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Stocks Battered As USD Finds No Strength May 6,2015

Equities Take Beating As Volume Returns

I had a sneaking suspicion that when every body came back from the holidays there might be a hit to stocks. We will have to wait and see if the dip buyers come back in force enough to hold the Dow and S&P from breaking recent lows. If history keeps in tact they will and we should see them at least hold their respective ranges but eventually they will take their ball and go home if they dont think the Fed is going to step in and save the day, or at least make an attempt ignoring how futile all QE programs have been so far. They will have to do something so this front running the Fed trade is not likely to go away any time soon but does have a good chance of being more sparse since the Fed is trying to curb the addiction to QE. Below are a couple comments from people I would consider smarter than me regarding the Fed or central banks in general. Of course I agree they are spot on.

From Stephen Roach

The world economy is in the grips of a dangerous delusion. As the great boom that began in the 1990s gave way to an even greater bust, policymakers resorted to the timeworn tricks of financial engineering in an effort to recapture the magic. In doing so, they turned an unbalanced global economy into the Petri dish of the greatest experiment in the modern history of economic policy. They were convinced that it was a controlled experiment. Nothing could be further from the truth.

And its not like they didnt know. After seeing clear warnings that have been totally ignored I get closer to believing this was planned. Lets all get out the tin foil hats 🙂

In 1873, a financial reporter named Walter Bagehot published a book that shined a huge spotlight on some of this phony prosperity.

Bagehot was Editor-in-Chief of The Economist at the time. He was a brilliant finanical thinker, and the book, Lombard Street: A Description of the Money Market, was his masterpiece.

“[W]e have placed the exclusive custody of our entire banking reserve in the hands of a single board of directors not particularly trained for the duty—who might be called ‘amateurs’. . .”
“But still there is a faith in the Bank, contrary to experience, and despising evidence.”

This is miraculously dim witted. To assume the men behind the curtain are going to get it right, and to willfully ignore the objective evidence which shows:

  • there is an unsustainble amount of debt in the system
  • the banking system is dangerously illiquid and over leveraged
  • banks are still engaged in the same risky behavior, 7 years after a major crisis
  • the central bank has far too much control over the economy
  • yet is run by amateurs
  • and is itself is at risk of failing

Of course, it wasn’t too long after this that Britain was overtaken as the world’s #1 economy, military power, and reserve currency.

So I guess everybody will have to make up their own mind. Was it planned? Or are they just that greedy and stupid? For now Im still sticking with stupidity.

EUR/USD Runs Third Intraday Push and Reversal

The EUR/USD finished the third intraday push and reversed for a full push upward blowing out the ADR by a bit as well so today I will be more bias for the long while still open for the short just in case this is a fake out to clear weak shorts. At this point I think this move has more to do with the IMF retracting its comments on a write down of Greek debt since Im sure the ECB literally had a conniption after seeing the report. I would surely pay to be a fly on the wall for that conversation.

The strongest level for the long today is pretty far away at the daily 1.1120. The 1.1154 is valid but weaker even though its proximity is much better. I will only consider a short from 1.1207 or above with a clear enough set up to change my bias and would prefer to see a stop run to the highs to clear any looming shorts.

EURUSD Finishes Intraday Cycle and Reverses 5-6-2015

GBP/USD Runs Push Up From Lows

The GBP/USD has shone more clear direction with the first push from the lows yesterday so I will be bias for the long here as well. The best level is at 1.5156 but considering its proximity to current price I will be cautious of a possible test lower to 1.5134 at yesterdays breakout. I will still be open for the short but only from a test of the highs and prefer to be long with my stop at break even if its gets there.

GBPUSD First Push Up From Lows 5-6-2015

EUR/JPY Finishes Second Long Term Push

Although the EUR/JPY has ran the second push I will be more cautious about a short today since it has also pulled back the entire second push move. This pair is still following the EU moves and is likely to continue. Therefore the EU push up will be the fake out if it makes the third push. The best short will be from the highs at 134.40 or a possible back side entry after conviction below 133.81. I will only consider a long after conviction above yesterdays highs confirming a failure of the second push.

EURJPY Finishes Second Push 5-6-2015


Forex News Today

News releases start off with Services PMI data from Euro Zone countries. Most are expected flat so any decent surprise could get them moving. Most important will be German and EZ figures but a large miss from Spain or France could get them running as they expect it to affect the Euro Zone data.

The UK also has its Services PMI data so I will be watching for the clear set up an hour or more ahead of the release. With the recent PMI disappointments, probability is skewed for the same here.

The US has ADP Non Farm expected at 200k. As usual with this release the larger the miss the bigger the reaction but it may be somewhat muted on a small miss since there is a Yellen speech later in the day.

Asian session traders have Aussie Employment data to watch tomorrow.

Happy Trading



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