Forex Of Interest

Forex has been really boring since 4th quarter 2017. There is just a lot of churning. I find that there is much better trading elsewhere at this time. I have a small interest in forex at the moment just to maintain some diversity in my portfolio. I trade momentum and I will allocate my finds to where I find momentum. I don’t get out of bed for 30 pips. Some people like that type of trading, good luck to you.

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Charts Of Interest

 

The theme for this year will be “have faith, but tie up your camel“.

Bill Gross has gone there and called the bond bull dead. I would like to wait until we see a weekly close above the trend line. It is certainly going to be interesting to see.

DAX weekly in consolidation.

FTSE weekly is holding the breakout.

VTI daily is strong bullish but price is 21% above the monthly kijun sen.

Nikkei weekly had a strong breakout.

Shanghai Comp weekly in consolidation.

ASX mth nice cup and handle breakout.

TNX weekly breakout of key trend line. See if it closes the week above the line.

See all charts below Continue reading

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Crypto’s Update

It has been a very interesting start to the year for crypto’s. There are plans to release a number of ETF’s this year for trading bitcoin. The bitcoin futures were not a great success as expected, mostly because of the requirements to trade them. I expect the ETF’s will do much better. Bitcoin futures options are expected to start after a few cycles of the futures contracts. The implied volatility will most likely make the options too expensive to trade. There is much better value in trading the altcoins. The “how to buy bitcoin” google trends search has been incredibly accurate. It will be interesting to see what it does from here. The search result is in consolidation after a very long down leg since mid December, a few days before the bitcoin futures started trading. There are a lot of very nice projects in some of the smaller cap crypto’s. A lot of the problems that bitcoin was supposed to solve, are now becoming evident. I would not be a long term investor in bitcoin.

Bitcoin futures 4hr in consolidation.

Bitcoin daily in consolidation.

Ethereum has been doing very well. Best to trade the consolidation breakouts.

Litecoin daily in consolidation.

Ripple daily in consolidation. Possible to see a reversal here. I certainly would not be a long term investor on this one. Good for short term swing trading.

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Markets Watch

We have had a very strong start to the year out of the gate. A strong January usually paves the way for the rest of the year, but we have to take it a week at a time and look at the evidence as it presents. Jerome Powell, the new Fed chair has admitted that the Fed is shorting volatility, which should not be a surprise to anyone. Junk bonds were looking a bit concerning into the end of 2017 but they have also rebounded for now which is bullish for stocks. Heaps of opportunities to get long but I will have one foot at the exit door. I am only trading short term with a weekly outlook. This is not the year to be a bag holder.

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Bond Yield Curve

One the most important charts to watch this year will be the U.S. yield curve. When the yield curve goes inverted it is almost a guarantee that a recession will follow soon after. The last time the yield curve went inverted was mid 2006. We saw the first signs of the GFC by mid 2007. We could well see the yield curve go inverted this year. This would be right in line with the long term demographic cycle and quite a few other long cycles. We should at least see a significant correction. As I say, I don’t make long term forecasts but we know what the warning signs are when we see them. Some people say since the global governments have intervened in the markets, that the long cycles are no longer relevant. It will be very interesting to see what happens over the next couple of years. Some experts are saying that inflation could move sharply higher causing the Fed to raise rates aggressively.

TNX 10 yr yield mth going back to 1995 shows the bull market in 10yr treasuries has been intact for the whole of that period. We are right on the key trend line now as the new Fed chair is set to take office. It is going to be one of the most interesting years in a long time. So many bond guru’s have called the end of the bond bull only to be proven wrong. Different this time?

Dynamic yield curve (source: stock charts). The key thing to watch is the red yield curve line on the left. When the left hand side is higher that the right, it means that short term rates are higher than long term rates and therefore the yield curve is inverted.

