Mr Spread Better's blog

[Mr Spread Better]

Sterling Rallies After Overnight Wobble

www.paddypowertrader.com

The Dollar threw a wobbly overnight and I fell for it hook, line and sinker. The Fed’s decision to do not very much gave equities and the Dollar an initial boost, but both suffered a post-party hangover this morning.

I should have stayed in bed; I fancied a lie-in, but duty called and I was ready for action at 7 o’clock. Quite often that’s the best time to catch the early move. But on days like today you’re coming in at the end of some-one else’s successful trade.

Twice I backed the Dollar, selling GBPUSD at $1.4080 and later on at $1.4113. The first bet was in a tentative £1, the second was a cautious £2 so the damage was limited to an overall loss of £124. To explain to newcomers, if the direction of a trade changes (like I wrongly thought GBPUSD had) my early bets are tiddlers, money I’m prepared to lose to find out if I’m right about the market. If I’m wrong I’ll go back into my cave and re-assess; if I’m right then I’ll start to up the bet size.

This morning’s losses were bailed out by a couple of winners in EURGBP. My first trade was to sell £5 at £0.9261, after a failed attempt to break above the 21 mav on the 5-min chart, and the subsequent break below the £0.9264 pivot point. I took part profits at £0.9241 then, with the price below ‘30, I trailed my stop down to £0.9251. Aaagghh!!! I was just too eager and was stopped out by a pullback.

But today I had faith in the trade and re-opened a short at £0.9251. I took some early gains at £0.9231 then ran the balance down to £0.9150 before my stop was hit at £0.9185. Total profit on those two trades of £205 wasn’t exciting, but covered my loses on a bad morning.

My equity bets look a touch healthier today (thanks Xstrata). I haven’t added to my short position as I want to see the strength of any rally first, and whether there’s any month-end monkey business left.

So, did any of you gold traders get back in at $880? I watched it and decided that, given my record in gold, I’d wait for the security of trendlines and moving average support closer to $855. And I missed an $18 bounce!

Hey, the Paddypowertrader team are working overtime to fill those gaps between trading. For the newbies, Z’s just published a ‘must read’ on how to get started with your trading (Dummy’s Guide: How To Make A Bet). And one for me, Flashrabbit’s put out a highly topical piece on gold (Inflation Or Deflation).

Happy Trading

 

[Mr Spread Better]

Euro Takes A Pasting Ahead Of Rate Decision

www.paddypowertrader.com

Every now and again I write a ‘confessional’, a blog to give newbies a laugh and make seasoned traders groan in despair. These confessionals usually feature a mistimed trade in gold, but this time I made a right fist of FTSE.

Check out the chart below and if you can see what the hell triggered a sale of FTSE at that point be sure to let me know. I don’t do drugs, and not a drop of Guinness had passed my lips. I wasn’t on the phone, or absent-mindedly tapping my finger too close to the keyboard. I did actually mean to trade!

Here’s the best explanation I can come up with:
I’d been looking to increase my short in FTSE, and over the past few days had made small gains from selling at around that level. Ignoring my moving averages and RSI I concentrated on the candles. The red (down) candle took out the previous green candles gains, but then rallied a bit (this was another mistake as it didn’t form an engulfing pattern). When the next green candle failed to hold above the previous high I jumped in and sold £1 at 4118.

I closed the trade out this morning at 4208 (probably where I should have been selling it) as I’m already running a long-standing short, which is quite enough when the market’s going against me. It was an unbelievably bad deal, not because I lost money, but because there was no rationale for the trade. I’ll bookmark this for my ‘Dumbest Trades’ blog next December.

In other trades I survived a sell bet on the Dow last night, taking a profit just before the rally, and sold EURGBP a couple of times, unfortunately closing ahead of this morning’s fun and games. The Euro’s taken a real pasting this morning; the EURUSD rate crashed 230-pips and even the less volatile EURGBP plunged by over 180-pips. So what’s that all about?

I’m not entirely sure, but here’re some of the scraps I’m picking up:
1) Knock on effect of Russian debt being downgraded to BBB (location, location, location I guess),
2) Goldmans reckon Euro interest rates will hit 0.5% by June,
3) The EURGBP rate failed to break £0.9080 for the third time in 3 days’
4) It was overdue a good mauling.

If you fancy an easy read with your coffee I’ve just knocked out a piece looking at where the equity markets stand ahead of tomorrow’s rate decisions and Friday’s payroll numbers (Where Are We Now? Equities). Hopefully, tomorrow I’ll be having a look at the currency markets.

