Carry Trade Softens With DJIA!
By Marek W. Stupka | January 24, 2008
The stunning collapse in global equity markets I mentioned in the “What’s Hot?” section trigerred carry trade liquidation of just about 300 bp…
[ Click on the chart to see bigger picture ] However, as you can see on the 1d chart for the GBPJPY above, the price movement itself was far from a fierce, or unusual, development in the carry trade markets. Impact of the Wall Street meltdown was rather muted…
Notice that this is one of the reasons to trade FOREX and abandon trading risky stocks and stock indexes. The thing is that with stocks you simply never now what happens the next day. There are fierce price collapses like this one. There are market gaps that no one will ever fill. [ click here to see FX advantages ].
On the other hand, spot FOREX, along with certain commodity futures and options, represent the financial market instruments on the opposite side of the unexpected risk scale. Want the conslusion? It is rather obvious: WE ARE IN THE RIGHT MARKET!!
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Another Carry Unwind !!
By Marek W. Stupka | November 12, 2007
Monday brought aggressive selling in GBPJPY, as Nikkei followed Friday’s weak performance in the Dow and felt more than –300 pips…
[ Click on the chart to see bigger picture ] Despite the no-work-today Veterans Holiday in the US, all of the carry pairs recorded unusual volatility levels.
The underlying reasons to these volatile moves are further problems in the sub-prime sector. (If you’re curious about what the “carry trade” means, and what exactly caused the subprime credit problems, you should visit the BLOG TOPIC SEARCH section on your left, click the FOREX Trading Analysis section, and do your search right there).
Anyway, this aggressive price action started on Friday, happened out of the blue and was very hard to predict via the technical toools. Basically, the pair did not follow any clear technical pattern, or, to be more specific, it swung bearish before we were able to analyze it with the technical tools. At the end of the day, the only pattern followed by the carry was the price action in the Dow Jones Industrial Average Index (DJIA).
Look at the daily chart for GBPJPY above. The pair has just crossed below the 24% Fibonacci Retracement line of the previous unwind. The volatility is high, and the movements are fast. Be very careful when trading this pair these days .
NOTE TO MY CURRENT 1-ON-1 STUDENTS: I will produce an update to this pair soon. Visit the Interactive Updates and Planners section for the newest planner….
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Carry Upmove Capped!
By Marek W. Stupka | October 17, 2007
In the last post I predicted the upmove for the most dynamic Carry Trade pair - GBPJPY. And the pair truly moved north. Now’s the time for correction…
Click on the GBPJPY 1d chart above. The pair is has just finished the right shoulder of the Head-and-Shoulders chart formation. At this point, the pair is ripe for a likely correction.
NOTE TO MY CURRENT 1-ON-1 STUDENTS: The Ichy Freak List is now fully replaced by the regular Chart Planner updates. In other words, Ichimoku Kinko Hyo has become an integrated part of the 1-on-1 Training’s system update structure…
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Carry Trade Rebound?!
By Marek W. Stupka | October 5, 2007
While eyes of most individual traders are on the currency majors, the “big dogs” are beginning to smell another set of juicy profits from the carry trade…
Observe the 1d chart for the most dynamic carry trade pair GBPJPY above. The pair is just about ready to post the right shoulder of the Head-and-Shoulders chart formation. At the solid red line breakout, there were all ingredients for a solid, mid- to long-term take-off !
[ Notice that I use Ichimoku Kinko Hyo for analysing the long-term trading opportunities. This limited blog space is not intended to describe every detail of this unique Japanese trading system which, if used wisely, is undoubtly the most powerful and profitable long-term strategy I know of. I have back-tested the system and it works very well. The comprehensive guide on how to use this system is part of the 1-on-1 Training.]
With my students, we are able to profit from trading opportunities like this is. Like I said, I will not dig deep into why my personalized Ichimoku strategy shows that the time has just been ripe to trade GBPJPY long. Neither am I going to share where do I see the market consolidating and/or reversing…
This know-how is destined exclusively for those who decide - or have already decided - to participate in the training, and let themselves be trained on how to trade with consistent profits. You can become one too [ click here to learn how ].
NOTE: If you are one of my 1-on-1 students and did not yet subscribe to receive the Ichimoku signals, drop me an email and I will add you to my Ichy Freak List. Once on the list, you will receive periodic updates on how to cash-in the opportunities that I plan for my own long-term trading…
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Dow Jones and the Carry
By Marek W. Stupka | September 6, 2007
In the world of trading it is no secret that Dow Jones Industrial and the Carry Trade are closely correlated. The question is: Can we benefit from the correlation?
The tight relationship between the Carry and the Dow has been present in the markets for years, and even decades. However, it is only over the last couple of months that the correlation is the strongest over the last 8-10 years. It is an exciting news, since now the Dow is leading the Carry, not the other way round, as used to be the case before!
