MOVING INTO CASH IN THE STOCK MARKET, LONG AUD

The markets to me have finally set the tone. If you look at a chart of the SPY, you will see that the MACD has not made an upward movement in the past few weeks eventhough the price of the stock has continued to rise. That is called negative divergence. The sell-off was accentuated by higher trading volume. If you prefer seeing stock charts that move up, look at the symbol SDS. It is the inverse of the SPY and will rise if the SPY falls. Today it really broke the downtrend line and I suppose it will move sideways for a few days in order to consolidate and move up. Also, just to put the theory out there - are we creating the "head" in a "head and shoulders?"


I have been looking at my currency and if I use the "intermarket analysis" looking at FXA on the stock charts and looking at the AUD/USD pair and the AUD/JPY pair both breaking resistance lines, I would say I am long both. I am already in on the AUD/JPY pair at $101.693 since I have received interest payments and I bought in tonight at $0.8431 on the AUD/USD pair. Also noted in other blogs: The strength in the commodity currencies (AUD, CAD, NZD) is inline with consensus expectations of generally higher inflation across the world which could be positive for commodities.


I also tried this forex system that I will call the DAILY EURO that supposedly has a 70% success rate if applied correctly.

The rules are:

1. EUR/USD pair only

2. Use 0600-0700 Mountain Standard time since I live in this time zone (apply it to your respective time zone)

3. Mark a horizontal line at 0600 opening on 5 minute chart

4. Mark the highest point from 0600-0700 with a horizontal line

5. Mark the lowest point from 0600-0700 with a horizontal line

6. IF:
A. Pair is above opening line more than below, go long when EUR/USD closes ABOVE the resistance".
B. Pair is below opening line more than above, short the pair when is closes BELOW the "support".

7. Set target equal to the high-low pip spread from 0600-0700. i.e. If high was $1.3425 and low was $1.3400, goal is 25 pips.

8. Set stop loss 5 pips above "resistance" or below "support".

Today, the goal was 15 pips due to the range and I was successful. Profit $150.
STATS: W/L = 1/0 (100%))

Click on the chart and look at the explanation.
One thing I noticed while looking at the chart.

1. It did come up to and meet resistance near the 0600-0700 high.

2. The overall trend prior to 0600 was DOWN, so my inclination was for further decline

3. Sell signals popped up before the move down that were consistent with the overall trend and these included a combination of A. A close below the 30 day SMA, B. The MACD cross below the zero line, and C. In a different stochastic indicator, an OVERBOUGHT signal was given. These would have afforded another 5 pips, or $50. Food for thought.

Good luck trading.
JD