"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Monday, September 29, 2014

Emerging Market Currencies Under Pressure

If one just looks at the Major Currency pairs and sees the Dollar a bit weaker this morning, it is very easy to overlook at what has been happening in some of the Emerging Market currencies. It goes back to that same interest rate differential and the fact that there is concern about slowing global growth, especially in some of these emerging markets. I should also note that there has been a large carry trade involved here as well.

I want to post a chart of the Brazilian Real for the benefit of grain traders and hog traders.

Please note that the currency just made a 6 year low against the US Dollar. Brazilian grain and Brazilian pork are dirt cheap on the global markets compared to US grains and US pork. Most US based grain traders have been in the past, and remain oblivious to such things.

Also, while not an emerging market, the Australian Dollar just matched its yearly low against the greenback. If it moves lower from here, we are talking about 4 year lows. Aussie beef is getting cheaper! It is only a matter of time before high-priced US Beef is going to price itself out of export demand.


  1. Hello,

    I might be into a monologue once more, but just to complete the chart and my last post from the previous line about Fibonacci and EUR USD.

    I'm zooming on the previous chart, weekly time scale.
    This time, I circled in purple the number of fake continuations, i.e a close past the fibonacci level which led to an infirmation and strong reversal the next candle.
    I count 4, which is a lot.
    So on a weekly time scale, fibonacci retracement levels, though showing their accuracy globally, was still dangerous to follow on the weekly time unit.


    But what about the 2week time unit? (and that's why I somehow like and follow those "exotic" time units as well (2 months / 2 weeks / 2 day).
    Here is the chart once more, but this time, for a trader who would wait for a confirmation on the 2 week time scale to make a decision.


    Doesn't it get incredibly better?
    Yes it does, sir.

    What does history tell me about the time unit I should be watching right now?
    It tells me that I should monitor the 1.2730 area for EUR USD until the 2 week candle closes, not the weekly candle. And this 2 week candle indeed will close next week.

    Conclusion : if EUR USD closes above 1.2730 by the end of this week, the breakthrough 1.2730 will be invalidated, and I would expect more a bounce towards the previous (but totally useless, lol) fibonacci level at 1.3150.

    Let's see together how it develops.

    Anyway :
    1) a trader doesn't make a decision based on a single criteria, be it or not fibonacci levels. It's multiple indicators and criteria which confirm what to.
    2) choosing the right time unit is critical if you want to improve your analysis.
    3) the two first points, and especially the second one, are practically never discussed in any so called "T.A based" BS gold bugs blogs I've been following throughout the years.
    4) If you can't find the fish at the poker table, you probably are the one. Maybe this is something true also in the univese of trading.

  2. El Erian...

    Falling Out Of Love With Gold


    We're one rumor or ECB announcement away from a quick spike past 86/USD and sub 125/EUR.
    I think it possible something noteworthy comes out of the EU within the next 2 weeks that further weakens the euro.
    The rebalancing of positions and the pivot around Sept. ending and Oct. about to begin could get interesting.

    1. I just came across this and it somewhat dovetails into what I was saying up above regarding the liklihood that some larger ECB "operation" will need to happen and sooner then later....and way more than 200 bln euro.
      "ECB will buy 200 billion euros of ABS and covered bonds in a year: Reuters poll"

      BANGALORE | Mon Sep 29, 2014 10:35am EDT

      BANGALORE (Reuters) - The European Central Bank will buy a total of 200 billion euros of asset-backed securities (ABS) and covered bonds in the span of a year, a Reuters poll of euro money market traders found on Monday.

      That is a sharp fall from the 300 billion euros expected in a similar poll on September 8 and a Reuters survey of economists last week. [ECB/REFI][ECB/INT]

      After surprising markets with interest rate cuts last month and offering banks more cheap loans to boost lending, the ECB is due to give more details of its plan to buy repackaged loans following its monthly policy meeting on Thursday.

      Traders said lackluster demand from banks earlier this month for the ECB's low-interest long-term loans, known as TLTROs, and the risks of deflation and weak economic growth across the region, will push the central bank to buy government bonds.

      "ABS purchases (are) unlikely to be too big or for too long," said a trader at a large dealer. "The ECB needs to buy sovereigns at some point and we think that will be sooner than later, especially after the abysmal take up at the first TLTRO."

