The Big Mac index, from Economist.com

The Economist's Big Mac index is based on the theory of purchasing-power parity (PPP), according to which exchange rates should adjust to equalise the price of a basket of goods and services around the world. Our basket is a burger: a McDonald’s Big Mac.

The right attitude to approach the market with is: "I don't really care if I make a trade today." Each open position should bear some degree of urgency, the result of laying in wait, ready to nail an entry you've been waiting for.

That's pretty rare. In fact, I'm convinced you only need to trade 5 times a year. As I've reviewed my trading records over the past 10 years it's clear that most of what I've done has been busy work. There's an argument for busy work as well. It's like placing some jabs at your opponent in a fight, testing the waters. It's so easy to get distracted with those jabs. If you've got a losing streak of 10 or so jabs it can be frustrating. That frustration colors what you'll see. It comes down to balance.

That was my thought as I looked at EURUSD this morning: staying in its trading range.

Yet the ¥ is making money for me. Interesting.

I can't look at oil without thinking I missed the boat. My primary theme is natural gas so I can't help but look at the oil futures daily. I missed the reversal at $51. I was waiting for $49. This is where my jabbing comment comes in. I regret not taking a jab at that level, just one contract to put it on my trade monitor. I'm not shorting energy here though there's a triple top on the hourly natural gas chart.


My issue here is the daily chart which is convincingly bearish:

Sometimes you just need to lay in wait. My bullish disposition is based on fundamentals. It's the most misunderstood commodity: priced like oil with a completely different geology. The simplest explaination of this difference is from Matthew R. Simmons, author of Twilight in the Desert. Imagine 2 balloons, one filled with oil and one filled with natural gas. Take your finger off both. Which empties faster: the gas of course. Further, once the natural pressure of the oil balloon empies you can still squeeze it to get more oil out. That's about what we've got in terms of natural resources.

However, there is little (I'd argue none) discounting for this geological difference. When shortages occur the spikes will be sudden and lasting. A well managed position in natural gas with a bullish bias is my current dominant theme. This is no quick money scheme.

In equities I'm holding AAPL, ECA, EMN, GOOG,IIG and NGG. When they turn south I sell calls. Pretty simple. There's no such strategy for futures that I know of. You need to either lighten up or get out. It's a binary situation. I suppose there are some spreads that could soften that position, but in general I find spreads noisy. I'm not managing the risk, I know what the risk is. I'm laying my balls on the chopping block. That's different.

That said, I still have 2.

Dollar's up on Fed optimism. Personal income and spending, weekly jobs and PCE inflation data arrived yesterday: all reinforcing the Fed's decisions to stay on the sideline. More from The Daily Pfennig: "The US savings rate has fallen to a 74 year low. The last time the savings rate was this low, was in 1933 during the Great Depression." All of the long-term conditions for the dollars continued decline remain in place.

My ¥ short is not immediately gratifying. I'm stopping at 121.4. Not an automated stop. Automated stops have been killing me. I'm watching this daily. I need a timer on my stops, which I assume tradestation offers. I just haven't had the time to figure it out.

From FT: "Low interest rates have been a crucial factor in the recent weakness of the Japanese currency, encouraging investors to put on carry trades in which long positions in high-yielding currencies are funded by selling low-yielding currencies such as the yen."

On the continued run on the S&P 500: A trend, once in place, will continue until something stops it. That something must be exogenous. The trend in equities is the healthiest I've seen in years, especially in the absence of any kind of market innovation to justify it run. There are changes in the world economy of course driving this growth: the advent of a consumer class int he BRIC countries (Brazil, Russia, India and China). Everyone's waiting for a pullback, including me. However, a trend will continue until it ends, and if you don't trust that, you're not making money.

Natural gas continues to be my continuing focus. The long-term chart suggests a number of things but I'm focused on the 6 - 8.5 range and building explosion suggested by stochastic. Open wedges are not predictors, rather they need interpretation. Often they fizzle into a trading range. With Russia seeking to create an NG OPEC and the supply issues of the near past (it's hard to ignore that peak at 15) this is as close at it gets to a safe bet in futures (if you're not Jim Rogers).

Bill Gates is pissed at the Apple ads. Funny story.

They ask, "Where has he been?" Africa would be my guess.

I used to detest Bill Gates for his lack of philanthropy. I remember going to the huge Chihuly exhibit at the Seattle Museum of Art. Dale Chihuly is arguably America's greatest living artist. At the show there was a roster of patrons and benefactors. Nearly every Microsoft board member was on the list, with the exception of Gates. Obviously I judged him way to early. Now he's making the multi-billionaire Jobs look like a selfish prick. That said I have no such judgements on Jobs. I'm going to wait and see.

I'm sure this story started when Gates met the PC guy, John Hodgman, backstage at "They Daily Show".

Shorting the ¥ here. I'm joyous about the weakening US$ here and just scanning for short entry points. The ¥ bounced recently but that's following a huge run up that no one convincingly accounted for:



The 50-period EMA is a good entry on this chart as there is a precidence, though it's only one. The trend is down on this chart. The chart is not a strong argument here, and I'm not taking a huge position, nothing like on EURUSD. However, this isn't about nailing it. It's about getting in on the 1st retracement which is one of my favorite habits. Half a mil heading south here. No stop just yet though 120.29 would be my recommendation (if you're looking for one).

