. And with a possible 1 % haircut to Chinas GDP as a result of the domestic virus break out, it’s hard to argue the direction of travel, especially given the current oil price linkage to the Chinese economy.

Traders (or Algos) sliced through resting stops on the March 2020 contract on incredibly high volumes for an Asia holiday. Globex is showing 57,211 WTI contracts going through so far this morning. Oil positions could be at risk on a deeper dive as long oil contract bullish bets remain elevated on a 6-month context (Jan 24 +520.6 K vs. Oct 11 +355 K)

How bearish is it ?? traders hardly blinked at the news the US embassy in Baghdad came under attack from rocket fire overnight, mind you there was no damage and no threat of supply disruption.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader 

“WARS” Zones Of Another Kind, The Wuhan Acute Respiratory Syndrome

So, traders will pivot from the other Wars, Trade and Iran, and into the “WARS” zones of another kind, the Wuhan Acute Respiratory Syndrome zone, where the latest travel restrictions now confine nearly 60 million Chinese.

Traders who would be typically discussing the weekend football results are now sadly focusing on mortality scores this morning. And trust me, absolutely no market professional likes making money off misery, but we all have a job to do to protect client’s savings. So, risk profiles need to be adjusted as the Wuhan frenzy factor kicks in, and risk markets enter the fear zone, a highly pandemic place in its own right. Even more so after President Xi calls the rapid spread of the virus a grave situation.

So defensive strategies will be priced at a premium out of the gate as investors shed China and global risk proportionally to the mounting reports of confirmed Wu- flu cases worldwide. Suggesting the market risk lights could start flickering between amber and red.

While much of the focus has been on the usual suspects’ luxury, travel, and tourism, just calculating the number of canceled tourist trips, declines in retail trade and similar factors are not sufficient to get a full picture of the impact of “WARS.” The structural changes to the global economy complicate the economic analysis of this because there are linkages within economies, across sectors, and across international trade and capital flows that need to be factored.

The biggest threat to the global economy is not just because the disease spreads quickly across countries through networks related to global travel. But also, because any economic shock to China’s colossal industrial and consumption engines will spread rapidly to other countries through the increased trade and financial linkages associated with globalization.

Unlike 2003 where SARS was less impactful on the developed world market, the rest of the world could feel the pinch this time around. And if the virus stunts China’s domestic economic growth in an echo of the SARS epidemic nearly 20 years ago, the falls could be even more precipitous than projected. And there are two reasons why: 1) consumption is now a more substantial part of China’s GDP, and 2) China’s overall growth trajectory. In 2002, retail sales accounted for 34% of nominal GDP; this share is now over 40%. And since China has been at the forefront of the global economic recovery this year, mostly driven by consumption, there could be a massive knock-on effect globally as China’s pivot from a brick and mortar economy to a services powerhouse means they import much more from abroad than they ever did

There has already been a significant markdown in China exposure and leisure stocks – as positioning had been extremely consensus in both. But not only could we see a multi-sector ASEAN equity market fire sale unfold, but a massive chunk of the nascent great global growth trade of 2020 could unwind. After all, a possible one percent haircut to China’s GDP is not a trivial matter, and indeed, when China sneezes, the world catches a cold.

According to the IMM commitment of traders, equity futures long positioning has continued to rise to new records, call volumes have surged to the highest since October 2018, and sentiment indicators are at the top of their historical band. Over the last three months, equity funds have also seen inflows of $75bn, the strongest since early 2018, with cyclical sectors being big beneficiaries, especially Tech, Financials, and Industrials. Indeed, the market’s fear factor has given way to greed, which could leave current positions precariously perched. Pullbacks of 3-5% in the S&P 500 have been typical every 2 to 3 months historically, but now we’re stretched to about 3.5 months, and if a significant Wu-Flu risk wobble occurs, we could see more profound positioning unwinds as a pandemic panic ensues.

There is nowhere that China’s economic influence is more on display than in Asia. The key driver of ASEAN’s steady growth over the past decade has been the rapid growth in bilateral trade with China. China has been ASEAN’s largest trading partner in the past ten years, with two-way trade reaching $292 billion in the first half of 2019. And thus, makes the rest of Asia extremely vulnerable to a China economic slowdown.

And although I have the usual assortment of crazy trade ideas going through my head, unusual for me, I’m starting to think cash is the right place to be for the next few weeks instead of trying to stand in front of the Wuhan freight train. It’s too early in the year to go into a trading hole.

Oil market

Oil sold off aggressively last week on concerns about the impact on China’s economy of the outbreak of a SARS-like virus. Brent was down close to 6% on the week as trader moved to price in a worst-case scenario around Chinas travel and transportation demise. But now traders are left with the impossible task of factoring in the global demand impact as the outbreaks are getting reported worldwide, not to mention a potential 1 % hit to China GDP. Given the extremely tight linkage between China’s economic growth and its appetite for oil, there’s no place to hide for oil bulls and as we saw last week, taking a bullish leap of faith proved to be a fruitless exercise in frustration.

Since the Wu-Flu incubation period is estimated at between 5 days and two weeks, we’ll need to assess the true extent of the damage after the Lunar New Year holiday, so I suspect the balance of oil markets demand devastation risk remains on the wobble until then.

Gold Markets

Gold is performing well in large part because of the slump in US yields since the new year. This fact seems to be offsetting the impact of a strong US dollar to a more considerable degree. And with the Fed on hold, so a risk-off induced break lower in yields could be relatively unobstructed, which would be very bullish for gold.

Also, the details of Friday’s US PMI report were a little downcast. New business did rise, but at a slower pace. Both manufacturers and service providers recorded a more gradual expansion of new orders than expected. And new export orders placed with US private sector firms dipped into the contractionary territory at the start of 2020. Which supported also provided a fillip to gold priced on Friday

But a Wuhan flu triggered sell-off in equity markets will likely drive gold demand out of the gates today, and long-term strategic buyers could compound the move higher as they start to position for the Wu-flu to spread at a faster pace in the coming weeks. The more rapid pace of contagion will represent another significant headwind to global growth. Given how early we are in the newfound growth cycle, more policy easing will be needed to support growth, which could be viewed as bullish for gold. A policy response from the PBoC is a given. But the big question is if the Feds need to react at some point down the road. All of which would be bullish for gold

Still, the effects on the US economy are a long way’s off as trade flows between China and the US have been reduced to a trickle due to tariff wars. And with only two, at this juncture, reported flu cases stateside, it’s not going to have a significant impact on US consumers, but its the fear factor that’s impossible to gauge. None the less at this stage of contagion the Wu-Flu is unlikely to have a material effect on the FOMC policy.