      Banks have stepped up the pace at which they are... (cont.)


  3. If u want to bash Fibo I recommend you to read Larry Williams' book, he done statistically and found Fibo no value at all. However, after reading Tom Demark's I believe in using Fibo for advanced traders only. Definitely not recommended for beginner traders

  4. Sp so volatile. It can be up then down crazily. No Fibo can save you in this environment. However Fibo worked with weakly or monthly charts. For the daily, it totally a joke

    1. Truth is not in books but in real personal experiment.
      You must find the trading system that will be convenient for you.
      I'm happy with fibo retracements. Some others won't.
      What fits some personality will not fit some other.
      There is no absolute truth and a single way of trading, with a single trading system.
      It also depends on who is trading.
      You must find your own way, and the only way is to practice.

  5. Most debt is still issued in US$. A rising US$ well automatically add to debt costs of issuing foreign countries. It is going to get ugly as money keeps pouring into the US markets.

    As far as fibs go, if the markets always went down or always went up, you wouldn't need fibs but with crowd mentality fibs gives a hint of what is going on or what to expect. Fibs are also fractal as they repeat on lower and higher scales.

  6. Dan, please explain why KWN continues with this ludicrous writing style, with the same articles churned out again and again, the words being just slightly rearranged. I should think it takes about 10 minutes to write one of these masterpieces - with silver surfer, asteroid crashing to earth, or Marilyn Monroe blowing bubbles added in. What type of person is this banality being aimed at, and how can they imagine this in any way enhances the credibility if KWN? Do people, even relatively simple people, continue to fall for this, or is their website shrinking to a frazzle? The other aspect I don't understand is the point of it all. Luring in moms and pops, or naive investors, can't be the most attractive of financial propositions. The big money lies elsewhere. Clearly, the website is set up to promote the interests of those writing the articles, but I don't see how it works at all. Rather, I would have thought it had the reverse effect, as indicated by the comments on your own website.

    As you seem to strongly object to what you consider to be excessive bullishness about gold when the trends are otherwise, you can be thankful that KWN and others are doing such a good job in shooting themselves in the foot.

    1. On KWN, I was one of those "suckered" in (back when Dan was still doing his interviews). If you are new to the scene, I can see how it is very easy to get caught up, especially if you've come to it by way of "government bad, everything is manipulated" aspect.

      There is usually only one small ad, for Sprott, in line with most articles. Must just be some back room deals, where KWN gives certain people/companies voices in exchange for operational money.

      Hey, I still think gold is good for diversification, and if you are just coming into it, $1220 is a lot more reasonable price that $1900 for some security.

      So while the bias is decidedly negative with most all out there currently, isn't that the time to buy, when it is bleak?

      I didn't buy the stock market back in Mar 2009, because it was going to go lower, right? Poor decision!

    2. What's the hurry to buy PM in a bear market?

      Maybe buy US$ and soak up some yield and currency effect while waiting for PM to bottom.

    3. We don't have any confirmation of a bottom yet.
      Why buy right now if gold is at risk of losing aonther 300 $?
      Why not wait for a confirmation of a bottom, even if it means buying 50 $ higher than now, but with a much better technical environment? Markets answer to technical charts.
      Why did I short gold at 1314?
      Go find my post and my chart at that time, because it was not that long ago.
      Main reason is we were hitting the red resistance of the downwards channel, weekly time scale.
      So why do you insist so much on buying gold right now, instead of at least waiting for gold to show it can free itself from this strong bearish downtrend?? Are you a masochist?
      Or is the idea to buy gold 50 $ higher than now is much more unbearable to you than the idea of buying now and losing another 300 $ in a few months?

    4. "$1220 is a lot more reasonable price that $1900 for some security."
      And $ 1000 $ is a lot more reasonable price than $1220.
      What's your hurry?
      Do you think you'll wake up tomorrow and see gold trading at 5000 $?

    5. Hubert, as Peter says very well below, TA is certainly useful, if only for the fact that so many use it.

      But if anything, gold is very much event driven, which TA cannot ever predict. This Friday will be payroll #s, and I guarantee it is a coin flip to predict what will happen to gold on Friday morning.

