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An Update :US Dollar Index ,USDJPY ,AUDUSD ,USDINR ,EURO ,YEN ,GOLD ,SILVER ,PALLADIUM ,WTI ,BRENT ,SPX 500 -Anirudh Sethi

  
  Analysis
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The dollar rallied strongly from March 9 through March 20 or the start of last week on March 23.  It has subsequently sold off and done so in dramatic fashion.  It is not clear the trigger of the stunning reversal.  Some observers attribute it to the Fed’s currency swap lines, which were offered daily (seven-day operations) to a handful of large central banks.
Others link it to the better risk appetites reflected in meaningful bounces in equity markets, but nothing as striking as the 17% rally in the Nikkei.  Even with a 915-point tumble in the Dow and a 3.3% drop in the S&P 500 before the weekend, both ended with double-digit gains on the week.  Gold’s 8.6% rally will not sit well with those who view it as a safe haven.  The 30- and 60-day rolling correlations on the percent change of gold and the S&P 500 are positive for the first time since the middle of last year and October 2018, respectively.
The technical indicators that we monitor, the MACD and Slow Stochastic, have turned down for the dollar against all the major currencies.  The poor technical condition suggests the dollar’s weakness is more than a function of month- and quarter- and fiscal year-end flows, but was technically over-extended.  We will use Fibonacci retracement and moving averages to identify potential price targets and relative strength.
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Paul Ciana, New Frontiers in Technical Analysis (Book Review )

  
  Education
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New FrontiersThe six chapters in this book are written by six different authors: “Evidence of the Most Popular Technical Indicators” (Paul Ciana), “Everything Is Relative Strength Is Everything” (Julius de Kempenaer), “Applying Seasonality and Erlanger Studies” (Philip B. Erlanger), “Kase StatWare and Studies” (Cynthia A. Kase), “Rules-Based Trading and Market Analysis Using Simplified Market Profile” (Andrew Kezeli), and “Advanced Trading Methods” (Rick Knox).

Ciana provides some fascinating data about the preferences of those who use the Bloomberg Professional Service. For instance, Europe opts for log charts 47% of the time and Asia only 9% of the time. Asia prefers candlestick charts, the Americas bar charts. Worldwide the most popular technical indicators (excluding moving averages) are RSI, MACD, Bollinger bands (BOLL), stochastics (STO), directional movement index (DMI), Ichimoku (GOC), and volume at time (VAT). RSI is the clear winner, with a 44.4% worldwide preference; MACD comes in second at 22%. Some indicators have geographical ties. GOC has a 10.8% popularity rating in Asia as opposed to 2.5% in the Americas and 2.8% in Europe. VAT has a 5.3% rating in the Americas and only 1.8% in Europe and 1.6% in Asia.

VAT, for those who are unfamiliar with it, is something of a seasonal indicator. For instance, “from a historical perspective, VAT considers the volume that has occurred on that day over the past X years to create the average for that day. … From an intraday perspective, VAT creates an average of volume from the actual volume that occurred during that time-slice for the past X days. In both applications VAT can be projected into the future to get an idea of expected volume.” (p. 37)

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10+1 Rules If You USE Charts

  
  Education
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Rule 1 – If you cannot see trends and patterns almost instantly when you look at a chart then they are not there. The longer you stare, the more your brain will try to apply order where there is none.

If you have to justify exceptions, stray data points and conflicting evidence then it is safe to say the market is not showing you what you think it is.

Rule 2 – If you cannot figure out if something is bullish or bearish after three indicators then move on. The more studies you apply to any chart the more likely one of them will say “something.” That something is probably not correct.

When I look at a chart and cannot form an opinion after applying three or four different types of indicators – volume, momentum, trend, even Fibonacci – I  must conclude that the market has not decided what it wants to do at that time. Who am I to tell it what it thinks?

Rule 3 – You can torture a chart to say anything you want. Don’t do it.

This is very similar to Rule 2 but it there is an important point to drive home. You can cherry pick indicators to justify whatever biases you bring to the table and that attempts to impose your will on the market. You cannot tell the market what to do – ever. (more…)

Leibovit, The Trader’s Book of Volume

  
  Education
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Mark Leibovit believes that volume analysis is “the closest thing we have to a real working ‘crystal ball’” in the markets. (pp. 425-26) In The Trader’s Book of Volume: The Definitive Guide to Volume Trading (McGraw-Hill, 2011) he outlines the fundamentals of volume analysis and introduces the reader to a broad range of volume indicators and oscillators.

We have all heard the mantra that volume precedes price. As Leibovit writes, “Market price trends do not happen in a vacuum; rather, it is the behavioral or programmed responses of traders and managers that result in the volume shifts that precede a price move. As the crowd mobilizes, as reflected in the volume numbers, its size and conviction will determine the direction and strength of the price movement. As the conviction of the crowd falters and the volume numbers pull back and diminish, so too will this impact the timing and direction of the trend.” (p. 24)

In analyzing the relationships between price and volume under various market regimes Leibovit pays particular attention to divergences where volume doesn’t confirm price action and signals a possible trend change. But he doesn’t rely solely on easy-to-spot divergences. He also introduces the reader to volume overlays, including moving averages, MACD, and linear regression. These overlays can help the trader see volume trends over a longer time frame.

And, of course, there is the plethora of indicators and oscillators, some 33 in all. Thirteen apply to the broad market; the rest can be used in the analysis of individual securities. In each case Leibovit explains the indicator’s or oscillator’s formulation, its use in trend confirmation, its potential divergence with price, and its use with other indicators. He also illustrates its practicality with a sample trade setup and entry. He closes each section with trader tips.