But in case you needed more reasons to buy gold this week, all eyes and ears will be honed on Chair Powell’s FOMC presser. Still, more specifically, Powell will be grilled about the financial stability risks created via the Fed’s liquidity injection due to balance sheet expansion.

There’s no blueprint for unwinding the balance sheet without some element of risk. But the fear heading into this FOMC meeting is a communication misstep. At some point, the Fed will need to communicate a temporary pause in the Fed’s repo activities as it can’t go on forever. Still, a misstatement could easily trigger a huge adverse market reaction. This in itself demands some protection either via long gold or downside USDJPY structures.

ASEAN currency markets

Depending on how widespread the outbreak gets, we could see more shifts in the market long ASEAN axes with tourist-heavy THB and the global growth-sensitive TWD as most vulnerable in this case.

The preferred way to trade this through FX is THB – with the economy dependent on tourism, the loss over China New Year will weaken GDP and weigh on the Baht, precipitously.

The THB remains the most exposed to the new coronavirus outbreak as Thailand is a top destination for Wuhan tourists. Analysis of seat capacity on flights by OAG shows that the two largest international markets are Thailand, with nearly 107,000 seats and Japan with 67,000 seats available.
Coronavirus – Tracking Down the Bug (OAG)

Other analysts estimates suggest a 3% haircut to tourists during the Lunar New Year holiday week.

But if the virus stunts economic growth in an echo of the SARS epidemic narrative and triggers a deeper slowdown in China and weakens the RMB. Then the Yuan correlated basket of KRW and MYR have the most to lose so we could see a further unwinding of capital market risk in South Korea and Malaysia this week.

G-10 Currency Markets

G10 FX vols are holding in for now in though spot markets will be quiet in Asia due to the Lunar New Year holidays across the region. Implied levels are already low, and concerns regarding the new coronavirus outbreak continue, so market makers do not want to be short vol just in case fear escalation. If the virus outbreak continues to expand, it could significantly impact the currency market where the safe-haven JPY and CHF should shine while the USD will attract its lion share of safe-haven flows. I don’t like either of those trades mind you 1) due to Japan’s economic proximity to ground zero, and 2) the SNB doesn’t care about the US Treasury currency manipulators tag.

The Euro continues to struggle even in the face of a moon shot on this week’s ZEW data, and while hints of a move towards a symmetric inflation target are a small positive within the context of the ECB policy review. Still, without a more supportive fiscal policy input and a bounce in rates, the Euro could languish.

But the Euro has been a critical funding currency of the “carry trade” this year, especially into the ASEAN basket. Hence, as local currency bullish bets unwind, it could add some support to the underlying EUR risk as those shorts get covered.

As for the market short dollar narrative, the US dollar will undoubtedly be a big talking point during the US presidential election, and the Fed is likely to end up cutting rates following the strategy review. But these events are later in the year, and for now, it’s hard to fight safe-haven US bond driven currency inflows.

AxiCorp’s Innes discusses Wu-Flu on morning podcast 6:23 min

Gold Daily News: Thursday, January 16

Yesterday’s U.S. and China Phase One trade deal signing ceremony brought a lot of attention, but little has happened in gold and silver. However, we saw big movements in platinum and palladium. The first broke sharply above $1,000 mark as it gained almost 4% and the latter has reached yet another new record high nearing $2,200 mark.

Right now, the price of gold is flat and silver is retracing some of yesterday’s advance. On the other hand, both platinum and palladium extend their short-term gains this morning.

Today, the markets will await the U.S. Retail Sales number. It is supposed to be the most important piece of economic data this week. But that’s not all. At 8:30 a.m. we will also get the Philly Fed Manufacturing Index and just before that, at 7:30 the European Central Bank will release its Monetary Policy Meeting Accounts. Then, the ECB President Lagarde will speak at 1:00 p.m. Last but not least, at 9:00 p.m. there will be China’s GDP number release.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care


Chapter 6 “Expanding Trade.”

The Story?

But if there a story to be told, its the Phase One trade deal brings with it several issues for global trade. First, existing tariffs on the majority of Chinese goods remain in place. More importantly, if the overly ambitious purchase targets are reached, it suggests other countries will lose out as Chinese demand for their products rotates towards the US.

Still, the questions around the US tech in the supply chain remains unanswered. So, can China realistically hit these targets, especially when US firms are more motivated to produce abroad while China is trying to wean itself off a dependence on US technologies? Or does it even matter?? But it’s all here in black and white The Trade Agreement  chapter 6 is worth a read.  

But Phase one is not BAD  for risk and should boost global growth, plus the Feds will add all the money in the world to keep risk sentiment afloat, and when the ship lists, remember its an election year when US policy always turns positive. So onwards and upwards!!

China Credit

China December aggregate financing CNY2,100.0 bn vs. CNY1,650.0 bn consensus. December new yuan loans CNY1,140.0 bn vs. CNY1,200.0 bn consensus. December M2 money supply +8.7% y/y vs. +8.3% consensus. No noticeable impact on the forward market so far, although rates could nudge a little bit higher.

Asia currency markets

Fading short-term trade-war concerns and evaporating geopolitical risks continue to bolster global equity and credit markets. However, FX markets are more cautious; the rally in Asian currencies took a breather today.

The Chinese Yuan 

There was a test lower for USDCNH on the open, but no follow-through.

As we anticipated on this morning note, some clients are taking profit on their USD/EM downside positions, mainly in USDCNH and USDKRW, on the signing of the trade deal. I also think the proximity to LNY (I know it’s a week away) is causing traders to pare back risk as we know RMB liquidity will be sparse. With bullish targets reached, it’s unlikely we will see any significant move lower for no other reason than P2 discussion are unlikely to start until the LNY has passed.

