“Remember that both in short-term trading and mechanical systems, the distribution of winners is skewed. Most of a month’s profits might come from only two or three big trades. Much of the time the individual profits may seem small, but more importantly the losses should be small, too.” Linda Raschke from Street Smarts
Now we'll have to see whether this is a valid trend reversal or just a false break out. I always go with the trading system and take whatever trade it says to make...which is a buy right now...but its hard to do. It's hard to be confident in the currency market because there are some major forces (central banks) at work that can create and end major moves like this one in a matter of days and even hours.
There is also a long trend line (yellow line) that is still not broken...we'll have to watch the pair as it approaches that potential resistance. For now, I'll be looking to go long the pair on much shorter time frames until a sell signal is established on the daily chart. 
This chart is part of a spreadsheet that I update on a weekly basis. Going through the motions of keeping a checklist of the different trends of the various currency pairs helps me stay tuned in to the flow of the currency market. I highly recommend that all traders keep some sort of daily, weekly, or even monthly checklist that is adapted to their trading strategy and update it on regular basis. Since my trading strategy is based on trend following, it makes sense to come up with ways to determine the trend and monitor the trends on several time frames.
In fact, it is a very well written and informative book that I would recommend to anyone that has at least a little knowledge about trading and is looking to learn more. 
As you can see from the chart, the pair is still approaching the upper regression line. I will be paying close attention over the next couple of days to see how it reacts to that level. There's a little bit of bearish chatter out there about how the dollar is heading lower and it might be completing a head and shoulders pattern and blah, blah, blah. I say that we have to take a wait and see approach and try to hold off on getting too bearish. Remember, the trend has been down and we don't want to go against the prevailing trend until a new trend is established.
As you can see, both the RSI and the MACD are very bearish right now...the RSI is sloping down and the signal line on the MACD is below the red line, which indicates a sell. While these are bearish, the price action has not confirmed the readings...at least not confirming that a new trend is developing. In my experience, it is generally a bullish (or at least neutral) signal when the MACD is falling after a bearish cross (the blue circle) but the price stays bound in a range like it has over the last month. I believe that it's jumping the gun a little to proclaim that the dollar down trend is beginning...it might just be some healthy consolidation and possibly a good opportunity to buy the pullback. Of course, I could be wrong and if the price action signals a new trend by breaking out of the range to the downside, then I'll be looking to short. Like always, only time will tell.
“When I meet someone who is interested in learning the trading business, I always refer them to what I consider to be the four Bibles of the business: Reminiscences of a Stock Operator by Edwin Lefevre, the fictionalized biography of the fabled Jesse Livermore; Technical Analysis of Stock Trends by Mcgee and Edwards, which was written in the first half of the twentieth century and whose tenets still hold today; The Elliott Wave Theorist by Robert Prechter and A.J. Frost, a classic, and finally Market Wizards by Jack Schwager, which is a compilation of interviews with great traders.” Paul Tudor Jones from the forward of The Logical Trader
As the above chart shows, we definitely have plenty of room to fall if this market continues its current downtrend. Don't get me wrong, I'm not predicting or claiming that the market will indeed continue falling, I just think that this chart offers an interesting perspective.
It's nice to look at and think about history to put some perspective on current situations. I hope everyone has a good weekend.
For the sake of disclosure (and also because I'm proud of him) the real estate broker in the article is my dad and Nine Frog Real Estate is his brokerage company. Check out his website, he's got some excellent articles that breakdown some practical aspects of investing in timber. Good job Pops.'We all worry’
Real estate broker George Galloway, who lives in Aledo but has his office in Palestine, said he has plenty of buyers like Nixon.
Galloway hasn’t seen any slowdown and believes that his niche in timber properties may be part of the reason.
"In East Texas, things are still happening; it’s just not tethered as much to what’s going on elsewhere," Galloway said. "I think the biggest issue is we never went hyper-priced like the rest of the country. I don’t think East Texas ever left earth. It was starting to do that two or three years ago, but it never really did."