Throughout the book the author stresses that there is no “one size fits all” solution to selecting the appropriate volume indicators and oscillators. Volume analysis is an art, not a science. It depends on the instrument being traded as well as the trader’s time frame.

But The Trader’s Book of Volume goes a long way toward taking the mystery out of volume analysis. In roughly 450 pages, amply illustrated with MetaStock charts, it offers concrete ways to use volume to improve trading results.

Book Review :Sell & Sell Short

  
Analysis, Education
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Sell and Sell Short (Wiley Trading) by Alexander Elder

If you are searching for a book on trading stocks then look no further, this is it. I have been a successful trader for years and read over 160 books on trading,and in my opinion this is one of the very best. Alexander Elder actually read the change in the market from bull to bear in late 2007 and was able to get this books first edition released in early 2008 when it was needed most.

While as the title suggests it teaches when to sell your stocks for profits, and also does the best job I have seen on explaining short selling and when technical indicators show to short. This book is a complete book for any trader. The main lessons of this book is when to lock in profits and exit a trade using a target, and how to double your potential for profits by not only buying stocks, but also selling stocks short and buying them back at a lower price for profit. Professionals sell short because while overall the stock market drifts upward, when a stock falls it falls over
twice as fast as it rises. I sell short and it is a powerful tool when used correctly. This book will show you when it is appropriate to short.

Dr. Alexander Elder is the only author I am aware of that integrates trading psychology, money management, technical analysis and keeping a trading journal into one book. These four factors will determine whether you are successful in the market or not, even more than the trading method you choose.

You will learn the three great divides in trading:

technical vs. fundamental
trend vs. counter trend
discretionary vs systematic
The author follows a discretionary, technical approach trading counter trend for the most part. However what you learn in this book can be applied to any type of trading. The authors own technical approach uses prices, volume, exponential moving averages (13 day, 26 day), envelopes, MACD, and force index. Limit your tools to no more than five, more is less, any more just causes confusion. The main method you will learn in this book is using the moving averages as a technical base for agreed upon value and buying at the lower edge of the envelope and selling at the high edge of the envelope when you have favorable MACD and force index agreement, or buying at value between the EXP MAs.

If you are going to be a trader you must follow the money management suggestions
in this book. NEVER risk more than 2% of your total equity on a trade, and if you lose 6% of your equity in a month you must stop, clear your head and start back next month. If you follow the 2% rule from the book, it will be a major life lesson in your trading and save you a ton in equity draw downs and will almost completely eliminate your risk of ruin. (more…)

10 Rules If You USE Charts

  
  Education
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Rule 1 – If you cannot see trends and patterns almost instantly when you look at a chart then they are not there. The longer you stare, the more your brain will try to apply order where there is none. If you have to justify exceptions, stray data points and conflicting evidence then it is safe to say the market is not showing you what you think it is. Rule 2 – You can torture a chart to say anything you want. Don’t do it. This is very similar to Rule 2 but it there is an important point to drive home. You can cherry pick indicators to justify whatever biases you bring to the table and that attempts to impose your will on the market. You cannot tell the market what to do – ever. Rule 3 – Be sure you check out one time frame larger than the one in which you are operating (a weekly chart for a swing trader, a monthly chart for a position trader). It is very easy to get caught up in your own world and miss the bigger picture getting ready to smack you. It can mean the difference between buying the dip in a rising trend and selling a breakdown in a falling trend. Rule 4 – Look at both bars (or candles) and close-only line charts to see if they agree. And look at both linear and semi-logarithmic scaled charts when price movements are large. Short-term traders can ignore the latter since prices are not usually moving 30% in a day. But position traders must compare movements at different price levels. As for bars and lines, sometimes important highs and lows are set by intraday or intra-week movements. And sometimes intrday or intra-week highs and lows are anomalies that can safely be ignored. Why not look at both? Rule 5 – Patterns must be in proportion to the trends they are attempting to correct or reverse. I like the trend to be at least three times as long as the pattern. (more…)

7 Ways to Become an Unsuccessful Trader

  
  Education
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If you’d prefer to become an unsuccessful trader, you can start by making the following common trading mistakes.

-The first big mistake is the flawed logic of extrapolation. Many traders and investors assume that a trend will remain in force until an “event” comes along to change it. But market trends are not like billiard balls on a pool table. This false assumption will put you on the wrong side of the market more times than not, especially at major turning points.

-The second big mistake is to suppose that news events drive market trends. In fact, the opposite is true: economic, political and social events lag market trends.

-One common mistake is to buy puts or calls that are way “out of the money,” with no other transactions to compliment them. Unless your timing is absolutely perfect — and who has perfect timing? — your chance of success is low. It’s like buying a lottery ticket.

-Another common mistake is to buy options with too little time left to expiration. With less than one month to expiration, the time decay begins to accelerate and the chances of success diminish.

-In the middle of a corrective pattern, it’s common to run out of patience while waiting for confirmation of a trend change. You have to give corrective patterns time to unfold before you jump in. This requires discipline, and a solid understanding of the many ways corrective patterns can unfold.

-Too many traders think Elliott wave is a trading system that tells you exactly where to enter and exit a particular market. That’s the biggest misconception. The reality is that it’s an analytical and forecasting tool, which helps you develop and use your own trading system, based on your own personal risk tolerance.

-Traders tend to over-rely on momentum indicators such as RSI, Stochastics and MACD to precisely spot turning points. But to paraphrase Mark Twain, markets can stay overbought or oversold a lot longer than either you or I can remain solvent.

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