Traders' Library Blog

Interview with Author and Trader Steve Palmquist

Tim Bourquin of TraderInterviews.com recently interviewed Steve Palmquist, the author of How to Take Money from the Markets: Creating Profitable Strategies plus Six Ready-to-Use Systems.

Click the play button below to hear the interview or read the transcript below.



Interview transcript:

TraderInterviews.com: Hello, everybody. It's Tim Bourquin. I'm here today with Steve Palmquist and Steve got a new book out that we're going to talk about. He's been around the trading game for quite some time and he's got a website that he talks about some of his trading strategies and things that he's doing. The book is called How to Take Money from the Market. It's also got a subtitle that we'll get from Steve in just a minute, but we're going to talk to him about his overall approach to the markets and how he finds good opportunities. So Steve, thanks very much for joining me on the phone today.

Steve Palmquist: Well, it's good to talk to you.

TraderInterviews.com: All right. Give us that subtitle. We talked about it before we started recording, but it was kind of a long one. So why don't you tell us the full title?

Steve Palmquist: Well, the full title is How to Take Money from the Markets: Creating Profitable Strategies plus Six Ready-to-Use Systems which is quite a mouthful, but then trading takes a little bit of effort.

TraderInterviews.com: Okay. So let's talk about your overall approach to markets and how you've kind of come as your overall strategy and methods for finding good opportunities then we'll talk a little bit about the book as well. So what kind of trader are you? Are you a short-term day trader or swing trader? Kind of talk about that and the markets you trade.

Steve Palmquist: Well, I'm a profitable trader. I don't try to focus on a particular market or a particular holding time. What I do is I look at the market and say it can only really do three things, right? It can be trending up, it can be trending down, or it can be a trading range moving sideways, and I found through testing hundreds of different trading systems that different systems work in each of those market conditions. So the first thing I do is look at the market and if it's trending up, then I open my trading toolbox and I pull out the systems that have shown good results in up-trending markets and if it's moving sideways I open a different tour in the trading toolbox and pull out different systems. But the key is to read the current conditions and use a system that has been tested for that environment.

TraderInterviews.com: How about the specific market or markets that you trade?

Steve Palmquist: I have a database of about 2,500 stocks and what I do is I trade patterns out of those stocks. So I'm looking for a particular price in volume pattern and I don't particularly care what the stock is.

TraderInterviews.com: Okay, and the systems that you talk about, either the six systems or any system, are these automated totally or are they just giving you signals and then you actually decide which signals to take?

THE TRADING MIND ACCORDING TO A MARKET MAKER

Josh Lukeman saves what I believe is his best chapter for last in his book  The Market Maker's Edge. In the 23rd chapter, entitled The Trading Mind, Lukeman lists several factors that are crucial in developing the proper awareness of the psychological and emotional influences on your actions as a trader.  They are as follows:

1.  FEAR:  "Fear is perhaps the most debilitating emotion a trader can experience. Painful memories produce fear, which warps a trader's focus.  When you are afraid to lose for one reason or another, you will end up focusing on loss and, by so doing, will attract precisely the opposite of what you hope to avoid" (272)

2.  LISTEN TO THE MARKET:  "Waiting for the market to confirm your initial opinion is crucial. The market provides clear signals for the best course of action, regardless of your opinion.  You must let go of any preconceptions about what the market is going to do, and instead remain focused on what the market is doing here and now" (273).

3.  ACCEPT RESPONSIBILITY:  "When you accept responsibility for everything that happens in your life, you empower yourself to create the trading world you would like.  By accepting responsibility for your trades, you empower yourself to consistently improve your performance in the future" (277).

4.  GREED:  "If you are driven by greed, then you are trading in a state in a state in which you are constantly aware of what you do not have.  This is called poverty consciousness, and it will work against your goals of creating abundance in your life" (277).

5.  FRUSTRATION:  "Your success as a trader at times hinges on your ability to conquer frustration.  Frustration will always appear on the path toward greatness.  Some will triumph over it, while others succumb to its pettiness.  When you encounter obstacles on your trail toward achievement, remind yourself that they were placed there in order for you to overcome them, so you can learn from them and become better than you were before" (278).

What we're reading...