Have a good look at the daily INDU$ chart above. Now compare it with a daily chart for any of the carry currency pairs. If you can see instant resemblance, you can sleep well tonight. Yes, you’re good at this! You’ve just proven yourself to be a quality trading analyst. (But wait! It gets even better once you apply to the 1-on-1 Training course!)…
The reason why these two financial market instruments are correlated is that they both are a direct reflection of the market risk. Whenever global investors show signs of high sentiment prefering the risk appetite in financial markets, both the Dow and the Carry immediately experience increased level of demand. And, on the contrary, when the investors tend to step away from they high-risk / high-yield investments, both Dow and the Carry begin to suffer and post lower and lower price levels.
As I already mentioned, this tight correlation has been present in the markets for many, many years, and I honestly can see no reason why it should suddenly collapse in the weeks to come.
There’s one more thing I like to share within this post, and it is the “September stock effect”. Every investment pro in Wall Street is well aware of the fact that September is generally and statistically the worst month for the stock performance ever. There are many reasons to this, the details of which exceed the scope of this article. In any case, it is good to keep this small piece of information somewehere back in our minds when trading the carry…
Now, knowing all this, currency traders can easily benefit from the strong relationship between the Dow Jones Industrial and the Carry Trade. The trick is real straightforward and easy. All we have to do, really, is to get access to a quality stock/index charting package (if your broker’s platform does not supply one, you can either subscribe to one, or google up a free application).
Once we spot a significant price change posted in a 1h-1d chart for the Dow, we should get alert and analyze our preferred Carry pair, t.m. USDJPY, NZDJPY, AUDJPY, GBPJPY, etc., for the same price action. — If you don’t know how to perform a quality Technical Analysis reserve your spot in the 1-on-1 Training, and you will start trading profitably in days! — However, it is also important to stress here that we should not follow the Dow performance blindly, but are encouraged to only trade the Carry when it is in line with our own analysis!
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Carry Continues to Unwind!
By Marek W. Stupka | August 12, 2007
Over the last week the USDJPY recorded the highest percentage decline in history. What happened? Risk aversion in Wall Street holds the answer.
Wall Street has seen some of its major market players liquidating their entire credit facitlities and thus withdrawing from the risks associated with keeping their credits alive. Countrywide Financial has executed credit of $11.5 billion, and Canada’s Coventree was not able to find buyers for its assed based commercial paper.
Despite over $300 billion worth of liquidity injections from central banks around the world, this liquidity crunch shows no signs of ending. For the world of currnecy trading, the Wall Street risk aversion translates to liquidating the long carry trade positions. In case you don’t know what the carry trade means, you should read the archived posts. Carry’s representative currency pair is USDJPY, and the so called “carry trade basket” usually includes all of the high interest-yielding Yen crosses, e.g. NZDJPY, AUDJPY, GBPJPY, etc.
The referential carry trade currency pair - USDJPY - thus posted huge unwind from long positions. In fact, the move was so strong that it broke the history record. Check it out!
Note the simplified technical analysis in the USDJPY weekly chart above. Can you see the yellow marked areas? Those are the basic technical signals that, at the appropriate time, notified us of the coming trend reversal.
See, we did not necessarily need to know about the Wall Street liquidity crunch (although the more you know about the Fundamentals, the better). Anyway, we are Technical Traders. We base our trades predominantly on the technical analysis. Sure, we keep staying tuned-in the major economic reports, but we watch our charts!
The simplified technical analysis above must, of course, be confirmed by additional techincal tools to actually form a trading strategy. But even after you apply them, the signal would have remained strong…
I obeyed the signal resulting from my complex analysis, and I made money on this bearish move. And I’ve made more than 400 pips of profit on this single long-trade setup over just 3 weeks! And I still kept the rules of conservative trading. Want to know the best part? I’m still in the trade! The pair has the potential to actually near to the 110.00-111.00 level…
If you, too, would like to learn how to make consistent profits, be it on the long-term, mid-term, or the session trades, you are welcome to participate in the 1-on-1 Training course. The simple technical analysis presented to you above is just a small glimpse of what you will learn in the course, and what you’ll be able to benefit from immediately.
Apart from the comprehensive, assorted, on-line trading education available to you for download any time you want, as the 1-on-1 Training participant you will receive periodical updates on technical charting, video updates on the session-based trading system, high number of explanatory ebooks, support materials, and much, much more. You will even be able to communicate with me directly (emails, videoconferences, instant messaging) about any issue that is not fully clear to you, or any area that you feel you need to grow in.
Ask for more information by clicking here. Reserve your training by clicking here.
Topics: FOREX Trading Analysis | No Comments »