My clients were asking me why I closed out of CNH so early, partly because I think we’ve hit a temporary floor on USDNCH, but primarily I don’t want to end up paying through the nose on a one-week funding squeeze carry. It could ease, but then again, it might not.

Plus, I’m weighing the odds of going dollar strategically long for only the 2nd time vs. the CNH since October 11. I think there is more risk tail risk than meets the eye, but no rush to trade given EM Asia vols continue moving lower across the board with the selloff accelerating in the last two days. One-month USDCNH is now at 3.9 from 4.6 at Wednesday’s open, 1m USDKRW at 6.0 from 6.6

The Korean Won

USDKRW is trading bid, with chatter on the street of corporate buying going through at the onshore fix market in the morning

The Indonesian Rupiah

Indonesian President Jokowi giveth and taketh after USDIDR gapped down to new lows as local bonds rally. President Jokowi hit the IDR rally pause button, saying a quick rupiah appreciation may hurt exports, so they must be cautious of rapid currency gains. Which immediately raised the yellow intervention flags and one-month USDIDR trades to 13700 from 13650 on this.

G10 Currency Markets

There has been a ton of USD selling across the board in the past 24 hours, but the market reaction has been “Meh.”

The Swiss Franc

Yesterday was the first day this year massive USD selling against EUR and CHF went through. The Euro flow is entirely uninteresting, given the tight follow-through ranges. But the fact there is any CHF buying at these lofty levels is the surprise indicating a considerable break down in the correlation with risk asset, which is both odd and bewitching. After all, positioning does seem to be the wrong way, but the resilience is unlikely to be offset by the SNB after the US Treasury report.  

British Pound 

Weaker UK inflation data yesterday has helped nudge market expectations of a BoE rate cut this month to above 65%. However, the UK PMIs on January 24 will remain important ahead of the MPC meeting on January 30. But I continue skeptical about building shorts as if we get a UK rate cut, it would not be the start of a cycle, but instead, a one-and-done insurance move before Mark Carney clocks out.

Despite the dovish BoE retort and weak data, policy transmission to FX markets has been poor lately. But the market could be getting that sense of déjà vu all over again that the opportunity of capital flows drifting back to the UK in 2020 is too big to ignore.

UBS Strategist Lefteris Farmakis suggests Governor Carney, rubberstamps a return to the ‘old normal’ for sterling, where the influence of economic data on monetary policy is its primary driver, and there you have it apparently  

Gold markets

The Stone Roses “Fools Gold” long hedge unwind trade is trying to unfold as gold is down around $5.00 buck from entry, although nothing to get excited about until the market clears the chunky stack of bids at $1550. So far, the 50 and 200 EMA have given way, but the bids are reasonably impressive down here.

Although we saw large dollar selling yesterday, there was a limited reaction, and at the heart of the trade deal, in my view lies a mildly positive dollar outlook on the margins over the short term. And I think this will be slightly negative for gold, but ultimately for gold, it’s where yields go and how the economic data evolves.

Time for the Stone Roses Trade, long gold hedge unwind “Fools Gold”?

Not all signals are aligned as risk sentiment endures, and while the long-term outlook for gold remains constructive, still, I’m struggling with the long gold strategy at the current price levels (1557-1558). In my view, the approach remains completely ill-defined at the moment, especially with S &P 500 making record highs. Until the yield on 10-year Inflation-indexed Treasuries starts to flash buying signals, bid on a deep dips remains a preferred strategy.

CTA’s are maxed long gold in their gold strategies, ETF positioning is stretched as is the IMM and given the Big gold trading banks’ ability to ramp up a gold paper and free up margins, the market could be ripe for a reversal if US bond yields don’t move lower quickly. It wouldn’t be the first time we’ve seen this set up in the last 4-6 weeks.

This article was written by Stephen Innes, Asia Pacific Market Strategist at AxiTrader

The Battle Between Safe Havens And Risk On Continues

Chris Vermeulen joins Cory Fleck to share the way he is trading these markets and what he thinks will cause a breakout in either risk-on or risk-off.

Profit during times when most others can’t which is why you should join my Wealth Trading Newsletter for index, metals, and energy trade alerts. Visit our website to learn how you can see what this research is telling us.

Chris Vermeulen
Founder of Technical Traders Ltd.

Market News Report: December 23 – December 27, 2019

The week behind

Last week’s Monday’s and Friday’s U.S. economic data releases were pretty important for the financial markets. On Monday stocks, oil were gaining and the price of gold was declining. And on Friday the U.S. GDP number pushed the risk-on markets even higher. We highlighted those data releases in our last week’s Market News Report. The rest of the week has also been interesting. On Wednesday the Australian employment data release pushed the AUD higher, and then the Japanese Yen fell following overnight BOJ Monetary Statement, Policy Rate announcements. On Thursday the British Pound accelerated its short-term downtrend after the Monetary Policy Summary release.

The week ahead

What about the coming week? There won’t be any important economic data releases in the U.S. And in the middle of the week, most financial markets will be closed. However, on Thursday there will be a speech from the BOJ Governor Kuroda. On Monday, we will get the Canadian GDP number. Last but not least, oil traders will get the usual inventories data. Let’s take a look at key highlights:

• We will get a lot less economic data releases in the coming Christmas holiday week.
• On Tuesday and on Thursday the U.S. markets will close earlier.
• The most important releases will likely be Monday’s Canadian GDP number and Thursday’s Bank of Japan’s Governor Kuroda Speech
• Oil traders will await Tuesday’s and Friday’s inventories data releases.

You will find this week’s the key news releases below (EST time zone). For your convenience, we broken them down per market to which they are particularly important, so that you know what to pay extra attention to, if you have or plan to have positions in one of them. Moreover, we put the particularly important news in bold. This kind of news is what is more likely to trigger volatile movements. The news that are not in bold usually don’t result in bigger intraday moves, so unless one is engaging in a particularly active form of day trading, it might be best to focus on the news that we put in bold. Of course, you are free to use the below indications as you see fit. As far as we are concerned, we are usually not engaging in any day trading during days with “bold” events on a given market. However, in case of more medium-term trades, we usually choose to be aware of the increased intraday volatility, but not change the currently opened position.

