Traders' Library Blog

A Trojan Horse: Keppler on Greece

A guest post from Dr. John Keppler, author of Profit with the Market Profile: Identifying Market Value in Real Time, now available from Marketplace Books.

Greece and its private creditors are expected to complete a debt-swap agreement this week. Luxembourg Prime Minister Jean Claude Juncker from the Institute of International Finance announced in an e-mailed statement from Athens that both sides were "close" to completing a voluntary exchange. Unidentified sources claimed that creditors were prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds.

Juncker himself had previously mentioned that the new bonds issued in the swap would have a coupon rate below 3.5 percent for the period up to 2020 and below 4 percent over the 30-year term. The bottom line is that these rates equate to a loss of about 69 percent on the net present value of Greek debt.

The agreement with bondholders is linked to 130 billion-Euro bailout, which is a second bailout from Greece's European partners and the International Monetary Fund for the country. Greece is in dire need of this bailout as it faces a 14.5 billion-Euro bond payment on March 20, 2012.

More importantly, the question remains whether the Greek population is prepared to tolerate the necessary economic hardships that are to come. Greek Finance Minster Evangelos Venizelos confirmed yesterday that a final debt swap accord was to be in place by next week. However, he also said that the next several days would shape Greece for the next decade. Venizelos, emphasized that in addition to the debt swap, Greece had "...labor, structural reforms and pension issues to resolve". He told reporters in Athens late yesterday after a meeting with troika officials that: "there must be a national pact forged with unions and employers."

Greece now requires 145 billion-Euros for the second bailout, 15 billion more than was originally agreed in October of last year. As a possible condition of the bailout, European policy makers are discussing plans to directly intervene in Greek budget decisions as the country struggles to cut its deficit.

It should not come as a surprise to anyone that such intervention would not be taken lightly by the Greek nation. It is obviously contrary to their national sovereignty. As we watched the markets reach new highs last week, this upcoming week will be tumultuous. The Greek debt crisis is far from over and the highly anticipated creditor swap agreement is not going to be the magic bullet that will push markets higher yet.

The U.S. Indexes are all facing some critical resistance levels; the Nasdaq 100 (NDX) is looking at 2480 and 2500. The S&P 500 (SPX) is facing 1333 and 1346. The Russell 2000 (RUT) is also confronting 800, 807 and 814. In addition, the ES mini futures monthly profile is also indicating that there is not much of an appetite for buying at the current high levels.

Learn more about Dr.Keppler, his trading, and how to contact him by visiting his website www.strategictrading.net.

 

S&P500 Technical Analysis Update: January 28, 2012.

Last week I wrote: "It looks like we are making an impulse wave up, now looking to complete wave 3. The expected correction will be a wave 4, probably even a flat one. Hard to predict if this will start next week. I am expecting a further move up to complete longer term wave {C} after the correction".

With the doji candle on the weekly chart, the bearish harami in the daily chart and a closing price almost the same as the previous week, I have the feeling that the correction is started. The put/call ratio both short and medium term are moving up with a flat price move. So, we have another warning for a down correction. Indicators are turning down. The index also reached the 161.8% Fibonacci target. I believe the index will correct next week. For now I think the total correction will be small (1280?). Since we have a good profit and expecting a correction I am closing the long trade early and go back in after the correction.

The total closed profit trading the index is 76.5% from the start in March 2009.

We have to consider that it is not impossible that we are already making the long term [C] wave down. We will have to wait and see if this is the case. However, since the short term is up, it may not yet be the case. SATS5 is green, we have a long position that I am closing early now. Swing traders can take profit and step back in after the correction.

FOREX Update EUR/USD pair: January 28, 2012.

Last week I wrote: "Since the S&P500 continued the move up and the EUR.USD is back in sync with the S&P500, the better chance was clearly for the start of the upward correction. Now expecting a correction wave 4 down in the S&P500, it is unsure that the move up in the EUR.USD will continue, especially if we have a lower closing on Monday. If the S&P500 correction starts next week, I then also expect a correction down for the EUR.USD".

Contrary to the S&P500, there was a much higher closing on Monday in the EUR.USD. And since there was no correction started in the S&P500, the EUR.USD continued the up move. I expect next week a further up move to the upper side of the downward pitchfork and the 100 day average around 1.33. But probably already next week followed by a downward correction once the S&P500 starts moving down. It looks like we started the longer term wave [B] up. But! We still have to consider the possibility that the top in May was already the top of wave [B] and that we started the long term wave [C] down since then. If that is the case there will only be limited up correction moves during the long term down move. A target would be the 200 day average around 1.38. SATS5 turned green on Monday. In the downward move SATS5 gave a very nice profit of 630 pips. We have a new SATS5 buy signal with a profit already.