One Good Trade, Social Media, and a Sellout! (Afraid to Trade)

Weighing the Week Ahead: Jobs (A Dash on Insight)

Ssshhh! You’ll Wake Up All The Traders! (WSJ)

Zodiac Shares Surge on Report of Possible Safran Bid (WSJ)

What is Your Big Picture? (SMB Training)

10 Stocks With Bullish Option Sentiment Reporting This Week (Seeking Alpha)

The Hindenburg Omen... Are you Trading Myths or Facts?

The financial press is full of articles about the ‘Hindenburg Omen’ and how it indicates that the market is about to plunge. The Hindenburg Omen is a combination of new 52 week highs and lows, the NYSE’s 10 week moving average, and the McClellan Oscillator. The creator of the Hindenburg Omen compares it to ‘a funnel cloud that precedes a Tornado’ and says it shows there is ‘a high probability that the market is going to crash’. The images of the actual Hindenburg disaster, and a Tornado, are vivid and scary. This plays well in the media, after all their job is to attract viewers for their advertisers, and a lot of financial shows can be; well, boring.

The key issue for any indicator is not the images it brings to mind, but whether or not it has predicted outcomes more often than chance, and hence is a useful trading tool. According to an article on CNBC the Hindenburg Omen has been ‘roughly 25% accurate in predicting big market upheaval since 1987’. That is another way of saying it has been wrong most of the time. Traders need to carefully understand, test, and evaluate every potential tool before considering using it. New indicators come along all the time. Some sound interesting, but the issue is always, ‘how well has it worked, and based on that should I add it to my trading tool box’. The idea of testing and evaluating a tool before using it is a fundamental part of trading. Even a broken clock is right twice a day, being right occasionally proves nothing. Traders need to break through the myths and select tools that have shown some real promise.

There are hundreds of indicators and patterns being used by traders. Many of them provide no more accuracy in predicting market direction than a coin flip. The bigger issue is that many traders do not even know how often the indicators and patterns they use have shown positive results, and how often they have failed. Not knowing this information is like throwing darts in the dark. Effective traders know what percentage of the time their trading techniques work in bullish markets, trading range markets, and bearish markets. Successful traders have multiple tools designed for different

The Trading Week: Aug. 30 - Sep. 3

Aug. 27, 2010 (Allthingsforex.com) – The U.S. Non-Farm Payrolls and Employment Situation report will take the center stage in the week ahead as investors anxiously wait to find out if the private sector of the U.S. economy would lose jobs in August for the first time this year.   

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that every currency trader should pay attention to. 

1.    USD- U.S. Personal Income and Outlays, a measure of the income received and purchases made by consumers, released along with the Personal Consumption and Expenditures Price Index- a leading indicator of inflation preferred by the Fed because it measures a variable basket of goods and services, as opposed to the CPI-Consumer Price Index which measures a fixed basket of goods and services, Mon., Aug. 30, 8:30 am, ET.

The core PCE Index is expected to show a slight increase in inflationary pressures by 0.1% in August from 0.0% in July, while personal spending rises by 0.4% from 0.0% in the previous month.

2.    CAD- Canada GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Aug. 31, 8:30 am, ET.

Canada’s economy could see faster growth in August by 0.2% m/m from the 0.1% m/m reading in July.

3.    USD- U.S. Consumer Confidence Index of consumers’ outlook on present and future economic conditions, Tues., Aug. 31, 10:00 am, ET.

Despite of the high unemployment, the consensus forecasts point to an increase in consumer confidence to 51.3 from 50.4 but, given the current deteriorating economic conditions, unexpected decline in the index would not be a major shocker. 

4.    AUD- Australia GDP- Gross Domestic Product, the main measure of economic activity and growth, Tues., Aug. 31, 9:30 pm, ET.

The revised estimate of the Australian GDP should confirm the expectations for faster economic growth in Q2 2010 by up to 0.9% q/q from 0.5% in the first quarter.   

5.    USD- U.S. ADP-Automatic Data Processing Employment Report, a measure of jobs lost or added to the private sector of the economy, also serving as a preliminary estimate for the outcome of the monthly non-farm payrolls, Wed., Sep. 1, 8:15 am, ET.

S&P500 Technical Analysis Update: Aug. 28, 2010.