Our Market News Report consists of two different time-related perspectives. The investors’ perspective is only suitable for the long-term investments. The single economic data releases rarely cause major outlook changes. Hence, we will only see a handful of bold markings every week. On the other hand, the trader’s perspective is for traders and day-traders, because the assets’ prices are likely to react on a single piece of economic data. So, there will be a lot more bold markings on potentially market-moving news every week.
Investors’ Perspective

Investors’ Perspective

USD/JPY

Thursday, December 26
• Tentative, Japan – BOJ Governor Kuroda Speech

USD/CAD
Monday, December 23
• 8:30 a.m. Canada – GDP m/m

We hope you enjoyed reading the above free analysis, and we encourage you to read today’s Market News Report – this analysis’ full version. The full Alert includes also the Traders’ Perspective which is very useful for the people who trade within shorter time frames. There’s no risk in subscribing right away, because there’s a 30-day money back guarantee for all our products, so we encourage you to subscribe today.

Check more of our free articles on our website – just drop by and have a look. We encourage you to sign up for our daily newsletter, too – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up for the free newsletter today!

Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits – Effective Investments through Diligence and Care

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Beating The Crunch: Can We Invest Wisely in an Economic Downturn?

The very mention of a downturn can strike fear into the hearts of investors. Economics tends to be cyclical in nature and while steady periods of growth are revered with widespread speculation, they’re usually followed by a profound decline.

We currently live in challenging times for world economies. Uncertainty surrounding the United Kingdom’s Brexit alongside ongoing trade wars between the United States and China have sent some clear warning signs that investors may be facing some challenging times in the near future.

(The future of finance in the UK is conditioned primarily by Brexit, and could prompt an economic slowdown. Image: Institute for Fiscal Studies)

The UK isn’t alone in its uncertainty. With four possible outcomes of Brexit in the coming months leading to wildly different GDP forecasts, the United Kingdom is just one of many nations operating in a fragile economic climate.

But is it possible to successful invest within the volatile markets of a recession? Here are a few points on how to wisely develop your portfolio while navigating the potentially choppy waters of an economic downturn.

Coming to terms with a recession

It could be useful to clarify what is meant by the use of the term ‘recession’, as well as ‘economic downturn’.

(Chart illustrating the impact of the financial crash and the slowdowns within the global economy that followed. Image: The Economist)

Essentially, a recession is the name given to a sustained period of economic decline. Economists typically agree that two consecutive quarters of negative Gross Domestic Product (GDP) growth can be defined as a recession, but this isn’t always the case. It’s also worth noting that GDP acts as a measure of all the goods and services produced by a country over a pre-designated period.

There are plenty of factors that can contribute to a recession, which is why many economists avoid predicting their arrival with much certainty. In 2008 the collapse of the US housing market sparked a worldwide downturn, while other factors like governmental change, natural disasters, and new legislation can all be big contributors.

Recessions take shape as a result of a widespread loss of confidence from consumers and businesses when it comes to spending money. This, in turn, leads to stagnant incomes, loss of sales and ultimately production. Unemployment generally rises due to cutbacks in industries and national leaders face the challenge of kickstarting a weak economy to remedy the effects.

Right now you may be wondering how it’s even possible for anyone to build a successful portfolio from these circumstances, let alone those looking to make intelligent investments.

As they’re intrinsically linked to the financial markets, recessions tend to point towards more instances of risk aversion from investors as they plot methods of keeping their money safe from damaging losses of value. However, the cyclical nature of finance means that recessions must give way to recovery sooner or later. Let’s take a deeper look into some of the opportunities presented to investors during a time of severe financial difficulty:

Can opportunities be identified?

Recessions are terrible things that can severely impact the lives of millions, possibly billions of individuals worldwide.

But many negative events can come with some opportunities attached. And while recessions represent a considerable burden on the world financial markets, they can also offer some extremely high-value prospects for new investors.

When a recession takes hold, asset prices typically fall hard. This means that investors who were previously priced out of making meaningful revenue from stocks, bonds, mutual funds, real estate, private businesses to name but a few, can suddenly find themselves presented with considerably lower costs than a year or two prior. As other investors are forced to part with their assets, you could swoop in and grab yourself a bargain.

(The Financial Times highlights the inverted yield curves within US Treasury bonds as a sign of a coming recession – as evidenced by historical trends within this chart. Source: FT)

The Financial Times recognises that the US Treasury yield curve has inverted due, largely, to ongoing trade wars. Further to the chart above, the newspaper also reported that UK yield curves on two and ten-year gilts inverted over the past summer – indicating that there are challenging times ahead for investors.

Naturally, when market predictions appear ominous, bearish investor sentiments become more prominent. The Financial Times reports that in the current climate, the price of gold is “soaring.” With “the price of the yellow metal rising above $1,500 per troy ounce for the first time in six years” back in August.

Prolific investors will always be on the lookout for opportunities to buy low and sell high, and even though the markets will no doubt show volatility, there’s a good chance that as a recession subsides, the assets you’ve bought into will begin to regain their true value.

With this in mind, it’s worth exploring the prices associated with specific stocks and bonds. If their respective values appear to be outstandingly low compared to their value outside of the economic downturn, you could be looking at a good opportunity to gain money as the market recovers.

Searching for value in capital markets

When it comes to equity markets, the perceptions that investors hold of heightened risk typically leads to the urge for seeing higher potential rates of return for holding equities. For their expected returns to rise higher, current prices would need to drop. This happens when investors sell off riskier holdings and transition into safer securities like government debt.

This is what makes equity markets fall prior to recessions. As investors grow fearful of seeing the collective values of their assets decline, they take a series of steps in order to retain as much value as they can.

Safety in investing by asset class

History tells us that equity markets have a pretty useful habit of acting as reliable predictors of upcoming economic downturns, so it’s important to pay close attention to the optimism or pessimism of traders within this particular field.