Trading Week Outlook: Jan. 23 - Jan. 27

Jan. 22, 2012 (Allthingsforex.com) – In the week ahead, the Fed’s monetary policy decision will steal the spotlight from Europe for a day, but with the private sector involvement negotiations set to resume in Athens and a two-day Eurogroup meeting on the agenda, investors will continue to gauge nervously the odds of a Greek default and its implications for the economic and monetary union.   

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- Eurogroup Meeting of Finance Ministers, Mon., Jan. 23 and Tues., Jan, 24, all day events. 

Only a few days ahead of the EU Summit on January 29, the two-day Ecofin meeting of finance ministers will set the stage for more discussions on how to deal with the next act of the Greek drama and contain the EU debt crisis. As the markets are still not completely convinced that the worst is behind, the EU leaders must deliver on their promises for bold solutions that would create the necessary firewall to prevent further contagion and safeguard larger economies. 

2.    JPY- Bank of Japan Interest Rate Announcement, Tues., Jan. 24, around 12:00 am, ET.

The Bank of Japan is not expected to make any changes to its accommodative monetary policy, leaving the benchmark rate unchanged in its record low target band between 0% and 0.10%. However, it will be interesting to find out if the bank will be forced into doing more quantitative easing as a tool to stimulate the economy which is losing steam.

3.    EUR- Euro-zone Composite PMI- Purchasing Managers Index, a leading indicator of economic conditions measuring activity in the manufacturing and services sectors, Tues., Jan. 24, 4:00 am, ET.

What About Apple?

That is a question on many traders' minds. Investors in Apple have been richly rewarded for the last several years. Shortly after Google went public, the financial news was always focused on Google. Google was a Wall Street darling. And the people investing in Google in those early years did very well. But during several of those years, Apple's stock price was quietly outperforming Google.

But everything changed after the earnings announcement from Apple last fall. Suddenly, the talking heads on CNBC were all making pessimistic predictions about Apple. To be sure, Steve Jobs' death is a significant loss for Apple. I recently read his biography and it confirms the critical role Steve played in many of the greatest innovations to come out of Apple. But the book also highlights many of the talented designers and engineers Steve hired for Apple, including Tim Cook, the current CEO. After all, we are talking about a company with a market capitalization of over four hundred billion dollars! One man doesn't make or break an organization of that size.

Apple's Business Prospects

The iPhone and iPad continue to lead their respective markets. Sales of the iPhone4s have exceeded analysts' expectations. The openings of the new iPhone4s sold out in a matter of hours in many locations. And none of these sales were included in the last quarter's earnings. The iPhone and iPad have also pulled through sales of the Macintosh computers. Many pundits are predicting the end of personal computers in favor of smart phones and tablets, but Mac sales are up. If you have any doubts about the health of Apple's business, visit your local Apple store; you can barely get through the store near my house - it is always packed with customers. This certainly isn't a thorough analysis of Apple's financials, but my point is simply this: Apple's upcoming earnings announcement will be very positive by all measures.

However, earnings announcements aren't judged strictly by comparison with the previous quarter's results. They are judged by comparison with the analysts' expectations. That is why it is exceedingly difficult to predict the market's reaction to an earnings report. And given all of the negative chatter about Apple, one has to wonder how the market will react to this upcoming earnings announcement. And that leads us to the most important question.

How Should We Trade Apple?

Apple is scheduled to announce their quarterly earnings after the market closes on January 24. A trader could take several different approaches to this announcement; some differ based on style; some depend on the trader's prediction for Apple's share price after the announcement. But remember: trading any earnings announcement is very speculative. Don't bet your IRA on this trade!

One possibility is the straddle. As of today's prices, the $420 straddle would cost $3,028. The trader profits for a price move either higher than $450 or lower than $390. The fundamental question for the trader is whether she believes Apple's share price will move that far after the announcement. The one certainty is that implied volatility will collapse after the announcement and the prices of these options will drop dramatically; a large stock price move, one way or the other, is essential to achieve a profit.