      Fed could raise rates soon (or not). Another war can start (or not). Etc, etc.

      All I am stating is the fact that gold is more affordable at $1220 than it is at $1900, and certainly it can still go to $1000 or lower.

      I am not in a hurry -- I am holding long term for myself and my kids and their kids. When the price goes below my overall average cost, I am a buyer, at least occasionally.


  7. Saying that Markets answer to technical charts is like saying that markets are predestined. Do you believe that? Markets answer to the expectations of people, and these are unpredictable, being influenced by a variety of factors, such as EVENTS. Can t/a predict events?

    Other factors influence markets such as human psychology: human conditioning via the media, human emotions of fear and greed, and the human tendency towards optimism as a necessary aspect of human survival. Can we measure these?

    Many maintain that there are cycles in economics and human behavior, and that these can be measured using mathematical concepts. Previously this was done by astrologers, and not so long ago - Hitler, Mussolini, and even Reagan had their astrologers - and they were supposed to be able to predict the outcome of events by calculating planetary and star alignments. Do you believe that?

    Now there is t/a in investment analysis. What are the exact criteria that would make this work, and how can we prove it except by pointing to our own experience and saying that it worked for me?The truth is that we cannot prove it, can we?

    Nevertheless, I do not wish to be arrogant here, and also must say I can prove nothing against it. Like Socrates I must say when I am asked if it works, that I know nothing, because actually in the philosophical sense nothing is knowable. Maybe the wise man must be eternally skeptical.

    But I am inclined to think (inclined is as far as I can go on anything) that t/a is valid BECAUSE so many people believe in it. It is therefore a criterion in investment, and needs to be studied, since it influences human behavior. If this is so it can help us anticipate outcomes. However, it needs to be combined with an appreciation of fundamentals, an instinct for markets acquired over many years, deep insight into human behavior, and a dollop of luck, which makes investing and trading a very tricky business.

    Life is full of paradoxes, and we find one here, as something that is not a science becomes a science simply because so many believe in it, and it can be used to measure the likelihood of an outcome. T/a is completely different from astrology because humans cannot change the movements of the stars no matter how hard they try, and to say that they influence human behavior is probably absurd. Whereas, humans can change the movements of markets by their beliefs and actions, and so the measurement of this may well be possible.

    1. I think the author of this blog not only use pure TA. He used COT report , that is FA. He used TIPS SPREADS , that is FA. Then he used Fibo for Monthly Chart of Gold. I think it is very excellent and balanced. If using COT only , u dead. TIPS ony u dead meat. Fibo only your account blown off.

    2. "Saying that Markets answer to technical charts is like saying that markets are predestined. Do you believe that?"

      Because nowadays, more than 80% of the orders in the market are made by robots, not humans.
      Most of the money traded in the market nowadays is the money managed by giant hedge funds, led by algos and robots, not humans.
      You, I, individuals, weigh nothing.
      Those bots use T.A in their trading decisions.
      That's why so many charts are so "pure" in terms of channels, extensions, etc...

    3. That means you believe in predestination. However, does it occur to you that robots and humans are programmed by humans.

    4. The odd thing is that if one does believe in predestination there is nothing you can do about it anyways, so what's the point of bothering with the markets? Even odder is the fact that you if you do bother with the markets it is because you were predestined to
      bother in the markets and have no choice in the matter; just the same as my being predestined to write these comments.

    5. Market not predestinated. TA not based on predestination. It believed in patterns of emotion and psychology. There are some patterns out there. Why crude oil usually up on Tuesday (this week not counted). Why gold often up on Monday and Thursday ? Why long SP 500 1-2 week before the triple expiration is profitable ? Why each 3 month and half gold makes new low or new high ? TA believes that markets will repeated itself if conditions are met. When Commercial net long, it is not an entry but just a condition. When sentiment is bullish, it is a condition. Feb is bullish month for crude. It is a condition.THEN If want to make an entry for long or short you need trend line, DNC, %R, Demark sequencing, Welles Wilder Volatity System, volatility breakout system....Unfortunately this is a free blog not a 1000$ monthly investment letter so the author can not share with you his whole analysis. But his stuff here still valuable to the readers


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