Last Tuesday there was a gap down and Wednesday the index fell to the support level of the previous wave 5-A and b. Now there is some up correction that is probably going to close this common gap, pushing the index to the resistance of the 50 day average and the upper side of the downward pitchfork. This will probably start the creation of an extension for impulse wave 3 down. I therefore assume that the up reaction will be limited. Reason why I keep also the manual opened short trade.

The red downward pitchfork will give direction to the down move. We can also draw a wide blue downward channel. The lower side of this channel and the median line of the pitchfork are a future target level.

Together with the 161.8% Fibonacci target, we can identify a possible price target around 930, to be reached by the end of September. This target level is also confirmed by the hight of the (A) wave projected down from the top of wave (B) to make up the (C) wave.

Since I finished testing my new SATS5 expert system for application on daily stock charts, I changed the expert here from SATS2 to SATS5. In the next weeks I will publish the new SATS5 expert under the menu item "SATS Expert". For now just look at the colored candles. Green means an open long position. First red or black candle after a green candle closes the long position. A black candle means an open short position. A green or red candle after a black candle closes the short position. Since SATS5 can trade profitably both with long and short trades, we will also start trading short automatically from now on using SATS5 signals.

We hold the open short positions from the SATS5 expert still being black. All trades are shown in the table below.

 

Update EUR/USD pair: Aug. 28, 2010.

Price continued the down move beginning of the week, falling below the 50 simple moving average. Now there is a reaction phase with price moving up back to this 50 average. The previous support of this average is now together with the 100 moving average building resistance.

I expect price now to move up a bit further along the 50 average, possibly up to the upper side of the down moving pitchfork, before making a new downturn to move toward the median line of the pitchfork. This gives us an idea of the future price direction. Together with the 682% Fibonacci target started from the beginning of the down move, we can estimate a price target of $1.16 beginning of October. There is support around 1.25, 1.21 and 1.19.

Probably we now finished the correction wave {B} and started the last correction wave {C} with probably a new low point to create the big [C] wave down. That move down would bring the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart, where price finds support on the 200 months' moving average. We should still not exclude for a 100% the possibility that the Euro is making an impulse wave up, now finishing wave 4 and turning up for wave 5. But for now I prefer the [C] wave down scenario.

 

GDP...not so bad say Treasury futures traders

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August 27th, 2010

 

Are long options better protection than stop loss orders? Carley and Karen Gibbs discuss...http://www.aweber.com/archive/decarleystock/U4vm 

 

Sometimes news that is bad, but not as bad as expected is interpreted and being "good news" and that is exactly what happened with today's GDP report.  A few months ago, the markets would have cringed at a growth rate of 1.6% but with expectations for the figure to be 1.4% or much less, it was a breath of fresh air.  Also a bit bearish for bonds was a slightly hotter than expected GDP deflator.

 

As always, Ben Bernanke testimony stole some of the thunder from economic news.  However, after all was said and done the market reaction to each event seemed to coincide.  The Fed chair pricked the bond bubble by stating that they believe the risks of deflation are not significant at this time and by refraining from announcing further quantitative easing.  He also pledged to continue to take action should the economic recovery continue to falter. 

 

The markets took his statements as a sign of stability and acted accordingly.  However, one day does not make a trend and Monday could be a little more reliable as an indicator of future market direction.  After all, option expiration in Treasuries was today and it is our guess that there were a lot of short call traders that bought future earlier in the week to protect positions were scrambling to sell the same futures in an attempt to avoid the inevitable chop that such a strategy poses. 

 

Reminder from yesterday's newsletter:

 

The 10-year note has found comfort in the 2.5% range, but we doubt this will hold in the long-term.  The only other time yields have been this low (late 2008 on similarly low volume trading), the move quickly proved to be a temporary anomaly.  That said, if you recall the last sub-2.5 trade yields reached 2% in dramatic fashion before reversing course.  Therefore, what seem to be favorable historical odds...there is a substantial amount of risk involved in speculating the so-called Treasury bubble. 

 

If you missed this trade yesterday:

 

Clients were advised to purchase October 5-year note 120 calls and sell futures this afternoon for a total risk of under $600 (before considering transaction costs).  This gives traders 30 days in the market with unlimited profit potential, capped risk and the ability to quickly adjust or take profits (futures face much tighter spreads than options).

 

A good exit point in the futures might  be just under 119 and depending on how things look, it might be worthwhile to hold on to the long call in hopes of a rebound.  Stay tuned...