One might also trade the iron condor on Apple through the earnings announcement. For this trade, the critical decision is the placement of the spreads. I would ensure my spreads were positioned outside of one standard deviation and also outside the break-even prices from the straddle. I think of the straddle pricing as the market consensus of the farthest likely price move in either direction. If I were establishing the condor today, I would sell the 460/470 call spreads and the 370/380 put spreads. At today's prices, that would bring in a credit of $207 with a maximum gain of 26% if both spreads expire worthless. However, implied volatility will decline after the announcement and one may be able to close the condor early for a nice gain.

If you have a strong directional bias for Apple, then I would suggest playing the appropriate half of the iron condor, e.g., if you are bullish, use the 370/380 put spread. But what if you are strongly bullish and want to swing for the fences? Take a look at the Feb 460/470 bull call spread. This is the proverbial lottery ticket - it will only cost about $100 and could return $900 for Apple above $470. But Apple would not have to move nearly that far to achieve gains over 100%.

Best wishes for trading the Apple announcement! 

S&P500 Technical Analysis Update: January 21, 2012.

Last week I wrote: "The closing price is moving flat the last 4 days with the fast PCRI still moving down near the bottom. This looks like a warning that we should expect the index to go down shortly".

Shortly was clearly not the past week with mostly higher closing prices. But probably as suggested last week a good time for swing traders to take profit. It looks like we are making an impulse wave up, now looking to complete wave 3. The expected correction will be a wave 4, probably even a flat one. Hard to predict if this will start next week. I am expecting a further move up to complete longer term wave {C} after the correction.

Indicators are topping and the put/call ratio is close to a bottom. Short term target is a correction to the support level around 1280. Swing traders should look for taking profit now. The total closed profit trading the index is 67% from the start in March 2009.

We have to consider that it is not impossible that we are already making the long term [C] wave down. We will have to wait and see if this is the case. However, since the short term is up, it may not yet be the case. SATS5 is green, we have a long position.

FOREX Update EUR/USD pair: January 21, 2012.

Last week I wrote: "The EUR.USD went a bit higher but closed the week around the same level as the previous week. So, nothing is really changed and we keep looking out for an upward correction. However, for the moment the EUR.USD (moving down) is out of sync with the S&P500 (moving up). If they come in sync again and since we are expecting a down correction in the S&P500, the contrary is possible with the EUR.USD continuing the down move, which I believe has a better chance".

Since the S&P500 continued the move up and the EUR.USD is back in sync with the S&P500, the better chance was clearly for the start of the upward correction. Now expecting a correction wave 4 down in the S&P500, it is unsure that the move up in the EUR.USD will continue, especially if we have a lower closing on Monday. If the S&P500 correction starts next week, I then also expect a correction down for the EUR.USD.

Once the medium term down correction completes it should go up again for the longer term wave [B]. But! We still have to consider the possibility that the top in May was already the top of wave [B] and that we started the long term wave [C] down since then. If that is the case there will only be limited up correction moves during the long term down move. SATS5 is black with a very nice profit (but we have closed the short position already). We are waiting for a new SATS5 buy signal.

Steve Palmquist.

Author of ‘The Timely Trades Letter’.    

‘How to Take Money from the Markets’,  

and   Money-Making Candlestick Patterns.

 

Analyzing trading patterns is vitally important to trading. Trading without understanding the statistics of a trading pattern is just taking unknown risks, and makes little sense. The trading patterns tested and analyzed in my first two books provide the beginnings of a trading toolbox, and the knowledge of when to use each tool. Without a clear understanding of how and when different trading patterns work, it’s easy to get caught up in fear, greed, group think, etc. However these emotional and non-data driven approaches often lead to losses. Traders need to be first and foremost focused on what the market is doing, and then selecting the most appropriate trading patterns, or remaining in cash, to address the current market conditions. Without previous testing and analysis of trading tools, and how they perform in differrent market conditions, traders are just randomly using tools that may or may not be appropriate for the current market.

It is also very important to have a clear exit strategy before entering any trade. If I don’t know where I want to exit a trade then I don’t take the trade in 1^st place. In trading range markets most stocks tend to pop and drop, if they didn’t the market (which is the summation the large number of stocks ) would be trending. So a trading range environment tells us that stocks are not going to run very far, by definition. I use this information to drive my exit strategy which is more short term in a trading range market then it is a trending market as outlined below.  In a trending market, individual stocks tend to pop and then move for a while. The market, the summation of a large number of stocks, is moving or trending because a lot of individual stocks are moving or trending. Once again observing the market conditions tells us how individual stocks are likely to behave, and that tells us how to manage our exit strategies.