I don't set stops these days as I'm finding spikes cutting some of my best moves short. Stops are great, and I don't recommend doing what I'm doing, that is keeping a position without a stop. However, if you're checking your positions daily you really don't need one. I've had far too many /Oh shit!/'s with positions that died early that those that ran the other way.

Summary on Microsoft Vista

Now is the time for the euro to run. Resistance becomes support. You can set your stop loss parameters to 1.2895 like money in the bank. That's the most you can lose. If you can risk 5%, trade as much as you can with a stop at 1.2895. With the € @ 1.2947 there's 52 pips to lose, times 100 = 5200. If you've got $100K in your account you can trade 10 lots or 1,000,000 on the trade. Nice. If you've got more trade more. The numbers go up. This is it!!!

Dollar strength here is surprising. I'm not sure how to account for it, but I'm certain that being long € is not a good way. I The downtrend on the hourly chart looks to be moving off of the 50-period ema. I'll set a short entry somewhere south of 1.2945:

The weak US$ theme isn't as easy to play as it used to be. Is the US$ strong against the € or is the € just weak here? This chart suggests it's the euro that's weak. The ¥ has been getting the most attention here but most of the talk has been against the US$. Looking at €/¥ there's a clear double top. Further, the hourly (always the driver in these near sighted markets) has bounced for a first time off the top of a down channel:

I like silver short here. Echoing gold on reversals silver is losing ground faster. Gold is showing a double-top, which is clearly the reversal de jour, whereas silver is showing a down channel. The hourly charts are benign, which is a problem. I'm taking a small short on silver here.

Copper's got a double bottom, but I missed the entry there.

The most likely misunderstood market is bonds. With unanimous upward revisions on Q1 expectations rates are skyrocketing building in inflation expectations. This course will reverse on clarity. Nailing this reversal is the most promising money maker on my radar.

It's no news that the £ is ripping up the € these days, but the € is still the driver:



I'm long on the € here keeping my ear to the rail. This is a potentially explosive trade.

Gold shot through resistance today. I'll go long on a retracement:



Airlines and telecom are continuing their streak. UAL is at a buyable retracement:



I closed Panera today. So much for buying on fundamentals alone.

Hilton Hotels ( HLT ) went macd green today in a strong continuing uptrend. I'm only entering double green macd positions now, until oil reverses. That's an exemplary chart:



Stochastic is too far out on overbought to take a long position here. Wait for a retracement.


There's a case to go long on the daily and short on the hourly charts US$/¥:



I like the weak US$ play better. I'm taking a small short here.

Gold a short here? Perhaps. I'm not in yet but keeping an eye on the chart.

Long time no post. It's tough. I just don't have the time I'd like to write. However, I'm trading off of a new theme and in case anyone cares I'm posting it here.

Goldilocks economy until oil bottoms. That's it. I'm looking for high return on internal capital companies at value. The retracement of tech on good earnings news is a buying opp.

I still like natural gas. That's a 5-year theme, perhaps more. Commodities will bottom and rally this quarter. I'm playing small bets to keep my ear to the rail.

Open positions: all long:

AAPL
ECA
EMN
GOOG
IIG
PNRA

I'm long on the euro as well.

I've updated my charts: click

New positions: short NZDUSD AND USDCAD. Long puts: OEFUR SPYUY.

I've updated my charts: click

Nice bearish moves on the US$ across the board. Sitting tight here. Buying AAPL and GOOG as well: AAPL on the dip before next week's event and GOOG on 50-week EMA bounce.

AUDUSD riding the 13-day EMA to the letter. Going long here for the US$ slide.

EURUSD closed with a profit. There's really nothing standing in the way of new lows on US$ now. I'l looking for the breakout with only small bets as I wait.

EURUSD short and USDJPY long right now.

MDY short, OIH TI long, SPY short and XBT TC long (ouch).

The US$ is showing remarkable strength in EURUSD. I'm long on the US$ on GBPUSD and USDJPY as well.

From FT:

He said that in an efficient market, such seasonal anomalies should tend to be arbitraged away. “Once an anomaly becomes well known, the speculative market begins to pre-empt it,” said Mr Meggyesi.

Last week’s 1.3 per cent rise in yen/dollar may have been the pre-emption, and Tuesday’s fall a dose of profit-taking.

I've updated my charts: click.

Current themes:

Strong recent earnings
Oil has peaked short term
Continued growth in China
Maturing boomers pushing growth in biotech
Weakening US$

I'm short EURUSD at the end of the day only because it's over-bought on both the hourly and daily. That's a day trade. I expect to return to long-term long on EURUSD at the next reversal.

I like USDCAD short but I missed the entry.

Same with EURAUD with a huge channel.

AUDUSD is riding the 13-day ema.

I'm short SPY, OIH and XLE.

GOLD and Copper are building to pennant breakouts. Should be tradable in a week or so.