Galloway said many buyers find land that has both recreational and timber — an attractive combination. Palestine’s location also lures buyers from the Metroplex and Houston. But few of his customers are getting loans; almost all are cash buyers.
"We all worry," Galloway said. "I have a stock portfolio. I got my statement last weekend. I thank God for every acre I bought that I didn’t put into the market. Land is always a good hedge against inflation. Those trees growing out there are becoming more valuable while I sleep."
As you can see, there's a nice triangle pattern developing on the chart. The daily prices are converging into some major consolidation and there's looks to be some potential support down at the 200 day moving average. These types of consolidation patterns generally appear at pivotal points...points where the stock will sometimes launch like a rocket or drop like a rock. Remember that chart patterns do not guaranty anything, they just present higher odds of some kind of action occurring. The key will be to stay patient and wait for a break out. You can also take a look at a longer time frame chart to get an idea of what the stock has been doing longer term and to see if there are bigger patterns or trends occurring in the higher time frame. For stocks, I like to look at the weekly chart.
As you can see, there is some major consolidation on the weekly chart as well. Also, there is a long term trend that is still intact and prices are pulling right down to the trend line. Although the consolidation and the pullback to the trend line are both great signs, there are still a couple of bearish signals on this chart. First, the MACD is falling and there was a bearish crossing (the blue circle in the MACD window). Also, the BB width is over extended and seems to be declining. These bearish signs are not bad news, they just indicate that it might be a little early to take a position...the stock needs to recharge a bit.
As you can see from the above chart, the Eur/Usd did not hit it's upper regression trend line. Although that would have been an excellent entry, it's not mandatory for a good short entry into the pair (short being long the dollar). Actually, my trend following system just flashed a sell signal and I've taken a small position with the intention of adding to it if it starts making money.
The red circle outlines the sell signal from my system. Notice that both lines around the price are red (this is the multiple trend following systems signals) and the bottom histogram (BB width) is above it's break out zone (the purple line). These signals tell me that it's probably time to sell the pair (buy the dollar) because it's the path of least resistance. We'll see how it plays out...because nothing is even close to a sure thing and my trend following signals are certainly not an exception.
Next week should be really interesting, both with currencies and stocks, and I look forward to posting some opinions on the price action. Be careful trading because we seem to be at a potential turning point...especially with stocks.
It's hard to determine the significance of today's move because it's the day before the Thanksgiving holiday and there was low volume traded. Friday won't be much help either because it will only be a half day for the US markets. With that, I say to take this week with a grain of salt and be ready for anything on Monday.
At this point, we'll just have to wait and see how the market reacts to these various resistance levels. If the price stalls at the yellow line, I'd be looking to short and if it blows through the yellow line without hesitation, it might be time to start buying. Like I always say, only time will tell. I don't try to predict the price moves, I only attempt to properly react to the signals that the market gives.
I hope that you all have a very happy Thanksgiving!!!
The yellow circle is the area that I'll be looking to sell the pair, preferably close to the top line. I'll probably take half the position on the initial touch and then wait for the trend following indicators to confirm the sell for the other half.
I like that the index is going down and that there seems to be some potential support at the 50 day moving average. I would not be surprised if the dollar index finds support at about the same time that the Eur/Usd pair hits the top of the linear regression channel. The index provides some insight into the breadth of the dollar, which will help to determine if the move is potentially sustainable. It is always nice to see the dollar rallying against several currencies as opposed to the one currency that you're trading it against.
The horizontal green line is the entry, the red is the stop and the blue is the limit order that was placed. It's not a coincidence that the profit target is about 3 times farther than than the stop...this setup had a favorable risk/reward ratio.
There are several points of overhead resistance that the market will need to get past and then hold them. The MACD is still bearish but it looks like it could turn up...today will probably be a pivotal day and it will set the tone for the following week. Given what we saw the last three trading days of last week, anything is possible. The only somewhat sure thing about this market is that moves happen very quickly and they tend to be big. Have a good Monday!