Trading should be data driven, not based on emotion, whishful thinking, or hot tips from TV hosts. To be data driven one needs to test and analyze trading tools and find out what really works, and when each tool should be used. Traders must understand which tool to use for a specific task, and have a clear understanding of how the tool works, and what can and cannot be done with it. I have extensively tested several trading systems, the results of this testing on specific trading trading tools are outlined in  ‘How to Take Money from the Markets’, and  Money-Making Candlestick Patterns. The testing process helps us understand how stocks usually behave after forming a specific pattern such as being outside the Bollinger Bands, showing strong distribution or accumulation, or pulling back or retracing during a trend. Understanding what a stock is most likely to do forms the beginning of a trading strategy. Trading without this information is taking unknown risks. 

 

 

 

 

 

Trading Week Outlook: Jan. 16 - Jan. 20

Jan. 14, 2012 (Allthingsforex.com) – After a couple of days of respite, dark clouds are looming once again as S&P downgraded the credit ratings of France and another eight of the seventeen members of the Euro-zone. The week ahead will keep traders on the edge of their seats with make or break “Troika” negotiations getting underway that will showcase the next act of the Greek drama, while EU leaders scramble to keep the debt crisis from spiraling out of control following the downgrades.   

In preparation for the new trading week, here is a list of the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- EU, ECB and IMF Inspectors Negotiations on Financial Aid for Greece, Mon., Jan. 16, all day event.

As uncertainty levels rise in the aftermath of the S&P downgrades, the “troika” of inspectors from the EU, the ECB and the IMF will be back in Athens to discuss the terms of the second Greek bailout. Recent headlines have not been able to instill much optimism on the Greek situation, with the head of sovereign ratings at Fitch calling it “frankly a disaster” and Reuters citing a source saying that the negotiations with creditors are “going badly”. As the Greek drama enters its new act, it would be imperative to find favorable solutions otherwise Greece would be one step closer to exiting the Euro-zone. Such move could open the door to other exits, with Portugal likely being the next candidate, especially after S&P has now rated the country’s debt “junk”. Anxiety and risk aversion should continue to keep the pressure on the euro.   

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Jan. 17, 4:30 am, ET.

In line with the Bank of England’s Inflation Report forecast, inflationary pressures in the U.K. could continue to subside with the inflation gauge pulling back to 4.2% y/y from 4.8% y/y in the previous month. Lower inflation would make the Bank of England’s policy makers more comfortable with a decision to expand the size of the quantitative easing program in the near future should U.K. economic conditions deteriorate.

3.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions and business expectations, Tues., Jan. 17, 5:00 am, ET.

Although still at depressed levels, the economic sentiment index in the Euro-zone could signal a slight improvement with a lesser decline of -48.7 in December from -54.1 in November.  

S&P500 Technical Analysis Update: January 14, 2012.

PLEASE NOTE I have recently changed the chart template.

Last week I wrote: "In this first short trading week of the year the index moved up on Tuesday and flat the rest of the week. I expect a completion of wave C above 1290 before we get the reaction down".

As expected the week high was at 1295.5, just above the previous top A to create a valid wave C. Indicators are topping and the put/call ratio is close to a bottom. The closing price is moving flat the last 4 days with the fast PCRI still moving down near the bottom. This looks like a warning that we should expect the index to go down shortly. Short term target is a correction to the level of the 200 and 50 day averages around 1250. Swing traders should look for taking profit. The total closed profit trading the index is 67% from the start in March 2009.

We have to consider that it is not impossible that we are already making the long term [C] wave down. We will have to wait and see if this is the case. However, since the short term is up, it may not yet be the case. SATS5 is green, we have a long position.

FOREX Update EUR/USD pair: January 14, 2012.

Last week I wrote: "And yes, we went down another 227 pips. There is some room left for a further down move, but technically I am expecting an up correction probably already next week".

The EUR.USD went a bit higher but closed the week around the same level as the previous week. So, nothing is really changed and we keep looking out for an upward correction. However, for the moment the EUR.USD (moving down) is out of sync with the S&P500 (moving up). If they come in sync again and since we are expecting a down correction in the S&P500, the contrary is possible with the EUR.USD continuing the down move, which I believe has a better chance.

Once the medium term down correction completes it should go up again for the longer term wave [B]. But! We still have to consider the possibility that the top in May was already the top of wave [B] and that we started the long term wave [C] down since then. If that is the case there will only be limited up correction moves during the long term down move.