However, even if the equity markets are in the midst of a deep decline, there’s still cause for optimism among investors. Assets still have the ability to undergo a period of outperformance, so it can often pay to keep your ear to the ground and hunt for small pockets of clear blue skies amidst the cloud-covered horizon.

Can efficiency be found within stock investing?

Stock markets can be volatile places even at the best of times. But history shows that there’s still plenty of security that can be found by investing during a recession.

One of the safest places to invest across a range of markets can be found within the stocks of high-quality companies that have been in existence for a long period of time. While this may not guarantee security, these types of businesses have shown that they can survive prolonged periods of financial difficulty in the past.

Indeed, the NASDAQ-100 index has experienced notably less profound volatility as it recovered from 2008’s crash than stock indexes comprised of less affluent companies.

Naturally, companies with credible balance sheets and little debt regularly outperform businesses with significant operating leverage and weaker cashflows. So it’s worth looking to established organisations for a little solidity when times get tight.

Will diversification remain a safe bet?

Even in the gloomiest of financial forecasts, always diversify your bonds. Even if you come across a company that appears to be thriving amidst an economic downturn, it’s vital that you diversify your assets.

Markets are extremely jittery when the world’s news is littered with closures and the falling GDP of nations and currencies. The landscape can change with little warning, and while diversification may not be a flawless way of thriving amidst the inevitable rainy days, it stands a much better chance than taking up the option of piling your faith into one company that looks stable today with no guarantee for tomorrow or the day after.

The world of finance hasn’t been brimming with confidence for some time now, and while investments should be made at the holder’s risk, there are certainly plenty of opportunities out there to build a respectable level of profits even in the midst of an economic downturn. Above all, stay patient, look out for emerging trends and make sure you diversify your investments.

Trade War: There Is A Limit To Everything

Trump’s statements are so often distress market participants that few people are now making predictions about whether the new tariffs were an instrument of influence in negotiations, or whether it could actually happen. If everything goes according to the second scenario, we will get an escalation of the trade war, which will result in pressure on the stock market, commodity market, supply chains, manufacturing and a lot of related sectors.

Trump cannot but understand that there are limits and deadlines for any process. Given the growth of equity indices, for which fertile ground has been created by easing policies and lowering interest rates, there is a very large scope for the decline. However, at the moment, stocks are still supported by hopes for the first phase of the trade deal.

In addition, the low-interest-rate environment also fed the US consumer bubble. The delinquency rate for credit cards jumped to a 7-year high in Q3, and the toxic debt level is also steadily rising. Leading credit card issuers in the U.S. had to increase loan loss provisions by 9.9%. These are the results of the policy of consumption stimulation and pumping the economy with liquidity.

However, there is one winning asset – gold. Against the background of the escalation of trade wars and easing of monetary policy in a number of major economies, the new decade may begin very successfully for gold. Goldman Sachs Group Inc. and UBS Group AG expect gold prices to rise to $1,600 per ounce.

Crude oil can be considered a loser side. Oil shows a decline for the second consecutive session, as concerns about the weakening of global demand prospects outweigh any agreements under OPEC+. Moreover, the expanded cartel has deprived itself of market share, allowing production to decline and supporting oil prices. Since the agreement began, the US has been able to increase its production by 4 million barrels per day. Inevitably, the parties to the agreement will realize that they will either be completely displaced from the market or will have to increase production, which will immediately collapse the oil market.

Within a few days there will be meetings of the largest central banks – the Federal Reserve and the ECB – with the prospect of influencing the dollar and the euro. No interest rate decisions are expected. In this case, market participants would like to understand the future intentions of the central bankers, while in the central banks themselves they would most like to see positive news releases to reduce the degree of expectations from the monetary policy.

This article was written by FxPro

Trader Predicts Assets Direction With This Forward-Looking Indicator

The longer a trader spends working with the charts, trading the markets and studying the trends/indicators, the more knowledge, experience, and capability that trader has in being able to see and predict future price moves.

We believe it is the same way with other professions in life – a professional race car driver, a professional pilot or ship captain.  Any profession where an individual is “at the helm” of some vehicle, instrument or live-action event, that individual will, over time, hone his/her skills to be able to foresee and manage certain aspects of the live operation better than someone without the experience.

One might want to call this a “sixth-sense”, but we believe it is simply applied knowledge and experience.  These individuals see and feel things that others simply miss or brush off as unimportant.

Trading is the same way and traders will become better and more skilled by following the charts very closely and watching how price reacts to geopolitical and regional economic events.

One of our primary price modeling tools is what we call the V10.  It has gone through a number of revisions over the years and is capable of running on almost any chart, in any time-frame.

What we learn from using this tool is when and how price rotates, confirms trend changes, sets up new triggers and more.  It also helps us to identify price cycles, when we should add-to positions, trim profits or expect a new market rally or correction.

Before you continue, take a second and join my free trend trade signals email list.

V10 TREND TRADING STRATEGY – AVERAGE TRADE 45 DAYS

As we expand the use of the V10 price modeling system into other markets, you’ll see how changes in price trends can assist us in seeing into the future and preparing for price rotation that others may miss completely.

NATURAL GAS V10 CHART ANALYSIS

This NG chart highlights a number of price trend rotations (from RED to ORANGE to GREEN, or from GREEN to ORANGE to RED).  Each time the color leaves a primary trend color (GREEN OR RED) we have an early warning signal that price rotation is setting up.

You can see the initial uptrend in late August we set up by a RED to ORANGE trend change.  The same thing happened in late October.  Now, a GREEN to ORANGE trend change setup near mid-November warning us that NG was going to move lower in the future.

These types of setups appear in all types of charts, asset classes, and time-frames and soon we will make different versions available so we have long term investing, trend trading, swing trading, and momentum trader signals.

THE POWER OF CYCLES WITHIN PRICE ACTION

When attempting to interpret price modeling systems or indicators with cycle analysis utilities, it is important to understand that cycles don’t drive price moves.  Price moves drive cycle rotations.  Knowing when price cycles are topping or bottoming can assist traders in understanding where and when new trade setups are viable and when to trim profits off existing trades.