Happy Trading

 

[arzoooo]

for more detail you can visit here


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regrads

 

[Mr Spread Better]

Rates As Expected But Sterling Flying

www.paddypowertrader.com

The interest rate decisions were the predicted non-event, but there was plenty of excitement on the forex see-saw with Sterling’s rise sending the Euro lower.

This morning I posted a piece on the major currency markets (Where Are We Now? Currencies); my take on the charts was:

GBPUSD-should re-test yesterday’s high and if it can hold above that level, should set its sights on $1.50
EURUSD-definite downtrend, should go lower
EURGBP-should re-test support at £0.8830 then fall further

I’m not going to claim 3-lemons on the fruit machine, but if I’d placed bets on all three calls I’d be sitting here now with a grin the size of a Texan’s backside. I don’t like running too many bets at any one time so, with short bets still on FTSE and a couple of banks, I restricted myself to a couple of long bets on Sterling.

I liked the long GBPUSD trade so tried an experiment today; parallel deals.
I bought £5 at $1.4445 with a conservative stop loss policy, and an additional £2 at $1.4453 with a tighter trailing stop. Predictably the ‘low interference’ bet on a strong trend performed better, and is still running.

Committing £7 was a fair old bet for me so I was keen to lock in some early gains. I halved my £2 bet at $1.4483 and closed out £2 of my other bet at $1.4519. The market was moving at such a pace even the stop on my small bet was lagging. Both bets survived some monkey business at 12 o’clock after the MPC announcement, but my £1 bet was stopped out at $1.4553 whilst Trichet was speaking.

I sold £1 at $1.4639 and brought the stop on my remaining £2 up to $1.4540. If I get hit there the trade will have made £530, which in addition to the £130 profit on my small deal, makes for a good day at the office.

This afternoon the Euro recovered some poise against the Dollar, having been lower earlier. But the EURGBP rate was smashed out of the water. The £0.8830 support I mentioned before was brutally swept aside as the price fell to £0.8736. I’m wary of selling the Euro down here and would like to see a test of the £0.8830 level before jumping in again.

And I’ll finish by including a chart I prepared earlier this afternoon, just to show that I’d used up all powers of prediction this morning. It shows the Dow making a new recent low; my comments at the time said that this would normally be a level to buy the market but……

At the time the Dow had recovered from a low of 7837 and looked pig sick. I didn’t fancy a long bet. Now, an hour later, it’s cruising at 8000, dragging FTSE back above 4200. The reason? Word on the street is that Obama’s stimulus plan will be approved on Monday and that the accounting practice of ‘marking to market’ is going to be suspended.

I’m happy for a stockmarket rally to set things up nicely for tomorrow’s payrolls.

Happy Trading

 

[Mr Spread Better]

Not Enough Job Losses To Hurt Equities

www.paddypowertrader.com

An appetite for risk is back on the table with high-flying equities and even buying of the Euro.

Boy, I’ve had a busy day; fitting in an annual visit to the dentist, a quick gym session and coping with a moody computer, as well as trading FTSE, GBPUSD, EURUSD, EURGBP and even GBPJPY. Not everything worked, or is working, but yesterday’s long bet on GBPUSD continued to give me a warm glow, just like the nuclear Scots porridge adverts.

Luckily I was too busy to interfere with my GBPUSD trade, which allowed it to keep pushing ever closer to that $1.50 level. I moved the stop loss up to a still cautious $1.4580, just below today’s low point; that will guarantee me a £600+ profit, but hopefully leave enough breathing space to push further ahead. Unless anything mad happens in the next few hours the price should end the week above its 50-day moving average.

I shorted the Euro several times today, against both the Dollar and Sterling. It’s been making me money but my last attempt, a £3 short on EURGBP is in the red. This was a trade too far, as often happens when I trade a range. I sold at £0.8718 then watched the mother of all squeezes up to £0.8790.

If I’d had the nerve to double up at that level I’d be quids in now, but one of my trading disciplines is to not increase a losing trade (yeah, I break that one if it’s a strong long-term view on the FTSE, but not on currency trades, oh no.) At the time of writing I’m only a few pips offside and need to consider whether to carry it over the weekend. Hmmm.

Of course, the trade that’s very wrong at the moment is my FTSE short bet. I tried to mitigate it by buying a £2 long bet this afternoon, but it just didn’t feel comfortable. After paying 4292 I gratefully accepted 4309 for £1 and, with the price at 4330, brought my stop up to 4302; this was subsequently hit. It sort of feels like FTSE could move higher; it’s hit a new high for the past 4 days. But I’d feel sick as the proverbial parrot if I closed my short up here, only to see a 300-point collapse, followed by a more serious 300-500 points!