SATS5 is black with a 978 pips profit now (but we have closed the short position already). We are waiting for a new SATS5 buy signal.

Free Webinar with Ross Jardine

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Since the crash of 2008 Ross has discovered the individual investor doesn't stand a chance against automated traders on Wall Street.

Would it surprise you to know that 73% of all trades each day on the US exchanges are done using automated trading systems?

In the webinar Ross will teach you:

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Most of all you will learn how you can take advantage of the power of automated trading.

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What About Apple?

First the disclosure: I am a bull on Apple. I like their products and am bullish on the future, even without Steve Jobs.

But many analysts apparently think it is time to bash Apple since Steve died. Consider the last earnings announcement. By all measures, Apple continued its recent growth both in revenues and net income, but the market yawned and Apple stock dropped. Some anlaysts appeared to be confused since the iPhone 4S had just been released prior to the announcement and thus those sales could not be included in the results, but analysts expressed disappointment anyway. It has become fashionable to discuss why Steve Jobs' departure will cripple a 400 billion dollar company - really? One man was responsible for all of the innovation, engineering and great product design? No doubt, Steve will be missed, but this seems over the top.

Another example appeared on Yahoo Finance this morning. The headline: "These 9 Brands All have Better Reputations Than Apple Right Now". Reading the story, one finds that Apple ranked tenth in the survey of consumer recognition and favorable attitude, but the article notes that Apple has not even made it into the top ten in the past three years! Re-read that headline. Does that make sense? Shouldn't the headline have reflected that Apple is moving up in consumer recognition? Once again, it was fashionable to put the negative spin on any story about AAPL.

As traders, that leaves us in a quandry. Apple will announce earnings January 24. By all news accounts, the iPhone 4S has been a huge hit. The iPad still commands a huge market share in spite of Amazon's newest Kindle. So I have no doubt that the announcement will reveal spectacular results - but how will the market react? Will analysts continue to search for evidence to support the thesis that Apple is dead without Steve Jobs?

Apple stock has been on a tear upward the past couple of weeks, so your bullish Apple plays have been doing well, but what should we do in advance of the earnings announcement? It certainly seems possible that Apple stock could drop in price even after a stellar announcement (buy the rumor and sell the news). So I am a bit wary of outright bullish plays. I will be looking at two possible plays in advance of earnings. One is a simple ATM straddle and the other is an iron condor. On the day before the announcement, I will price the straddle and determine whether the stock price is likely to move far enough to make that trade profitable. I suspect the straddle may be too expensive, but we'll see.

The other possibility is the iron condor. As long as the spreads encompass the expected price range after the announcement, the drop in implied volatility will drive an increase in the profitability of the condor, a negative vega position.

It will be an interesting market event to watch. Hopefully, we can make it a profitable one as well.

The Jardine Range--Sneak Peek

Chapter excerpt from bestselling book, Just a Trade a Day by Michael Jardine.

CHAPTER 4

The Jardine Range

 

 

 

“What goes up, must come down.”– Sir Isaac Newton

 

 “What goes down, must come up.” – the Jardine Range Corollary

Figure 4.1 and Figure 4.2 illustrate the two options for the trading day.

What Goes Up

Several years ago, it occurred to me that each day starts out with a natural potential trading range. The idea of a range makes sense because nobody really has any idea whether the market will go up or down. Usually, it does both, but nobody has any idea, on any given day, whether the market day will finish up or down. If someone did hold that information, he or she would be rich—and very lucky.

 

Natural and Potential

It is, however, possible to determine a natural potential range for the market, on any given day. This is not to say that the market will go up to the top of the range, nor that it will go down to the bottom of the range; but in terms of potentiality, it is quite easy to determine a range within which the market will naturally trade, and to at least one end of which it will trade and then reverse. What does that mean? Three things:

If prices move up to the top of the range, they will then reverse trade back down. This is shown in Figure 4.1.

If prices move to the bottom of the range, they will then reverse and move back up. This potentiality is shown in Figure 4.2.

If prices move outside of the range, then something unnatural is happening, like news or a slew of earnings reports, for example. Or, perhaps, just a stronger overall trend that was only temporarily halted at the extreme of the range.

Let’s observe what happened to the S&P E-mini Futures market on September 30, 2009.

Figure 4.3 shows that the market closed at 1054.50 on Tuesday. In preparing for the next trading day, I observed that there was a VPC above where the market closed, at 1059.00. I also noticed that there was a VPC below where the market closed, at 1044.00. The market will open in between those two points. Those two points form a natural trading range, which I call the Jardine Range. There are a few important points to recognize about the Jardine Range.