 

You should be trading December futures by now...We think the near-term highs are in, but let's face it there is no such thing as easy money.  As noted in yesterday's newsletter support in the December 10-year note lies at 124'04ish.  This marks the up-trend line as well as other technical areas (Fibonacci and MA analysis).  Friday's plunge tested the 124'07 area and puts the market at a significant make or break point.  There might be some buyers trying to come in at this level, but failure here could lead to a slide to the mid-122's...at which point we would have to be bullish based on seasonal factors. 

 

In the meantime, the 30-year bond futures look to be much more vulnerable.  The first "good" support in bonds doesn't come in until we see 131, but 4 handles off the weekly highs leaves the selling a bit overheated and we could see a Monday morning bounce. 

 

Stock index futures bulls might have pulled it off

*All rights reserved.  Reproduction or distribution of this newsletter without prior consent is strictly prohibited.

 

August 27th, 2010

 

Are long options better protection than stop loss orders? Carley and Karen Gibbs discuss...http://www.aweber.com/archive/decarleystock/U4vm

 

 

It has been a long and hard week for stock market optimists.  Bad news after bad news has put unrelenting pressure on equities but today's trade might offer enough momentum to fend off a slide in the S&P to the 1,000 area. 

 

Second quarter GDP was revised lower as expected, but the news wasn't as bad as most had anticipated and more importantly what the markets had priced in.  As of now, it is believed that the U.S. economy grew at a rate of 1.4% last quarter as opposed to what many believed would be much worse.  Also helping the bulls were comments by the Fed chair ensuring that the Fed would be ready to step in and defend against a weaker economy if necessary. 

 

As we have been noting in this newsletter, the market feels too bearish.  Retail investors have pulled their money out of stock funds in droves and there seems to be very little interest in putting it back to work anytime soon.  In fact, according to the American Association of Individual Investors, the number if individual investors that have a bullish outlook on the stock market in the next six months has plunged to 21%.  This is the lowest reading since March of 2009 and we all know what happened then.   I hate to say it, but once all of the weak hands are out, it is often the time to begin looking for a rally. 

 

In yesterday's newsletter, we were calling for a bounce to the 1065 area, and today we got what we were looking for but it will take some follow through buying early next week to confirm a near-term bottom.  I hope some of you were able to capitalize on our advice of trying to get long the S&P on a dip to the mid-to-low 1030's; the low prints weren't see and the 1037 print was quick...

 

Going into Monday, it seems as though we could get a bit of digestion from the rally.  Aside from seeing a 25 plus point run in the S&P from Friday's low, historical statistics suggest that the next to last trading day of August tends to see a struggling market.  According to the Stock Trader's Almanac the S&P has closed positive only twice in the last 13 years. 

 

We see resistance in the September S&P futures near 1065 and then again just under 1070.  In the meantime, support lies at 1050 and 1034. 

 

If you are trading the NASDAQ or the Russell, we have revised our upside targets to 1835 and 624.  If the markets take another big dip down, look for support near 1756 and 596.  We still lean toward buying weakness. 

 

Free Chapter-Resistance and Support Levels

Continued reading from Tape Reading & Market Tactics.

Click here to read Chapter 12. 

Chapter 13

Resistances

Resistance and Support Levels

During all movements of stocks, whether up or down, there are repeated resistance levels. There are a number of different causes for them, and, likewise, their effects are quite different.

It is difficult to find the exact reason why a certain stock should meet resistance at 52 one day and at 56 a week later. However, if we picture the thousands of people—perhaps millions during roaring bull markets—who are interested actively in the market, and add the pool, professional, and banking elements, we have a large number of situations something like this:

 

The Buying Side Those:

who are buying today.

who are covering short sales.

whose buying “stop” orders will be executed.

who have orders in at lower prices.

who have orders placed at higher prices.

who sold lower down, and wish to buy.

who sold higher and wish to buy.

 

The Selling Side Those:

who are selling long stock.

who are selling short.

whose selling “stops” will be executed.

who have orders in to sell at higher prices.

who bought higher up and will sell.

who bought lower down and will sell.

 

 

Home Sales Plunge—What Does it Mean for Traders?