And on that note I’m off to register my fantasy rugby team just in time for the weekend’s fun and games. Ireland at home to France must be the game of the weekend, unless the sweaties can surprise a confident Welsh team.

Have a good weekend

 

[Mr Spread Better]

Risk Appetite Drives Shares And Sterling Higher

www.paddypowertrader.com

Sterling has been sniffing around the $1.50 mark as Barclays gave shares another boost. But why on earth is the Euro doing so well?

The best thing I did this morning was to switch my screens off and go to the gym. My take on the weekend press was that UK banks and property companies would drag the market lower. On the currency front I reckoned that expectations of a mega-gloomy inflation report from the MPC on Wednesday, and rising estimates for the cost of a bad bankers bonus protection scheme might take the gloss off Sterling’s rally.

And in early trade both of these looked reasonable bets; the pre-open in FTSE was lower, and both EURUSD and GBPUSD pushed below their daily pivot points. But to me this seemed like an early Monday morning fake, and after watching the screens for 90 minutes I decided on some exercise. Of course when I returned around mid-morning GBPUSD had resumed its recent trend, consolidating above $1.48; Sterling had also broken below £0.87 against the Euro, allowing me to close Friday’s short bet for +30 pips. I’ve just re-opened a token £1 short at £0.8732; the reason for the small size is because I’m not sure why the Euro’s doing so well today, so I’ve restricted myself to a small bet for the time being.

The two main themes have continued along last week’s merry path, with my short FTSE bet not looking good, but my long bet on GBPUSD notching up further profits. And on a smaller scale my bank shorts continue to work against me.

I closed another £1 of my GBPUSD long bet this morning. I was a bit too keen, accepting a bid of $1.4872, but I’m not sure if we’re entering the end-game for now. Sure, there’s no reason why the move should stop at $1.50, but I’ve stayed in this trade quite a while for me; my last sale was over 200-pips lower so what the hell. I’ve now got £1 remaining, protected by a stop at $1.4680 (again, just below today’s lows).

I need to try and keep an open mind on equities as, once again, I’m now running a fundamental view, rather than a trade based on technical analysis. Charts on the major equity markets are started to kick-up buy signals and even if I don’t trust the market I don’t want to be another 200 points offside and still singing the same song.

Hey, wasn’t the rugby great over the weekend. Wales look hot, but the best game was the Ireland, France humdinger. And what a try; a determined burst through the middle, a neat little sidestep and crashing over the try line-just like any good number 8, nice one Jamie Heaslip.

Happy Trading

 

[Mr Spread Better]

The Yo-Yo Euro

www.paddypowertrader.com

Whilst the world waits on superhero Geithner, the Euro has been the main mover-in both directions. Meanwhile, some of the gloss has come off Sterling’s rising star.

As Alanis Morissette once said, “Isn’t it ironic?” My first trade of the day was a canny purchase of EURGBP at £0.8679, on the grounds that the Euro’s overnight collapse had gone too far, too fast. But when the price didn’t seem interested in the up-travelator and started to tail off I cut my position for a £10 loss. At the time it was a discipline; after all, I was trying to call the turn in a nasty sell-off.

Once the loose buyers had been shaken out however, the EURGBP rate showed a very steady uptrend all morning. This uptrend continued after I sold at £0.8751 and £0.8760. I’m not sure what’s behind the move other than short covering of early Euro sales on fears that Russia might default on some overseas corporate debt. But a break above £0.88 will see me cut my bet and watch from the touchline for a while.

Yep, the eagle-eyed will have spotted that I sold without confirmation from my indicators; I chose levels that had produced trading profits over the past few days, but should have waited for a moving average crossover to rubber-stamp the trade. I’m happy to run the trades at the moment, and I put the Euro in the same category as equities and West Brom; they’re all due to go down.

But what’s starting to worry me is that on the daily charts the Euro is showing some signs of flattening out. Against the Dollar it’s broken free of the powerful downtrend line and is threatening to break above a flattening 21-day moving average. The other momentum indicators don’t confirm a ‘buy’ signal, but neither do they help the down move. Of course, out in the real world any substance to stories of Russian debt problems will likely rip the chart pattern to shreds, but just something to be aware of.

So, how will equities fare today? There’s a real debate out there on whether markets are turning the corner and the right noises today will light the blue touch-paper, or whether all the good news is in the price. The third, slightly nasty, option is whether we see a strong rally tonight that forces the shorts to capitulate and limit their losses, whilst the longs and neutrals rub their hands at the prospects of a better selling level.