If we know when the most active and relevant cycle is trending, topping or bottoming and the expected cycle length for a potential price trend, then we can make a more informed determination about the viability of the trade setup and risk factors.

We are also able to use the price modeling systems and cycle modeling systems to better understand how far price may move, when we may begin to see price weakness in the trend and other important factors to help us manage our trade properly and reduce risks.  This is where things get really interesting and exciting.

EXAMPLE SP500 PREDICTED PRICE MOVE

HOW I PREDICT FUTURE PRICE MOVEMENT

This last chart shows you the price of Natural Gas futures.  We have overlaid our proprietary Cycle Modeling tool onto it so you can clearly see how the price has moved in alignment with the cycles.  Follow the LIGHT BLUE cycle line on the chart and try to understand that the range/height of the cycle lines does not correlate to price levels.  They represent the “intensity” of the cycle peak or trough.

A higher peak on the cycle line suggests this upside cycle peak has a higher intensity/probability than a lower cycle peak.  We gauge these rotations as a measure of intensity or amplitude.  Lower cycle troughs suggest a price bottom may have more intensity/amplitude in price than a moderately higher cycle trough.

Follow the three-cycle lows starting near early October on this chart.  Each of them resulted in deeper Cycle troughs on our Cycle modeling tool.  Yet, the real price reaction was to set up a small inverted Head-n-Shoulders bottom pattern.  The last cycle trough low didn’t result in a deeper price level, but it did result in the completion of the bottom pattern that prompted an immediate upside price rally – more intensity.

We’ve also highlighted some of our most recent trades related to our analysis using the V10 and our Cycle modeling tool.  +35% over the past 4 months on three successful trades – we’re pretty happy about that.

Also, keep in mind that we are not showing you what the cycle modeling tool or the V10 is predicting for the future.  We reserve that for our valued subscribers/members.  We know where the cycle and other predictive modeling systems are telling us the price will go, but we can’t share it with you (yet).

Since 2001, our focus has been on learning and mastering the tools we have developed and use as well as the Cycle Modeling tools so that we can follow the markets more closely, learn to provide better opportunities and attempt to identify the highest probability trades for our members.

What we never expected was that our efforts to study, learn and apply these tools would provide us with that “sixth-sense” ability to attempt to see into the future and to attempt to predict 10 to 20+ days into the future.

Our modeling tools share opportunities with us all over the markets and across multiple instruments and time-frames.  We recently posted our gold and gold miners price/cycle forecast here. We focus on Daily and 30-minute intervals for our members, but we see these opportunities across all levels intervals – from 1 minute all the way to monthly/quarterly.

The one thing we are certain of is that our members continually write to us about how important it is to them to have us explain the setups, trends, cycles and future market implications to them in our daily market videos.  They don’t have to try to learn to do this type of cycle research on their own, we give them the details every morning before the markets open and any trade signal we have for SP500, gold, oil, nat gas, bonds, and more.

Chris Vermeulen
Found of Technical Traders Ltd.

The Technical Traders Wealth Trading Newsletter

Is The Current Rally A True Valuation Rally Or Euphoria?

Over the past few days, our researchers identified another rally like this that happened recently and wanted to highlight the eventual outcome of this type of Zombie-Rally. Before you continue, take a couple of seconds and join our free trend signals email list.

Zombie-Rallies happen in the market when there are really no other alternatives but to “keep doing what seems to have been successful over the past few months or years”.  A good example of this is the DOT COM rally that continued to push higher and higher even though investors and traders could clearly see the wheels were coming off the train and companies were not able to achieve profits to measure up to proper valuations.  This is a measure of GREED becoming a driving force behind investor sentiment.  Who’s going to go against the markets when the trend bias is continuing to push higher and the risks of shorting far outweigh the risks associated with following the herd.

Our researchers use our Custom Market Cap index to help us understand where peaks and valleys are likely to form in the markets and, generally, this utility is quite accurate.  It measures the ability of the US stock market to rally, sell-off and rotate very clearly and can be used to measure when the price has reached near extreme levels.  Recently, we authored an article suggesting liquidity and volume would begin to fall over the next few weeks and months that would result in increased volatility headed into the end of 2019.

December 1, 2019: LIQUIDITY & VOLUME DIMINISH – WHAT NEXT?

CUSTOM MARKET CAP INDEX CHART IS CLEARLY IDENTIFYING A MARKET PEAK

Our Custom Market Cap Index chart is clearly identifying a market peak has formed as of the end of

November 2019.  The extreme high peak on this chart on the Thanksgiving holiday week is well above traditional high peak levels and should be considered an extremely high price exuberance peak in the US stock market.  Our expectations were that an immediate price rotation would setup pushing prices much lower over the next few days and weeks.

Historically, once the price reaches these extreme levels, the price typically rotates lower and attempts to target the lower/middle price boundaries drawn by our channel lines.  This would suggest that an 8 to 12% downside price rotation is in our future should this price peak follow previous examples.

Yet, what other evidence could we present to support our expectation that this recent price rally is truly a “zombie-rally”?

TRUE STOCK MARKET VALUATION APPRECIATION INDEX

Our researcher team put together this chart to highlight the true valuation appreciation at various times within the past 6+ years.  When this chart is climbing, valuation levels in the global stock markets are rising in comparison to traditional safe-haven instruments.  When this chart is falling, then valuations are decreasing in comparison to safe-havens and total overall valuation appreciation.  Think of it as a measure of how much conviction is behind the market price activity.  The more traders believe the future appreciation is valid, the more valuations will appreciate and investors will move away from safe-haven investments.  The more concerned traders become about price valuation levels, the more likely they are to begin to hedge into protective, safe-haven, investments and the less confidence they have in the ability of price to appreciate in the future.

This chart highlights a number of key factors…

_First, the true market peak occurred in September/October 2018.  That was the high point on this Global Valuation chart and that was the peak of positive investor sentiment before the US Fed initiated a very deep price rotation.

_Second, the rally from the November 2016 Presidential elections till the January 2018 peak was a true broad-participation rally where global investors really believed in the future price appreciation of the global stock markets.  Thus, we see this Global Market Valuation chart rally much higher after the November 2016 elections.