As a trader, you probably pay some attention to the news. Even if you strictly “follow the charts,” I’m sure you’re well-aware of the new statistics released by the National Association of Realtors this week—and that home sales dropped a staggering 27.2 percent last month. According to the NAR’s news release, “Sales are at the lowest level since the total existing-home sales series launched in 1999, and single family sales – accounting for the bulk of transactions – are at the lowest level since May of 1995.”

It’s not good news. But what does it mean for traders?

Some are already calling for a double-dip recession. Volume is expected to return as traders get back from summer vacations, but those looking for market clarity are unlikely to find it. An article from FoxBusiness.com today suggests that September could be especially volatile.  

 It’s interesting. As a trader, you have already put yourself in a better position than most. You’ve committed yourself to an active role in your financial future. Everyone can make predictions about what this news means for the market, and what is going to happen next—and you can believe they will. But if you’ve been in the markets for a while, you already know better than to listen to all that. The market itself will tell you what to do—but you will need to be ready to respond, to take advantage as opportunities present themselves.

The world has changed, and if this week’s news isn’t proof of that, I don’t know what is. The same old strategies just aren’t working they way they used to, for businesses as well as individual traders. It’s now more than ever that we need to innovate and expand our arsenal of trading tools and tactics so that we are prepared for whatever the market presents us with.

I hope that some of our products can help you with this daunting task. For example, in one of our latest releases, Steve Palmquist presents six complete new trading systems, each one specifically designed for a different market environment. (Don’t worry, he explains when and where to use each one, too.) Good traders know that money can be made in any market environment—with the right strategy and proper execution. Jea Yu also focuses on these points in his new book, Trading Full Circle, and DVD, Short-Term Profit Hunter, both released earlier this year.

I think that most top traders would tell you that the best way to improve your trading is through education. And it doesn’t have to be some expensive course—we offer all kinds of FREE learning tools in our online Education Corner—but keeping on top of your trading and continuously challenging yourself to master new trading strategies is crucial. The more you learn and experiment, the further you will refine your skills, and the better prepared you will be—for whatever comes next. Let’s hope it’s good news.

THE BEST STOCK TRADING BOOKS

Since this is my inaugural post as a  Traders' Library guest contributor I thought it would be appropriate to list a few of the books that I believe should be on every trader's bookshelf.  Most of these I have mentioned at one time or another in my own blog so to my readers they will come as no surprise.  Instead of giving a summary of each one I will allow the author's own words to provide an idea of what is in store for the reader.  Although these are categorized please approach the books with the understanding that each one could fall under any or all of the categories mentioned.  

ONE HOUR LIFETIME BOOKS:  these books are easily read within an hour or so yet provide a lifetime of trading wisdom.

1.  Zen in the Markets by Edward A. Toppel. Although deceased Mr Toppel has provided a trading book that will outlive his children's children. "Egoless people have nothing to protect. They just do whatever the market tells them to do" (11).

2.  8 Ways to Great by Doug Hirschhorn.  I recently had the pleasure of  interviewing Dr Hirschhorn and came away with a greater understanding of risk.  "Frequently, what they [successful traders] learn from losing money is more valuable than what they learn when they make money" (90).

3.  How I Made $2,000,000 in the Stock Market by Nicolas Darvas.  An oldie but goodie not for its $2 million system but for its wisdom that has not changed since it was written some 50 years ago.   On losing $100,000 in a few short weeks: "I can hardly believe it.  Now I know it was cause by egotism leading to vanity leading to overconfidence, which in turn led to disaster.  It was not the market that beat me.  It was my own unreasoning instincts and uncontrolled emotions" (113).

NEW NEW BOOKS:  these are books that were recently published and will most likely become time honored classics. 

1.  One Good Trade by Mike Bellafiore.  I have provided a detailed book review of OGT and recommend it.  "Developing a bias can be helpful when trading a stock, but when the price action contradicts your theory, then you must exit" (137). 

2.  The Daily Trading Coach by Brett Steenbarger.   Although Mr Steenbarger has left the blogging world this book encapsulates much of his teachings in 101 lessons.  "The drive for self-improvement is different from the desire to make money and is far more rare" (108).

3. Trading From Your Gut by Curtis Faith.  This former turtle trader reveals the psychology behind the turtle trading rules.  "As with the moves of a chess master, the master trader makes trades with purpose and passion" (55). 