The charts aren’t much help either; true, the S&P failed at the 50-day MAV, but it’s still well above the 14 and 21-day MAVs. The FTSE and Dax are above all three averages.

Happy Trading

 

[Mr Spread Better]

Sterling Falls On Warning Of Deep Recession

www.paddypowertrader.com

Sterling’s collapse continued as Bank of England governor, Swervyn Mervyn King warned that the UK was in “deep recession”. . This speech will be adapted by Monsieur Trichet some time in the future.

This morning I decided to blow some of my winnings to show newbies the difference between a strategic and an impulse trade (yep, I have done this before).

Trade 1-Impulse
To be fair, there was a bit more thought involved than just running after some Kylie lookalike with a bunch of flowers. I’m already a small short in Lloyds and thought it would be likely to suffer if the bears kicked off again. After the recent relief rally a small downturn looked to be coming into play and the shorter moving averages had crossed below the 50-MAV on the hourly chart.

So far, so good, but here’s the crazy bit; I made my decision and acted straight away, selling £5 at 87.6p. Now that’s fine if I’m running a large portfolio and making a decision for the long term. But as a trader it was daft; I sold just after the shares were marked down and spent the morning with an irritating red blot on my trading book. I’m relaxed about the trade, but could, and should, have got better terms by using the charts.

Trade 2-Strategic
Yesterday I was running a short bet on EURGBP, but it was starting to look like the tide was turning. I set a disciplined stop at £0.8805, which was taken out whilst I was being treated to lunch. A nuisance, but that’s part of trading, and I was damned glad of that stop as the price pushed onwards towards £0.89.

I don’t like the Euro, and I’m not sure why it’s doing so well, but the charts favoured it so today I looked to trade EURGBP on the long side. The overnight move had added 100 pips so I really wanted a pullback before jumping onboard. Early trade refused to give an inch so I used the break above the day’s high as a trigger.

Trading the breakout without a pullback is a riskier trade, but often there’s money to be made if you’re awake. I’m also far quicker in shutting the trade down if I don’t think the momentum’s there. I paid £0.8973 for a fiver, selling £3 at £0.8983 and a further £1 at £0.8998. Then, after reaching £0.9029 the price tailed off, hitting my stop at £0.8983.

A decent pullback gave me the chance to re-enter the trade, although I sacrificed a larger gain by opting to wait for confirmation from my signals. I paid £0.8963 for a fiver, taking profits at £0.8975 and finally £0.9003 when, again, support above the big figure diminished. The profits were steady rather, rather than exciting, but the trade had a plan and it worked.

Regulars will know that I’m usually bearish on equities (sometimes too bearish), but I’m not getting too carried away after yesterday’s move. Sure, it was good to see a sell-off, but really it wasn’t up to much. Prices are no-where near testing the uptrend line from November’s low, and today’s seen a bounce off the 21-day moving average. I added to my short bet last night, but closed out for a small gain ahead of the US close.

Finally, for those of you still confused by what the US stimulus package is all about:

This year, US taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:

Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.

Q. Where will the government get this money?
A. From taxpayers.

Q. So the government is giving me back my own money?
A. Only a smidgen.

Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.

Q. But isn’t that stimulating the economy of China?
A. Shut up.

Below is some helpful advice on how to best help the U.S. economy by spending your stimulus check wisely:

If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to the Arabs.
If you purchase a computer it will go to India.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan.
If you purchase useless crap it will go to Taiwan.

And none of it will help the American economy.

We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer and wine (domestic ONLY), funerals, weddings, or tattoos, since those are the only businesses still in the US.

Happy Trading

 

[Mr Spread Better]

No Further Panic In Lloyds Shares

www.paddypowertrader.com

European trading can react to US holidays in one of two ways. The lack of liquidity can lead to exaggerated price moves, or yawwwnnn….But it gives a welcome chance to prepare for the week ahead.

The trade diary has a few spare lines on today’s page; Late on Friday I sold £5 of Lloyds at 58.5p, but they were a punt on the weekend press and I closed the trade this morning at 56p in the absence of any follow through. The shares are now steady at 61p, around 10p off the early lows.

An early short bet on GBPUSD backfired. I sold a token £1 on what looked like a failed attempt to re-take the $1.42 figure. But the trade was ill-timed and I closed out on a move above the moving average for a £50 bloody nose.

At Mid-day the range on GBPUSD was a derisory 123 pips. The average daily range over 20 days is around 260 pips. With no US trade today I’m going out with my in-house IT expert to get a new computer.

