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Santa Has Arrived, Equities Have Best Day In Years Dec. 19, 2014

Can Santa Bring New Highs In US Equities?

In todays markets anything could happen so I would have to say yes, Santa Yellen and her buddies at the Fed could easily push stocks to new highs. I have to say my thoughts are rather close to this article I read this morning and remember mentioning several times in this commentary. People need to wake up or more so pull their head out. No I did not write it even though members who have been around awhile know I sure could have 🙂 In short this is what every one in the US should be thinking. Enjoy.

I used to get a kick out of the cute little children waiting for the Fed Chair to come and deliver presents or coal.  So giddy and excited from the anticipation of not knowing who Janet thinks were good boys and girls.  Who’s going to be rewarded and who disappointed?  And I don’t know how many people asked me today what the Fed will do.  My answer was “The same thing they always do, nothing.  So stop asking”.

You see if you read some of Stanley Fischer’s early work on the rational expectation model you find that the key to fixing the lack of long term effectiveness to monetary policy is by confusing the working man. The idea being, people will act rationally with the information they are provided and so what typically happens is that people change their behavior which counters the impact of the policy being implemented.  The solution is to keep us guessing.  And so what they have done for essentially every meeting is nothing.

However, they use the media to talk about all the things they just might do. 

At this point, I just get annoyed with the ridiculous foolishness of people.  We’ve got to start using our own brains.  The Fed stopped using any benchmarks because while the benchmarks were improving, the economy wasn’t and isn’t.  

Does anyone really not get it??  I mean I was under the impression that the pundits on television were just acting for the sake of good drama.  Is that not the case?  Are people really still confused by what’s happening in the market and broader economy?  It’s been 6 years of the absolute same bullshit.  How could anyone not clearly understand exactly what is behind the action or non action of the Fed???  Come on people wake up.  

The economy is a wreck.  Debt to GDP is at even higher all time record highs than the stock market.  Demand is absolutely dead except for the flooding of debt that continues to bury the average consumer.  None of that equates to economic growth.  It’s just cash flowing today rather than tomorrow.  And so there can be no rate hike.  Not for, well ever.  Perhaps in 2 years we see a token quarter point to make it seem like we’re not completely dead but we are.  Our economy is dead.  You take away the increases to household debt and you have negative GDP.  If you want to keep it in the calculation well then you have to take it out of your forecasts because you can’t count those purchases twice.  And what you buy today with money you don’t have means money you do have in the future will not be available to buy anything.  Is that clear to all?

I might sound a bit frustrated but I am frustrated.  It’s one thing to throw your hands up and say I get the system is a complete sham but I just don’t have a solution.  But please do not sit there and pretend that there are any market forces behind the financial markets other than the Fed.  And please do not pretend that the current policies are expected to generate economic growth.  But please do acknowledge that you understand what is happening here.  If you don’t, well then take a giant step back and have a good look around.   For what is happening is the grandest con job in the history of the world, bigger than the Trojan Horse by at least a few hands.  There is no coming economic growth.  That jump in GDP that they’ve been promising each quarter for 20 quarters now is not coming.  In fact, it only gets worse from here.

And those all time highs in the stock market, well until you cash out, those remain unrealized and I would suggest cashing out.  The reality is the powers that be are out of the market and preparing for a big sweeping transfer of wealth from all those little retirees and soon to be retirees out there that believe the market is no longer a risky asset. Their assets will be picked up for pennies on the dollar.  The point is folks play along for the entertainment of it.  Play along because it’s tradition.  But don’t play along because you think the market is still some random response to fundamental supply and demand relationship. 

The market has not been a function of fundamentals for some time now and is not reacting to them in any way, shape or form.

EUR/USD Pushes To Test Daily level

The EUR/USD did make the push down to test the 1.2268 level yesterday but if they are going to keep pushing it down they will need to break the monthly low at 1.2245. There will also need to be new highs in the USDX as well which I sort of doubt they will do before the end of the year. Now that I said that they will prove me wrong but the probability is low. The best levels to trade are 1.2320 for the short but if they do intend a break down then will likely hold the psych 1.2300 level. Otherwise the long is valid from yesterdays lows since direction isn’t clear with they way they made these pushes.

EUR/USD Hourly chart 12-19-2014

GBP/USD Rises on GBP Strength

They didnt seem to want to push the USDX to new highs yesterday so the GBP/USD made the first push up while the EUR/GBP dropped . Normally I would be bias for the long here but cautious that its not really USD weakness driving it. The best level for the long is down at 1.5608 while I would only be open for the short at yesterdays highs where it has the hourly 200 as confluence.

GBP/USD Hourly chart 12-19-2014

EUR/JPY Holds Range, No desire to Push Yen Weaker

Its always strange when equities dont push the EUR/JPY with it signaling that the risk on trade is weak as well. This is most likely due to the BOJ press conference today so we probably wont see any movement until Kuroda speaks. If history is any guide he will weaken the Yen but that’s not a guarantee by any means. The levels haven’t changed but as they work into this triangle the risk goes up until we see some conviction out of it. At this point much too risky to enter before the speech.

EUR/JPY Hourly chart 12-19-2014

Forex News Today

News events are quiet today with only German PPI and GFK Consumer Climate. With these released early in the day they could cause a spike on a big miss but I have my doubts on any sustained move. Otherwise there isnt any other significant data to get them pushing.

Have a great weekend




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