Factor Update – October 30, 2016
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CORRECTED Factor Alert — Eurodollar spread, October 27, 2016
This is a corrected Factor Alert regarding the Eurodollar spread strategy. I was not as clear as I needed to be -- the confusion coming from the fact that higher yield rates equal lower Euro prices. It is easy to become confused in the process, especially when dealing with spread differentials.
The trade I am in and recommend is to be long the nearer contract (ED5) and short the deferred contract (ED10). This strategy anticipates that deferred contracts will build in an expectation for larger interest rate hikes in the future than are currently priced into the market. Narrow spreads, as we have now, anticipate only minor Fed rate hiking in the future.
The email below corrects the previous communications. Sorry for the confusion. The charts are more clearly labelled.
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Eurodollars (interest rate) are by at least one magnitude the most liquid futures market in the world. The Eurodollar market was one of my favorite markets to trade prior to the insane QE-infinity of the world's central bankers. It is insane how liquid Euros are -- typical monthly volume will exceeds 40 million contracts. Unlike most futures markets wherein the liquidity resides in the nearest contract, Euro contracts are liquid for several years into the future.
Special Report — The Three Most Important Ways to Track Trading Performance
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Factor Alert, Japanese Yen, October 27, 2016
The focus of this commentary is on Yen futures and spot USD/JPY. Remember, a bearish outlook for Yen futures is equivalent to a bullish outlook for the USD/JPY spot rate.
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Euro Dollar Forex Pair
Euro Dollar Forex Pair
It is time to take another look at the Euro Dollar Forex Pair from the 30,000 foot level. The quarterly graph displays two prominent features. First, the 6½-year descending triangle top completed in Mar 2015 has an unmet target at .8670. Second, the decline in Mar 2015 found strong support at the 45-year trendline.
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Factor Update, October 23, 2016
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Factor Special Update on the Chinese Yuan, October 22, 2016
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Factor Member October Webinar
Peter Brandt - Member Webinar.
Recorded live October 13, 2016
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Factor Alert (Oct 17, 2016) — A case for being a short-term Crude Oil bear
As usual I must emphasize that I deal in possibilities, not probabilities and certainly not certainties. Chart patterns develop and sometimes work out -- more often than not they morph or even completely fail. Nevertheless, chart construction can offer the opportunity for asymmetrical reward to risk trade set ups and that is the most a trader can expect.
A case can be made that the next $5 to $7 move in Crude Oil will be to the downside.
The weekly continuation graph has traced out a near textbook 15-month inverted H&S bottom dating back to Jul 2015. The neckline on this pattern ranges from 51.50 to 52.50 depending upon the roll date used to create the continuation graph (most active, first notice, last trading date). The graph shown below rolls at last trading date. A decisive closing price completion of this H&S pattern would set up targets of 62.58 (May 2015 high) and 76.40 (measured move of H&S).
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Factor Alert (Oct 18, 2016) — Australian Dollar
The Aussie $ seems poised to gain on several other currency units based on the charts.
AUD/CHF -- the weekly chart displays a 22-month symmetrical triangle. A decisive close above the Apr 2016 high will be enough to warrant a long position. I am willing to risk about 60 BPs on the trade. Symmetrical triangles often lack reliability. Also, patterns longer than 12-months are more apt to experience morphing.
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