The quiet trading day provides an excellent chance to catch up on a bit of reading and Galloping Zebu has just come out with a great piece on how to identify trending markets (Finding Trends in Markets Part I). Although I rely heavily on the 21-day moving average as my trend indicator, my daily charts also show the ADX indicator mentioned in Zebu’s article as numerical back-up.

The trouble is, the current readings on major equity markets support the cries in many of the recent posts that the markets are soooo dull. There’re no discernible trends in the major European indexes and only a weak trend in the US.

None of the major currencies are demonstrating a strong trend at the moment, again, borne out by the regular swings in price. Perhaps this serves as a useful warning to newbies that, unless you’re an ace range trader, to be careful with entering trades where the market will chew you up and spit out the left-overs- a bit like it did to me this morning!

This is the week leading up to expiry of February options on Friday, but before that there’s a host of key economic announcements, including the minutes of central bank meetings in the UK and US, inflation numbers from the UK, Europe and the US and the German ZEW survey. Check out the full list in the Weekly Wrap.

Finally, the Atlantic Ocean covers 41 million square miles, give or take the odd wave. So how on earth did two state of the art, nuclear-armed submarines with radar equipment happen to collide? Was this an expensive game of chicken, or a ploy to get Gordon Brown off the front pages?

Happy Trading

 

[rups]

bear on tsb, the hbos toxic assets are far from revealed.

 

[Mr Spread Better]

Gold Higher As Equities Plunge

www.paddypowertrader.com

That’s more like it. The equity bears are having a picnic; the S&P 500 is currently below 800 and gold has plugged $1000 into its Sat Nav.

My only trades today have been in GBPUSD; the first trade was poor quality and cost me a few quid, the second was better and left me with an overall profit.

I’d been hoping to get to the gym before the release of the UK’s inflation data, but for some daft reason decided to open a trade first. I fancied that the overnight news on European banks, and the consequent weakness in equity markets, would benefit the Dollar. The GBPUSD rate was way below its pivot point and falling. I would have preferred to sell on a pullback, but early-morning fever took over and I dipped my toe in with a £1 sale at $1.4136.

The only thing that happened for the next hour and a half was that I missed the gym. The price gyrated close to my opening level, not inclined to return to the lower levels ahead of the inflation announcement. In fact the steady improvement ahead of the number looked suspiciously like a few people knew what was coming. I opted to hold the bet over the announcement (only because it was a tiddly £1 bet) and closed out at $1.4178 on the higher than expected inflation figure. The loss of £42 was irritating but bearable.

My second trade was of far better quality, and had the added bonus of providing a link to Galloping Zebu’s excellent Finding Trends In Markets Part II.

Zebu talks about using a moving average crossover to enter the trade; this usually means that you don’t get the full 3-course meal, but that you’re more likely to enjoy a good main course, rather than get chucked out during your starter. I tend to trade when the price crosses a moving average, rather than wait for a moving average crossover, but only if the move is confirmed by either a MACD or RSI momentum indicator.

Don’t get me wrong; I’m not saying my way’s better (it’s certainly more risky). I’m simply using it as another example of the many variations on a theme. If you check out the chart above you can see the two entry points; the first where I entered after a closing candle on the price crossover, the second after a closing candle on the moving average crossover. But that’s a selective (though topical) chart. Many other charts would show my early entry stopped out as the momentum dies. I guess the real message is, “have a play, make use of the demo account, and see what floats your boat”.

So, back to my trade, I bought £2 at $1.4222 and, after trailing my stop at a safe distance, closed the trade at $1.4295 after the second assault on $1.43 failed. The trade netted me £146; enough to offset my earlier loss and pay for some tuna sandwiches.

But forex trading was a sideshow today. My real winner was an extremely patient short bet on FTSE, and I must admit to closing out part of the short at 3998. Previously there was good support around here and I reckon I’ll get the chance to re-open at a higher level in the next few days. The real fun will begin if the S&P 500 ends the week below 800. With option expiry on Friday I’m hearing there will be a lot of support around this level-hmm we’ll see.

A final observation; gold looks to be the safe haven of choice, rather than the Dollar or Yen.

Happy Trading

 

[rups]

the market is running sidewards. The pensions investments and fund manager investments are buffering this position. its not like the old days where pension provisions were not as heavily invested into stocks. these funds are not as concerned about the individual stock price as long as they get dividends, if your looking for more bear behaviour look into where pensions are pulling, because thats where new bottoms will appear, but to be a bear now is as smart as being a bull.