Two Turning Points—That’s It

First and perhaps most obvious, the closest VPC above the market open and the closest VPC below the market open constitute the Jardine Range. I usually draw a box to indicate the range.

React, Don’t Predict

The Jardine Range does not aim to predict anything. Its sole purpose is to provide a basis for reacting, not predicting. It is important to remove opinion, conjecture, and as much other outside “noise” as possible from the trading decision, because those will freeze you like a deer in headlights when it is time to make a decision. They will also prompt you to jump skittishly each time the wind whistles or an animal calls out. Or they may prompt you to enter the market too early or too late, and probably too often.

The Jardine Range does not predict how wide the likely range will be. It does not predict that prices will go up to the top or bottom of the range.

Back to Newton

The Jardine Range does indicate the natural “gravitational forces” of the market. That is to say, the closer that prices move towards either VPC, the more they will be drawn to it. Without getting too astrological, think of the gravitational pull of earth towards objects in outer space, or even to objects on its surface. Taking that one step further, all nature is drawn to forces just as objects are drawn to gravity. Observe the heads of those guys perched at the bar as an attractive woman enters. Watch what a flower does when the sun comes out. It is easy to understand what happens when the market approaches either end of the Jardine Range. Traders will exit positions, and that will cause a momentum shift that could result in a reversal or just a pause. The extent of that shift is of no concern at this point in time. We merely need to understand that there will be a shift. What we do with that shift is covered in Part Two.

Objectivity is Your Friend, Subjectivity Your Enemy

Start now by drawing the Jardine Range on your charts at the end of each trading day. Then check it each morning before the market opens. Will the market open within that range? Or will there be a gap? If the market gapped up or down, you may need to re-draw the range so that it includes only the one VPC immediately above and the one VPC immediately below the opening price.

Observe what happens as prices move towards either of the VPCs. Consider how you could use this information to your advantage. Remember, this information is all objective. Something will likely happen at either end of the Jardine Range, regardless of news, sentiment, or what the talking heads are saying; regardless of what other pivot points, harmonics, or lines in the sand have been drawn. Actually, for the time being, it is a good idea to ignore the rest as you gain an understanding of just how powerful the Jardine Range can be.

Then you can build a trading system on top of the Jardine Range. You can gradually layer back in your other lines in the sand—but only, I suggest, as independent indicators to confirm what the Jardine Range is already telling you.

Then you can go back to your old methods, and see if the Jardine Range and the Universal System can help make you a better trader. Many traders I know do this.

Or you can do what I did, and just drop everything else and trade the Universal System. I use nothing else. It gives me time to listen to that gurgling stream, take the kayak out on a beautiful day, or jump in the car for an afternoon of photographic fun in the mountains. After all, that’s what it’s all about, isn’t it? And if the weather outside is foul, I stay in and design “productainment” applications for the iPhone over at LeftCoastLogic.com

 

SELF TEST QUESTIONS

1. What is the Jardine Range?

a. A high and low band created by a moving average above and below the current prices

b. The most recent day’s high and low that has not been touched yet by prices

c. The most recent VPC above and below the open prices

d. A range of Market Profile POCs that form a band around the current price

2. Is the Jardine Range predictive or reactive?

a. Predictive, because it predicts whether the market will go up or down from its opening price.

b. Reactive, because it is not concerned with which direction the market will go.

c. Neither. It neither predicts nor reacts to price movement.

d. Both. The range suggests that prices will touch both ends of the range at some point during the day.

For answers, go to www.TradersLibrary.com/TLEcorner.

 

Trading Week Outlook: Jan. 9 - Jan. 13

Jan. 7, 2012 (Allthingsforex.com) – With another “Merkozy” meeting, Spanish and Italian debt auctions, and the European Central Bank’s monetary policy decision on the horizon, the week ahead will place the ball in the European Central Bank and the EU leaders’ court, as traders anxiously await the latest news from the embattled Euro-zone.  

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- German Chancellor and French President Meeting ahead of the EU Summit, Mon., Jan. 9, all day event. 

The German Chancellor and the French President are scheduled to meet to prepare ahead of the EU finance ministers meeting on January 23 and the next EU Summit on January 30. Although the Euro-zone newswires have been relatively quiet over the Holidays, the pressure on the euro has kept mounting in recent weeks. With the economy slowing and the EU debt debacle far from over, the clock is ticking for the EU leaders to find and implement concrete solutions to the crisis that threatens the existence of the European Monetary Union and the single currency.

