As expected London and New York are both seeking a stronger ¥ this morning. What's interesting here is how much stronger the US$ is moving. There are a lot of gaps here in the chart. There's a lot of opportunity here if you can catch the right direction.

I'm playing the long side of both the US$ and € this morning. That may change by noon. It's really all about that hard ceiling @ $122 and 159 €.

The ¥ is soaring, likely due to the fact that traders are recognizing that in fact the ¥ is a topic of G7 discussion. This hiccup is curious:



I'm reading it as a strong desire to short the €, some trepidation overcome by conviction. Only Japan is open right now. It will be interesting to see what London and New York do with this. Usually they disregard what happened in Tokyo.

The difference a day makes! All the stops are out now for shorts, finally. TTEC and ICE off to a good start both down around 2%. The great thing about shorting is it's good quick money. It takes years for a tree to grow and the ax takes it down in a day. But those profits are short-lived. There's no such thing as a long-term short and the most you can make on a short is 100%, unless you're playing puts or selling calls.

I'm at the Meadowood Resort today. In the lobby they had a copy of FT which I picked up and went straight to the currency page. I couldn't help but think "I read this online almost every day, but here, on paper, the meaning is so different." Content, even valuable content, online has less value for some reason. I obviously want to play the EURJPY, and I know what the dynamics are there. But reading the news with paper in my hands had so much greater an impact.

The number one impression I had was, "This EURJPY trend has a lot more to play out. That trend is going to run." I think you're mind works faster online that it does with eyes on paper. You consider different scenarios. I'm recommitted to that trend. There's only one question? What's the entry? It's a clear as a bell on this chart:



The 50-day! I made it glow a bit to make it look more attractive. Don't you want it? I know you do!

But you have to wait. Like all good things they come to those who wait. When the day comes and the ¥ is only 119.72 € as on this chart you will be thinking differently. You'll think, "Oh I see this! It's the beginning of the downtrend, but it's not. We'll wait and perhaps short a spike.

Good thing I haven't shorted any of my short candidates yet. They're all doing quite well! TTEC is up 23% today. A computer services company. Now may actually be the time to short that one. Here's how my shorts and longs are panning out: click.

Teletech Holdings (NASDAQ: TTEC) beat earnings estimates and raised guidance today. You don't short a stock like that no matter what kind of tear they're on. Nonetheless the market did faulter today, mostly on housing bubble fallout fears. Who will lead the correction? Will there ever be a correction?

The ¥: is has charged up the track from it's low of 120.05 against the US$. I closed out my short there with some dissappointment. From the Daily Pfennig:

While the U.S. snuggles up tight to Japan and pats them on the back telling the world that yen weakness is OK... The European leaders aren't feeling the same love for Japanese yen. If you think the yen is weak VS the dollar, you should be a German manufacturer and see how awfully weak the yen is VS the euro!

So, some rumors were going down, someone's underground, no wait! No Eagles this morning, we only want HAWKS! Anyway, rumors were circulating last week and early this week that the G-7 ministers would include a discussion on the weakness in yen, and add a note in their meeting ending communiqué. This had yen stronger for a couple of days... But with Japanese officials throwing cold water on the rumors... Well... We get yen weakness again.

Of course the conspiracy side of me says that the Japanese officials have been briefed on the G-7 meeting, and took this time to jawbone the yen weaker, know all the while that the communiqué will strengthen yen... Same old Japanese.... Get it weaker now, so that when the communiqué helps strengthen the yen, it will merely offset the weakness, and we end up back in square one! UGH!



I'm obviously playing the G7 meeting on this trade. Perhaps I was a week early. Keeping out of USDJPY for now. The real volatility is in EURJPY. I'm placing a $100K short there to keep my finger on the pulse. Still playing the G7 there's no way the €|¥ combo is off the table.

Did you ever look at a position in your portfolio and say, "What the hell was I thinking!" I'm looking at the strange move on Imergent Inc (AMEX: IIG) this morning and thinking, "blips happen". Then I look into my trading log, (click, to see just what the hell I was thinking and find no mention. I dig into the fundamentals and I see things I like. Okay now understand why I got in here. I expected leap forward from this pullback. Gross margins 75% on a service company. That's good. Trailing 12 months ROE 82%, I like this a lot. PE 5, Price to Sales even better 1.26. So what's with that trading blip on an earnings announcement. Could only be 1 thing, insiders want out. Dump it! Bye-bye.

Short candidates: FXI, PPH, ICE, ACH, TTEC

Why… Corrections are natural. I don't expect this one to go beyond the well-established 50day EMA.

Shorting theme: US-focused companies, little manufacturing or sales overseas

iShares Trust FTSE China (NYSE: FXI): Will be most damaged by the coming G7 meeting. Yuan devaluation will be a top priority on everyone's list.

Pharmacl Holdrs Tr Dep Receipt (NYSE: PPH) : Strong appreciation in the face of the fact that all DC politics have turned against them, no currency exposure to save them.

IntercontinentalExchange ( ICE ): Bubble-like runup. Overbought on every measure.

Aluminum China ( ACH ): Double-top, Overbought, will suffer from trade talks. You'd be lucky to get any shares on this one though.

Teletech Holdings (NASDAQ: TTEC): Sitting on a spike. Just announced.

Zero Ink Printing: http://www.zink.com/

I don't see any clear way to invest in this yet, but should have a negative impact on HP.

I recall back in 1998, when consumer color printing was taking off, a VC telling me the guy who invents a magenta that doesn't fade will be a billionaire. I suppose archive inks came soon after that but I don't recall any names associated with that invention. Kodak? This technology looks promising but I do wonder about quality. I like that their strategy is to build right into phones.



Speaking of obsolete technology I just ordered a Lenovo x60 so I can work on the beach. The docking station they make for this thing is an absolute joke. They have no DVI port but include a parallel port! Is that insane or what? When did they stop making parallel port devices? When they started making archival ink?

There's a strange similarity in the opposing pairs eurusd / usdjpy right now. This is hardly news as the general disparity between the ¥, € and US$ are the main topic of the G7 meeting. There's a potential turning point here that I've noticed on the on the charts which, if it holds, will make a tough spot for the € even harder.



¥ 120 and 1.29 € are clearly tipping points. Right now I'm long eurusd, and short usdjpy. Oddly enough it's the ¥ short that's making the money. If I spot a reversal at ¥ 120 it would suggest a new strong leg for the ¥'s downtrend. Buy any stochastic oversold in EURJPY. Oh my fucking God look at this chart:



I'm looking to short the equity market right now. The question of course is who's the best short? I wouldn't look to short any multinational that can exploit these currency and labor pricing discrepancies.

My bet is that the big loser of the G7 meeting will be the Yuan. According to the "Big Mac" index it remains the world's most undervalued currency. More importantly it remains the easiest kitten to kick in the room. I've often argued that the only bubble in the goldilocks economy is the China bubble. There's growth there for certain, but everyone seems to forget these guys are a bunch of commies. It's like expecting miracles out of the folks at the DMV just because they're underpaid.

There are real arbitrage opportunities in all the BRIC countries, but the Yuan is the only currency in that mix that doesn't float. Do we really want the Yuan to float? If we did wouldn't that be the single largest threat to the US$'s preeminence? Okay, no wonder we're not aggressively pursuing that one.

The China ETF FXI is in the last moments of a closing pennant. Look at the percentage change on that chart. If it falls south of 102 short that bad boy and really impress your friends. "Hey! I'm shorting China!" Yeah, that would turn a few heads.

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