_ Third, since the peak in October 2018, the global market participants have been much more fearful of the capability of future price advances.  There has been no real price appreciation advance on this chart since the peak in October 2018 and we believe this highlights a very weak foundation in the global markets for this current “zombie” price rally.

If our researcher team is correct, there is a very real potential that a broad market price rotation could test the lower boundaries of this market valuation chart and possibly attempt to push true global market valuations below the February 2018 lows.  This would represent a complete collapse of the global stock market resulting in a -10 to -15% price correction over the next few weeks/months.

Every rotation on the Global Valuation Chart over the past 3+ years can be clearly seen on this SP500 chart.  The January 2018 peak followed by the downward price collapse.  The October 2018 peak followed by the downward price collapse.  Even the June and August 2019 price rotations are clearly evident in the Global Market Valuation chart as downward valuation corrections.

CURRENT US STOCK MARKET PEAK IS NOT SUPPORTED AS A TRUE VALUATION

The current US stock market peak is not supported as a true valuation advance by this data.  Yes, the stock market level is much higher than the peak level in October 2018, but the underlying global market true valuation level is suggesting this is a zombie-land for investors.

The only other time something like this happened was near the end of 2017 when the US stock market continued to climb much higher even though the valuation levels were already weakening.  Although this was a brief period of time, the span from November 2017 till the end of January 2018 resulted in a very similar type of price rally.  Take a look at the “2018” markers on these charts.  You’ll clearly see the Global Valuation chart is showing the valuation level was DECLINING just before the start of 2018 whereas the SP500 chart shows the market price was rallying upward consistently…  Welcome to Zombie-land.

CONCLUDING THOUGHTS:

If our researchers are correct, this current rally will likely end as we near the end of this year when volume and liquidity diminish.  The rotation lower, on Monday, December 2, was very clearly a downward price rotation away from these extreme peak levels and, potentially, an end to the zombie-land price rally of the past few months.

The end of 2019 and early 2020 could be full of very violent and dramatic price rotations as the true global market valuation levels have yet to rally to meet the US stock market peaks.  This underlying fact suggests that price must fall in order to realign with true valuation levels or the valuation levels must immediately start to rise to meet current price levels.  Our research team believes that price levels will collapse to meet true valuation levels.  There is no indication that any true investor valuation appreciation is taking place at the moment, thus price must fall to fair values based on true investor valuation estimates.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
Founder of Technical Traders Ltd.

Range-Bound Into The End Of 2019?

The news may continue to push the price higher as the overall bias has continued to be to the upside.  Yet, our Fibonacci predictive modeling system is suggesting the current price trend has begun a “scouting party” type of move which may end in a moderate price correction fairly quickly.

IWM RUSSELL 2K STOCK INDEX CHART

Our Adaptive Fibonacci price modeling system is capable of learning from past price activity and attempts to present key price data and trigger levels that are important for future trending.  The GREEN and RED horizontal lines on the right edge of this chart shows where the TRIGGER LEVELS are for the Fibonacci system.  The bullish trigger level (GREEN) is 2.5% above the current price levels.  The bearish trigger level (RED) is nearly 16% below the current price level.  This suggests that price would have to target either of these levels to establish a new price trend, or continue rotating within these levels to setup new minor peaks and valleys in the price – thus creating revised TRIGGER LEVELS. Get my updates by joining my free trend signals email list.

What we find interesting is the current “scouting party” type of rally that is taking place on the right edge of this chart.  This upside price move is above historical resistance (the CYAN LINE) and appears to be an attempt to test the support levels above the $160.50 level.

If the price is successful in establishing support above this level, a new bullish trend may begin.  If not, the price will rotate lower and potentially begin a new bearish price trend.  Remember, the downside Bearish Trigger level is 16% below the current price – so that the downside move could be quite dramatic.

TRANSPORTATION INDEX WEEKLY CHART

This TRAN Weekly chart highlights a similar range-bound price setup where the bullish and bearish Fibonacci TRIGGER LEVELS are well above/below the current price.  The upside Bullish Trigger Level is 4.15% above the current TRAN price level – thus price would have to rally at least 4.5% higher to qualify as a breach of this Bullish Trigger Level and qualify as a potential new bullish trend.  The Bearish Trigger Level is near 18.4% below the current price level – thus the price would have to fall 18.5% from current levels to breach this Bearish Trigger Level and to qualify as a new Bearish Trend.

Where does this leave us headed into the end of 2019?  Our researchers believe the Santa Rally that most traders expect maybe more like a lump of coal in 2019.  We don’t expect any big breakout rally to happen over the next 35+ days and we don’t expect a massive 40% price correction either.  Our Fibonacci price modeling system is suggesting that any rotation within this 20% price range would be considered “absolutely normal” given the ranges that have been set up over the past 2+ years.

Last week we share these charts on the VIX that paint a clear picture of what is likely to unfold in the next week. This current week is one of the strongest months of the year so

Therefore, the downside price move of 6 to 12% would be completely normal.  And the upside move of 2~3% from current levels would be completely normal.  Any price rotation within the GREEN/RED Fibonacci triggers levels would be considered “normal price rotation” given the established price ranges, peaks and valleys.

We’ve been saying for months, 2019 and 2020 are certainly going to be interesting years for traders.  We believe any price rotation or breakout could lead to a wide range of price rotation that may shock skilled technical traders.  At this point, a 22%+ “normal” price range has setup in the markets.  Prices could rotate within this range and “not really go anywhere” in technical terms.

I want to wish everyone a Happy Thanksgiving and if you find this type of analysis interesting be sure to visit my website and sign up to get both my swing trade and investing ETF trade signals at 41% discount, plus a free bar of silver or gold with my Black Friday Offer Today! Visit: www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

VIX Warns Of Imminent Market Correction

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance.  This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. You can get all of my trade ideas by opting into my free market trend signals newsletter.

VIX VALUE DROPS BEFORE MONTHLY EXPIRATION

When the VIX falls to levels below 12~13, this typically very low level is usually associated with an extreme peak in price.  Throughout history, after the VIX has collapsed to these types of low price levels, the markets have a tendency to revert/correct in ranges that are typically in excess of 3.5% to 5.5%. In some cases, these corrections have been as large as 11% to 18% or more.

