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A Great Reversal? Print
Written by Site admin   
Saturday, 04 July 2020 10:05

In the last newsletter the US$ featured. The big question was, is this a Great Reversal taking place as we watch the charts unfold.

It all takes time of course, and we will only know the answer when, and if, it does in fact collapse. We may have to wait some time!

When the US Dollar falls, the Euro tends to rise. It's an inverse relationship that is never perfect but does create opportunities for traders. As the US Dollar was topping, the Euro was bottoming, bounded by those red lines that pick out support and resistance zones from way back.

Everything has a life cycle and markets are no

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Another Great Reversal Print
Written by Site admin   
Wednesday, 03 June 2020 12:50

Could this become a Great Reversal?

The US$ interbank liquidity crisis and then the effects of Coronavirus, forced the Fed to inject massive reserves into the international banking system to stop its dollar from moving ever higher. The DXY chart suggests it might be working.

It show two classic reversal patterns that have been used by traders ever since technical analysis began.

In March the dollar crashed lower, then shot higher which could be the start of a Broadening pattern, occasionally found at major reversals.

Price action oscillates widely and eventually breaks out moving the same distance from the extreme as the depth of the pattern. That gives a target around the 2018 lows.

The bigger pattern is a potential double top, the first high at the end of 2016. Double tops are very common and again have a target based on the depth of pattern.

If the DXY were to break below those 2018 lows it could run on down to at least 80 where it spent the first five months of 2014 before breaking out of it's last major, triangle, reversal pattern.

 
An opposing view Print
Written by Site admin   
Wednesday, 03 June 2020 12:45

An opposing view

Conventional wisdom is a wonderful thing, particularly for herding creatures. In our herds we are social animals and so agreeing with others' points of view gives us the group acceptance that we crave.

It's safe, it takes no independent thought, it's comfortable and easy to go along with the majority opinion.

Questioning, by applying thought to the reality of what is actually happening, and stating those thoughts, risks being labelled a heretic and an outcast. Now, feeling unsettled, the herd is now longer safe and comfortable for us.

Those in control of "herd think", are those who shout loudest and the most often. And so it is with the US Federal Reserve, who have told us there is no alternative to their current policies in achieving economic growth.

They want us to spend our savings and then borrow and spend, borrow and spend more. The goal, they tell us, is so the economy will not collapse but will grow again and we will all achieve Nirvana.

This became the conventional wisdom and has lasted since at least the GFC in 2008.

Lower, then negative, rates will ensure we can spend even more than we can borrow. The banks will even pay us to borrow - as long as we spend of course.

Reality is turning out a little differently.

Bank of America recently published a chart showing what happens when savings rates drop below 4%. The opposite of what the Federal reserve were telling us they expected.

Spending does increase as rates fall, but this effect changes below about 4%. Consumers then worry about their future. Ever lower rates then reduce spending and increase savings, as BofA quote:

As low growth & inflation make low-risk-asset income scarce (e.g. from government bonds), households are forced to reduce consumption and increase savings in order to meet retirement goals.

Forced saving further depresses demand in a vicious cycle.

It's a doomed loop as the full article here explains.

 
Range bound EURGBP Print
Written by Site admin   
Wednesday, 13 May 2020 10:00

Stuck in a loop &

Range bound

Dear Trader and Clickevents reader

As we all await release from lockdown, our enforced daily routines are tending to merge into a Groundhog Day world.

Socialising has become distancing, with WhatsApp the vital connection to our extended families. We've adjusted to taking virtual afternoon tea and barbecues with friends on Zoom and have amassed so many films and series to watch on DVDs and downloads we are starting to hope lockdown doesn't end too soon!

It's been quite a lesson in adjusting to changing circumstances and that should be no great difficulty for traders. Market dynamics never stay the same for long, morphing from one stage to the next.

Massive trends

As virus realty took hold, the Dow Jones collapsed into a rampant down trend, losing over 5,000 points in three weeks.

Then the Oil debacle between the Saudis and Russia was preceded by the collapse in demand as countries closed borders and trade.

These massive moves in oil and stock markets have been partially rescued by Trump's printing press, but many of the  currencies have stalled.

Since late March many of the currency pair charts are showing a distinct change from deeply trending to range bound.

The EURGBP is typical of these.

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Diligence pays off Print
Written by Site admin   
Thursday, 09 April 2020 09:33

Diligence pays off...

Dear Trader and Clickevents reader

That is the message Governments across much of the world are telling us.

Stay at home, be diligent about following the rules, and you will stay safe, that's the message we are given

Only time will tell of course if those countries following full lockdowns, leads to an outcome that is different from those who are doing the opposite, such as Sweden.

For several decades, the goal of western world central banks, has been maximum global GDP growth. At all costs, of which, max debt was the supporting act. It's highly likely we are watching that growth collapsing as with a chain saw taken to a rotten tree.

In time, our children and grand children will read and talk about 2020 and how life was before. It's set to be very, very different in many ways.

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From the blog

50:1 or 500:1?

The FCA is at long last catching up with US regulators and proposing changes to what has become the wild west amongst questionable spread betting, CFD and Binary providers.

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