4. Technical Analysis Using Multiple Timeframes by Brian Shannon.  Almost exclusively for the technically inclined, TAUMT is full of information on how to understand market behavior as seen through the eyes of moving averages and various time frames.  My signed copy is highlighted and marked up in such a manner than I couldn't give it away.  "If you anticipate all possible scenarios, it is easier to maintain objectivity and avoid costly emotional decision making" (5).

CLASSY PSYCHOLOGY: these are books about the psychological and behavioral aspects of trading.  In my opinion, these should be read first before any technical analysis is even attempted.  If the mind is not right, no chart is going to look right.

1. The Disciplined Trader and Trading in the Zone by Mark Douglas.  These two books make up  the Bible, both the old and new testaments, of stock trading psychology.  Must haves.  "If I had to distill all of the reasons [for success] down to one, I would simply say that the best traders think differently from the rest" (Trading in the Zone, p.7).  

2.  The Investor's Quotient by Jake Bernstein.  Personally recommended to me by world renowned trader and cycle forecaster Charles Nenner, Bernstein's book is one of the best treatises on behavior psychology and its effects on our trading.  "The final test of any trading methodology is inextricably tied to the individual who is using the technique" (55). 

This is by no means an exhaustive list but does give a good base upon which to build a solid understanding of the stock trading game. See you later...in the crosshairs. 

Stop Order vs. Stop Limit

Free excerpt from Build Wealth in Any Market: How to create consistent, reliable income from the stock market by Ross Jardine. 

 

Stop Order vs. Stop Limit

Many investors are confused when it comes to the difference between a stop order and a stop limit order. Many of the online brokers actually have two buttons you can click on their order screens that say “STOP” or “STOP LIMIT.” When most investors look at this screen, the word “stop” jumps out at them. They do not pause to think what the difference is between the two.

In fact, some people reason that since they are going to put a price where they want the safety net to be, that is their stop limit, and they click the box that says “stop limit” and enter the price where they want to get out.

Now let me clarify this issue, because it is very important. A stop loss order and a stop limit order are two very different things. And it is very important that you understand the difference so you don’t use the wrong one.

I am going to make a blanket statement and then explain it. Here is the simple rule: DO NOT USE A STOP LIMIT, just don’t do it. What you want to use is a stop order or a stop loss order. (A safety net order.)

So what’s the difference? In this case, one single word can totally change the meaning of what you’re doing. Let’s look at the difference.

Let’s say we buy a stock for $20 and that we are willing to risk 20 percent of that. This means that the stock could drop down to $16 before we would get out. So this is where we place our stop loss order to get us out. If our broker will allow us, we would place our order good-‘til-cancelled (GTC) to keep it in place without having to re-enter it on a daily basis.

The thing that would trigger our stop order is a drop in the price of the stock to $16 or less. When the $16 price is reached, at anytime the market is open, our order is triggered. The brokerage firm then sends a market order to the exchange that is filled at the current market price.

That doesn’t necessarily mean you are going to get out at $16; it just means that when the stock hits $16, the brokerage house will send a market order in to get you out at whatever the market price is when your order arrives. This may be a little above or a little below $16, but it is the $16 price that triggered the market order being sent.

Now, how is this different than the stop limit order? First, it’s important that you understand what a limit order is. This can be an order to buy or sell an investment where we set the minimum price we’re willing to accept. This price is our limit. A limit order is not filled unless you are able to get your limit price or a better price. So let’s apply this to a stop order, as we understand it thus far.

Trading Gaps in Google

Do you trade the opening price gap in Google?

Do you have historically tested data showing which day of the week you should avoid?

Historical probabilities could be the secret sauce that has been missing from your trading plan. Check out the free research video below to learn more about which day of the week works best for trading the opening gap in Google.

 

Today's All Things Forex Broadcast: What's Next for the USD, EUR and JPY?

In the broadcast today: What's Next for the USD, EUR and JPY? In the aftermath of the ugly U.S. housing market report, we ponder what the future may have in store for the currency majors and interview Mr. Cliff Wachtel, Chief Market Strategist at Ava FX, on his outlook of the USD, EUR, JPY and GBP, we analyze the latest trend developments with the EUR/USD and GBP/USD currency pairs, we examine the bearish breakout in the USD/JPY pair as the USD reaches new 15-year lows against the JPY, we highlight the market's reaction to the verbal intervention attempts from Japanese officials, the German GDP, the Euro-zone Industrial New Orders, and the U.S. Existing Home Sales, we discuss new forecasts from Morgan Stanley, Bank of New York-Mellon and UBS, and prepare for the trading session ahead.