2.    EUR- Germany Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities in the Euro-zone’s largest economy, Mon., Jan. 9, 6:00 am, ET.

In line with the contraction in the Euro-zone manufacturing and services indexes, the German industrial activity is expected to follow suit with a drop by 0.5% m/m in November from the 0.8% m/m increase in the previous month.  

3.    EUR- Germany GDP- Gross Domestic Product, the main measure of economic activity and growth, Wed., Jan. 11, 4:00 am, ET.

Even though Germany has done much better than the rest of its EU partners, the final reading of real GDP growth in 2011 in the Euro-zone’s largest economy is forecast to be revised lower to 3.0% y/y from a previous estimate of 3.6% y/y.  

S&P500 Technical Analysis Update: January 7, 2012.

PLEASE NOTE I have recently changed the chart template. It is explained HERE.

Last week I wrote: "Price remains above the downward pitchfork and close to the 200 day average. The fast put/call ratio is moving up with price moving horizontally. Meaning we should expect some reaction down soon". In this first short trading week of the year the index moved up on Tuesday and flat the rest of the week. I expect a completion of wave C above 1290 before we get the reaction down. The total closed profit trading the index is 67% from the start in March 2009.

We have to consider that it is not impossible that we are already making the long term [C] wave down. We will have to wait and see if this is the case. However, since the short term is up, it may not yet be the case.

FOREX Update EUR/USD pair: January 7, 2012.

PLEASE NOTE I have recently changed the chart template. It is explained HERE.

Last week I wrote: "The EUR.USD obeyed nicely my preference and went lower to the expected support at 1.287 as mentioned on the weekly chart two weeks ago. I think we can still go a bit lower before there will be an up reaction".

And yes, we went down another 227 pips. There is some room left for a further down move, but technically I am expecting an up correction probably already next week. Once the medium term down correction completes it should go up again for the longer term wave [B]. But! We still have to consider the possibility that the top in May was already the top of wave [B] and that we started the long term wave [C] down since then. If that is the case there will only be limited up correction moves during the long term down move. SATS5 is black with a 937 pips profit now (but we have closed the short position already). We are waiting for a new SATS5 buy signal.

Where is the Market Going in 2012?

A guest post from Dr. John Keppler, author of Profit with the Market Profile: Identifying Market Value in Real Time, now available from Marketplace Books.

We are now starting a new year; new beginnings are usually accompanied by optimism and hope. Yet, at the beginning of this year, I have received many e-mails and calls of distress from clients, students and friends. It seems that almost everyone is expressing serious concern and anxiety about 2012. The dire forecasts for this New Year include an actual prediction by the Mayan Calendar that civilization and the world will end in 2012.

Many financial analysts and pundits are also making some seriously alarming predictions about the financial markets. I have heard many theories about potential catastrophic financial events and some are postulating possible outcomes that would have been unthinkable only a year ago. Unfortunately, global leaders have not provided any words of comfort or optimism. They are not sanguine about the upcoming year. German chancellor, Angela Merkel, has warned that the year ahead will "undoubtedly" be harder than 2011. This is one of the most stark remarks in a series of downbeat messages from European leaders expressing fears over the economy.

Merkel said Europe was experiencing its "harshest test in decades" but would ultimately be made stronger by the crisis. Her solemn New Year greeting, broadcast on Saturday, set the tone for other European counterparts. The Greek Prime Minister, Lucas Papademos, spelled out a continuation of harsh austerity measures, while the Italian president, Giorgio Napolitano, warned that sacrifices would have to be made if the country was to avoid "financial collapse".

The French president, Nicolas Sarkozy, said people had to be "courageous" when facing the challenges ahead. "I know that the lives of many of you, already tested by two difficult years, have been put to the test once more. You are ending the year more worried about yourselves and your children," he said, adding: "This unprecedented crisis, which is without doubt the worst since the Second World War, is not over". However, Sarkozy, who is lagging behind in the polls just months from a presidential election, vowed that there were nonetheless "reasons to be hopeful" and that no further public spending cuts would be made.

In Italy, Napolitano was less eager to gloss over the economic position of a country, which last year was feared to be on the brink of becoming the next eurozone country to seek a bailout. "Sacrifices are necessary to ensure the future of young people; it's our objective and a commitment we cannot avoid," he said in his New Year speech.