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Volatility Watch

I have been hearing some very interesting talks on volatility in various pod casts that I listen to. We have just seen the VIX make a record low to a 9 handle. One thing I have been harping on is to watch this short VIX crowd. If anyone is going to get nervous about any downside in the markets it will be the VIX shorts all heading for the exit. Some experts have been saying that the volatility ETF’s could blow up and close up shop very easily, should there be a sudden move higher in the VIX. We know that the short trade is massively over crowded. Watch closely.

This podcast is one that I listened to recently. It explains the main points very well. – Adventures in Finance Ep 46 – What Lies Beyond? Big Themes for 2018 Part I: Volatility

VIX daily down to a 9 handle.

SVXY weekly watch for any sign of reversal like in August 2017.

VXX is well below the daily kumo. If VXX gets above the daily kumo we can be fairly sure of some major downside in stocks. Just something to watch.

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Tame Your Monkey Mind

Trading is not difficult but gaining the mental edge to be successful can be. This did not come naturally for me. I spend a lot of time reading about trading psychology. I don’t do anything in my trading that anyone else can’t do. I often wonder why it is that 95% of people fail at trading. One possible reason could be that people struggle to control their monkey mind. When I show my trading method to people, they can understand what I am showing them, but they find it very difficult to put it into practice. When I ask them why they placed a trade that was against my rules, and they lost money, they invariably start their answer with “I thought”. It takes time to control the monkey mind. I spend a lot of time on my mental aspect of trading. I found it very hard to meditate, but I can focus on my mental edge when I go on my daily walks. I focus on being successful. I try to imagine how good it feels to make a profitable trade. When I do well, I reward myself. I understand that trading is not about being right or wrong. I always say that trading is 95% mental. Try some basic mental exercises for yourself when you go for a walk. You can get better at it with practice. I am going to be talking about the mental aspects of trading that I have learned in coming posts.

Buddha came up with the term “kapicitta,” which refers to the monkey mind. While all of these monkeys are creating chaos in our minds, jumping from branch to branch, Buddha urged his disciples to develop “a mind like a forest deer”. Buddha noted that deer are especially gentle creatures who are able to remain aware and alert no matter what is going on. They can quiet anything that is distracting in the background and only focus on the here and now.

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Tech Watch

This is an update on my FANMAG study. For all of the headlines in the media in 2017 about the tech wreck, the NASDAQ index weekly never even closed below supertrend for the whole year. The current NASDAQ price is 25% above the monthly kijun sen. There will be a mean reversion at some point. There is no use in trying to say when that will be. You first have to look for a weekly close below supertrend and then look for the confirmed weekly reversal. I will be showing this as it unfolds. It is going to be very interesting to see how this plays out.

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Crypto’s Update

Well what a year it was in 2017 for crypto’s. It will be known as the year that crypto’s really made sceptics take notice. For me 2017 was the year when I changed from sceptical to realising that cyrpto’s are here to stay. I made a few trades early in 2017 and found it very easy to trade on my method. In October, November, December I did extremely well.

I believe if you look at crypto’s in terms of the internet, 2017 for crypto’s was 1995 for the internet. Having said that, I believe that Bitcoin will soon lose its place as the dominant player just as Netscape did. Only time will tell.

I think the best way to trade crypto’s is short term swing trading. I am not a long term HODL’er as the term has become known.

There are so many projects that have great potential this year that I will be trading. I will only cover the main ones here on my blog as an example.

Bitcoin weekly is in consolidation. I would not be making any long term forecasts about where it is going.

Ethereum weekly is getting very wide of the kijun sen. If there is enough momentum the kijun sen can turn up. Interesting to see what it does.

Litecoin is in a weekly consolidation. I expect 2018 will be a very good year for Litecoin.

Ripple daily. This made a huge run in December. It is a bit wide of the daily kijun sen . Could expect some consolidation.

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Forex Of Interest

There are a few forex pairs that are not bad. It is usually a bit slow in Forex for the first week back of the new year. The Fed is looking at an additional three rate hikes this year, which if they do proceed, will take the yield curve inverted. I expect a hike in March and then we will see after that. See how things look when Jerome Powell takes over.

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