Live Broadcast from 1:00 pm to 2:00 pm, Eastern Time (18:00 - 19:00 GMT), Monday - Friday.

Listen to the archived Broadcasts

Today's All Things Forex Broadcast: USD, EUR, GBP, JPY Quiet before the Storm?

In the broadcast today: USD, EUR, GBP, JPY Quiet before the Storm? In a day light on economic data, we focus on the USD, EUR, GBP and JPY ahead of a sequence of crucial economic reports that could serve as catalysts for significant price moves at the end of the summer, we analyze the latest trend developments with the EUR/USD and GBP/USD currency pairs, we continue to monitor the USD/JPY pair which is still stuck in its recent range, we highlight the market's reaction to the Australian election, the meeting of the Japanese Prime Minister and the Bank of Japan's Governor, the U.K. Business Confidence, and the Euro-zone Composite PMI, we discuss new forecasts from JPMorgan-Chase, Bank of New York-Mellon and UBS, and prepare for the trading session ahead.

Live Broadcast from 1:00 pm to 2:00 pm, Eastern Time (18:00 - 19:00 GMT), Monday - Friday.

Listen to the archived Broadcasts

S&P500 technical Analysis Update: Aug. 21, 2010.

After a small reaction beginning of the week, probably creating a correction wave 2, the index fell definitely below the lower side of the last up moving pitchfork. We now expect a further down move for wave 3.

The new red downward pitchfork will most probably give direction to this move. We can also draw a wide blue downward channel. The lower side of this channel and the median line of the pitchfork are a future target level. Together with the 161.8% Fibonacci target, we can identify a possible price target around 930, to be reached by the end of September. This target level is also confirmed by the higth of the (A) wave projected down from the top of wave (B) to make up the (C) wave.

Since I finished testing my new SATS5 expert system for application on daily stock charts, I changed the expert here from SATS2 to SATS5. In the next weeks I will publish the new SATS5 expert under the menu item "SATS Expert". For now just look at the colored candles. Green means an open long position. First red or black candle after a green candle closes the long position. A black candle means an open short position. A green or red candle after a black candle closes the short position. Since SATS5 can trade profitably both with long and short trades, we will also start trading short automatically from now on using SATS5 signals.

We keep the open short positions with the SATS5 expert still black. All trades are shown in the table below. SATS5 works even fine in very long time frames like a monthly chart of the S&P500 with an 8% compounded profit per year over the last 50 years, not bad for 10 minutes work once every month. More later on...

 

Update EUR/USD pair: Aug. 21, 2010.

As mentioned last week there was some interruption in the down move in the first half of the week. But Friday the EUR/USD fell out of the up moving blue pitchfork channel and below the 50-day moving average, but finding some support on the 100-day moving average. Drawing a new downward red pitchfork channel and price normally moving toward the median line, we have an idea of the future price direction. Together with the 682% Fibonacci target started from the beginning of the down move, we can estimate a price target of $1.16 beginning of October. There is support around 1.25, 1.21 and 1.19.

Probably we now finished the correction wave {B} and started the last correction wave {C} with probably a new low point to create the big [C] wave down. That move down would bring the Euro to the level of the previous long term correction wave [4] of the long term up move as you can see in the monthly chart, where price finds support on the 200 months' moving average. We should still not exclude the possibility that the Euro is making an impulse wave up, now making wave 4 and turning up soon for wave 5. But basically I would now go again for a further down move!

 

The Trading Week: Aug. 23 - Aug. 27

Aug. 20, 2010 (Allthingsforex.com) – With the Fed, the Bank of Japan and the European Central Bank recently deciding not to withdraw stimulus to their economies, next week’s crucial data from the U.S., Japan and the Euro-zone should help investors to determine whether the economic recovery is faltering.

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that every currency trader should pay attention to. 

1.    EUR- Euro-zone Manufacturing and Services PMI- Purchasing Managers Indexes, two leading indicators of economic conditions measuring the activity of purchasing managers in the manufacturing and services sectors, Mon., Aug. 23, 4:00 am, ET.