CURRENT CONTINOUS VIX PRICE CHART

The current VIX level, near 12, is near the lowest historical levels of the past 12 months.  Every time the VIX has fallen to near these levels, a peak in price has set up within just a few days potentially.  Each time this setup has occurred, the price has rotated/corrected downward by at least 5.5%.  Is that about to happen again in the US markets?

CUSTOM MARKET CAP INDEX

Our custom Market Cap Index is also suggesting a market peak has setup and that price may likely revert to lower levels. Historically, when the price reaches these extreme price ranges, a rotation/reversion price event takes place.  We believe a price reversion may be setting up in the US/Global markets that traders may not be prepared for.  The current rally in the US stock market suggests a broader market rotation may take place.  This suggests a deeper reversion event may be setting up.

Last week I talked about the 3-year record high outflows in the GLD gold bullion ETF and how it’s warning us that investors are not fearful of falling stock prices. This along with the vix, and our custom index paint a clear contrarian signal that a top is near!

CONCLUDING THOUGHTS:

As we near the end of 2019, the current bullish price trend may come to a dramatic end as the VIX charts and our custom Index charts suggest the US/Global markets may have reached levels that support a price rotation/reversion event may be setting up.  Traders need to be prepared for the risks associated with such an event and plan for extended risks.

If you find this type of analysis interesting be sure to video my website to learn more about how you take full advantage of this analysis every week at www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

WARNING: Credit Delinquencies To Skyrocket In Q4

This is a tell-tale sign that the US Fed decreased the Prime Rate recently as a result of broader credit issues related to higher interest rates for corporate and other borrowers.  The last thing the Fed wants is another collapse on the lending markets similar to 2008-09.

(source: zerohedge.com)

Low growth continues to plague the global economy as this extended run in the US stock market continues to mature.  There are many questions all traders are asking – will it continue higher or have we reached a new peak in price activity?  Many economists believe we are ending an expansion period related to the revaluation of the global markets after the 2008-09 credit market collapse.  The typical price cycle of approximately 6~7 years has extended beyond traditional bounds and many analysts are wondering how it may end?

If an economic cycle has truly come to an end, we should expect to see some change in economic activity levels, consumer confidence and mortgage/housing activities.  The end of an economic cycle is usually aligned with some moderate level of economic contraction and a slowing of economic activity.  The one thing that may continue throughout this end of the mature economic cycle is the “capital shift” where capital rushes away from risk and into the US stock market as long as the reversion event stays at bay. (source: zerohedge.com)

Consumer Confidence levels have fallen recently to new lows.  This is a very clear sign that consumers expect the economy to contract a bit based on continued trade-related issues and the overall maturity of the economic cycle.

Most of the “rest of the world” has continued to binge on credit/debt since the 2008-09 credit crisis.  This is a very clear sign that the US Fed and global central banks have pumped trillions of dollars out into the consumer, corporate and global markets over the past 8+ years.  The question for all of us is when and if this debt becomes a liability – when does this credit become un-serviceable?

China and Asia were some of the biggest consumers of US credit/debt since 2008-09.  This graph highlights the incredible 10,667% increase in debt in China since the 2008-09 levels – from approx 300 million to 3.2 billion in 8-9 short years.  It appears the global economic rally was really the “binge on credit” rally.

US Mortgage debt has climbed to near all-time highs recently as well.  This is a sign that the US housing market has rallied to levels that are very close to the peak levels in 2007-08 – just before the crash.  It may also be a sign that cracks may soon start to appear in the housing markets across the US as delinquencies and foreclosures may continue to skyrocket.  People need to be able to service this debt/liability effectively in order to maintain their assets.

We believe the path of least resistance in the US stock market is higher – at least until price breaks below the current price trend channel.  The continued capital shift where foreign investors continue to pour capital into the US stock market will likely continue until some event shakes the confidence of these foreign investors.

You can see from our Monthly chart of the ES, below, we have highlighted the longer-term economic maturity trend which typically lasts about 6~7 years.  The rotation in 2015-16 was very mild as the US Fed continued a type of quantitative easing process by buying bonds and keeping interest rates historically low.  Because the US stock market actually failed to experience any real price rotation near this 2015~2016 cycle date – we believe the current cycle highs are extremely extended and related to the credit binge that has taken place over the past 8+ years.

Our cycle research suggests we may have already past a cycle peak event and may be operating on borrowed time right now.  This suggests that any further upside price activity in the US stock market may be a function of the overall strength of the US stock market compared to the weakening economic activity throughout the world.  In other words, the capital shift process is still feeding large amounts of capital into the US stock market as foreign investors flee risk and uncertainty.  If and when this ends, the US stock market will likely begin a price reversion process that may result in a very deep price correction.

This last Monthly ES chart provides a closer look at the technical indicator data that we believe highlights the overall weakness that is building up in the US stock market.  Even though we’ve recently pushed to new all-time highs, our technical indicators are suggesting that price is actually weakening in the upside price trend and could break lower at any moment.

The Direction Movement index, Momentum, and MACD of Momentum are all highlighting a weakening price trend that appears to be setting up for a broader downside price move eventually.  Traders need to be very aware of the risks in this extended upside price trend and to prepare for the potential of a new credit crisis event related to the current credit levels that are far more extended than in 2008-09.  If something breaks in the credit markets now, there appears to be nearly 5x to 10x the amount of credit extended throughout the global than there was 8 short years ago.

November will be the month of breakouts and breakdowns and should spark some trades. I feel the safe havens like bonds and metals will be turning a corner and starting to firm up and head higher but they may not start a big rally for several weeks or months.

October was a boring month for most major asset classes completing their consolidation phase. Natural gas was the big mover in October and subscribers and I took full advantage of the bottom and breakout for a 15-22% gain and its till on fire and trading higher by another 3% this week already.

If you like to catch assets starting new trends and trade 1x, 2x and 3x ETF’s the be sure to join my premium trade alert service called the Wealth Building Newsletter.

Happy Trading
Chris Vermeulen
www.TheTechnicalTraders.com