"No one, no social group, can today avoid the commitment to contribute to the cleanup of public finances in order to prevent the financial collapse of Italy," Napolitano added. As growth stalls in countries across Europe, governments are coming under pressure to make further cuts to spending and fears are growing that 2012 could bring a second recession.

In Greece – the first country to have sought a bailout in 2010 – Papademos warned that there would be no let-up in the austerity measures, which many Greeks feel are too tough. "We have to continue our efforts with determination, so that the sacrifices we have made up to now won't be in vain," he said in a televised address.

In the U.S., reflecting on 2011, Obama said it was a time of great challenge and great progress for the U.S., including the end of the war in Iraq, the death of Osama bin Laden and signs of an economic recovery.

"There's no doubt that 2012 will bring even more change," Obama said. "And as we head into the New Year, I'm hopeful that we have what it takes to face that change and come out even stronger, to grow our economy, create more jobs, and strengthen the middle class."

In spite of this somber mood, the markets closed 2011 near their highs and opened the New Year even higher. A rather perplexing outcome considering the magnitude of challenges and problems that currently confront our planet.

Naturally, everyone wants to know if the markets will continue to move higher in 2012 or whether we are going to experience a dramatic pullback. In the last quarter of 2011, the markets have been characterized by uncertainty and increased volatility.

I anticipate that the markets in 2012 will continue to experience this same type of roller coaster behavior. The markets will likely experience powerful swings in both directions. Uncertainty and fear combined are both extremely powerful forces and contribute to highly volatile markets.

Trading these markets will require a high level of skill combined with a nimble and flexible approach. It is important not to become married to a single direction in these tumultuous markets; much like a roller coaster, the markets will dip and rise when least expected on news, events, and speculation.

Investing and trading in uncertain and volatile markets requires a constant focus on volume levels and a careful study of the actual volume breakdown levels for any traded instrument. Actual market activity will be the most reliable indicator of what is likely to happen rather than relying on the predictions or forecasts of pundits.

I am optimistic by nature and I feel that some progress will be made in handling some of the pending issues. However, I am also pragmatic and realistic about 2012. I know that there are going to be some unanticipated surprises and many unintended consequences for various actions, policies and events. Naturally, the market will reflect and factor these occurrences throughout the year. Stay informed, be alert and flexible. Do not become over committed to any one theory or prognosis for the markets.

Learn more about Dr.Keppler, his trading, and how to contact him by visiting his website www.strategictrading.net.

We also have a special offer on Dr. Keppler's new book, just for TL blog readers--check it out here.

 

Archidply Industries Bullish Gartley Pattern

A Bullish Gartley Pattern recently completed on Archidply Industries (ARCHIDPLY on NSE.) The trade setup was identified in the November 28, 2011 issue of The Geometric Trader - Global Equities Report. The report stated that the setup was complete and to buy on a stop one tick above the high of the recent low bar.  

2 days later orders were filled as the market rallied above the high of the low bar. 

As seen above, the trade worked. Our favorite method of managing a trade like this is with the Single In/Scale Out method of money management as described in the book The Gartley Trading Method: New Techniques to Profit From the Market's Most Powerful Formation. To learn about this effective trade management technique, click here to watch an instructional video. To identify Gartley Patterns before they complete, check out The Geometric Trader - Global Equities Report at www.geometrictrading.com

Trading Week Outlook: Jan. 2 - Jan. 6

Dec. 31, 2011 (Allthingsforex.com) – The first trading week of 2012 will kick-start the New Year with a sequence of important data from both sides of the Atlantic, giving traders an opportunity to compare economic conditions in the U.S. and the Euro-zone, and to gauge the next moves by the Fed and the European Central Bank. 

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe. 

1.    EUR- Euro-zone Manufacturing PMI- Purchasing Managers Index, a leading indicator of economic conditions in the Euro-zone measuring activity in the manufacturing sector of the economy, Mon., Jan. 2, 4:00 am, ET. 

As more economists predict a “mild recession” in Q4 2011, the trend of Euro-zone weakness could continue with the manufacturing index staying in contraction territory for another month with a reading of 46.9 in December from 46.4 in November.

2.    USD- U.S. ISM Manufacturing PMI- Purchasing Managers Index, a leading indicator of economic conditions in the U.S. measuring activity in the manufacturing sector  of the economy, Tues., Jan. 3, 10:00 am, ET.

In contrast to the Euro-zone manufacturing, the U.S. manufacturing activity is forecast to register another month of expansion with a reading of 53.3 in December, compared with 52.7 in the previous month.