The preliminary flash estimate of the Euro-zone Composite PMI could reveal the early signs of a slowdown with the manufacturing index forecasted to pull back slightly to 56.4 from 56.7 and the services index remaining flat at 55.8.

2.    USD- U.S. Existing Home Sales, the main gauge of the condition of the U.S. housing market measuring the number of closed sales of previously constructed homes, condominiums and co-ops, Tues., Aug. 24, 10:00 am, ET. 

Following a disappointing housing starts report, the sales of existing homes are expected to expose more weakness in the U.S. housing market with up to 7.2% drop and 4.63 M homes sold in July from 5.37 M in June.

3.    JPY- Japan Trade Balance of the difference between imported and exported goods, Tues., Aug. 24, 7:50 pm, ET.

The Japanese trade surplus is forecasted to show a minimal increase to 470 B yen from 460 B in the previous month, but a decline in exports would signal that the Japanese economic recovery could be losing momentum. 

4.    EUR- Germany IFO Institute Business Climate and Expectations Index, a leading indicator of economic conditions and business expectations in the Euro-zone’s largest economy, Wed., Aug. 25, 4:00 am, ET. 

The ZEW institute survey, which is a leading indicator of the German IFO, registered a larger-than-expected decline and it would not be surprising the see the same outcome for this report as the IFO index is expected to pull back to 105.5 from 106.2.

5.    USD- U.S. Durable Goods Orders, a leading indicator of economic activity measuring durable goods orders placed with domestic manufacturers, Wed., Aug. 25, 8:30 am, ET.

With the U.S. industrial production rising more that the estimates and the manufacturing sector leading the recovery, the orders for durable goods could confirm the trend with an increase of 3.0% m/m in July from the 1.2% drop in June. 

6.    USD- U.S. New Home Sales, an important gauge of housing market conditions measuring the number of newly constructed homes with a committed sale during the previous month, Wed., Aug. 25, 10:00 am, ET.

The U.S. new home sales are forecasted to rise a bit to 340 K in July from 330 K, but considering the weak housing starts figures, this report could have the potential to disappoint. 

7.    JPY- Japan CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of Japan, Thurs., Aug. 26, 7:30 pm, ET.

Deflation could remain heavy on the minds of Japanese monetary policy makers as the inflation gauge stays below 0% with a reading of -1.1% m/m.  

8.    GBP- U.K. GDP- Gross Domestic Product, the main measure of economic activity and growth, Fri., Aug. 27, 4:30 am, ET.

The U.K. GDP revision is forecasted to confirm the stronger-than-expected 1.1% q/q growth in Q2 2010, as shown by the preliminary estimate.   

9.    USD- U.S. GDP- Gross Domestic Product, the main measure of economic activity and growth in the world’s largest economy, Fri., Aug. 27, 8:30 am, ET.

This will be the main spotlight economic event of the trading week and the market has already been pricing in the potential for a significantly lower revised estimate which could show the U.S. economy growing by only 1.4% q/q in Q2 2010 compared with the preliminary estimate of 2.4% q/q growth.   

10.     USD- U.S. Consumer Sentiment, the University of Michigan's monthly survey of 500 households on their financial conditions and outlook of the economy, Fri., Aug. 27, 9:55 am, ET. 

In the aftermath of what could be a disappointing GDP report, the U.S. consumer sentiment is not expected to instill much optimism as the consensus forecasts point to a reading of 68.3, down from 69.6 in the previous month.

Today's All Things Forex Broadcast: Crucial Week ahead for the USD, EUR and JPY!

In the broadcast today: Crucial Week ahead for the USD, EUR and JPY! As market sentiment continues to turn sour, we explore what the crucial week ahead may have in store for the USD, EUR and JPY, we list the Top 10 economic events that will move the markets next week, we examine some of the consensus forecasts for the upcoming economic data, we analyze the bearish breakouts in the EUR/USD and GBP/USD currency pairs, we analyze the latest trend developments with the USD/JPY pair, we highlight the market's reaction to the statement from a policy maker at the European Central Bank, the Canadian CPI, and the downward revision for the upcoming U.S. GDP report, we discuss new forecasts from Commerzbank and UBS, and prepare for the trading week ahead.

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