Market commentary by Lane Clark, Beta 2 Ltd, Wednesday March 9 2011

Gold tracked oil lower and was under pressure from firmer equities, however, bargain hunters from jewellers as well as worries that violence in Libya and the Middle East and the possibility of military intervention could offer support for the metal. Gold has dropped to $1430 from a nominal record high with Silver steady below a 31 year high.

Gains in the ETF holdings indicated a growing interest in the metal with the Gold/Silver ratio hovering below 40:1, the lowest since Feb 1998. Holdings in iShares Silver trust rose to 10,913.32 tonnes by March 8m the strongest since early January.

The Swiss franc lost ground on Tuesday after haven demand for the currency was dented as oil prices fell back from the highs.

Reports that Kuwait was in talks with other Opec members to increase production and on speculation that Gaddafi was in talks to leave the country saw crude prices recede.

The Swiss franc fell 1% vs. the dollar in late trade amid talks of persistent selling from Middle East investors.

The euro fell for the 3rd straight session vs. the dollar with further pressure likely as investors remained unconvinced that Friday’s European summit would quell concerns about the regions fiscal problems.

Euro zone sovereign debt concerns intensified in the aftermath of a Moody’s downgrade to Greece’s credit rating. Greek default swap spreads rose 8 basis points to 1030, off an earlier high.

Yields on Greek 10 years jumped as much as 48bp to 12.82%, what is critical to note here is that each time we reached precisely these current levels of stress in the CDS and euro zone fixed income markets over the course of the past year, the euro has typically come under substantial pressure.

The dollar also rose against the yen, gaining 0.2 percent to 82.80 yen helped by a generally rising trend in US Treasury yields. On Wednesday, yields backed off a bit, with two-year Treasuries at 0.726 per cent versus 0.729 on Tuesday, while 10-year yields slipped to 3.546 per cent from 3.555 the previous session.

Dollar/yen is the currency pair most sensitive to movements in bond yields because both low-yielding units compete as the market’s favoured funding currencies for the purchase of risky assets. Any shift in the yield curve or rate expectations typically impacts both currencies.

Sterling fell against a rebounding US dollar on Tuesday as investors unwound long positions, although it edged up against the euro as sovereign debt worries put the single currency under pressure.

Expectations that the European Central Bank will raise interest rates ahead of the Bank of England are likely to offer the euro support against the pound, however, with some expecting the pair to hold above 85.72 pence, the low struck on Monday.

In February, three members voted to raise rates, pointing to inflation in Britain that remains well above the BoE’s target of 2 percent. Governor Mervyn King maintains inflationary pressures are temporary and tighter rates could choke off a recovery.

That is in sharp contrast to the anti-inflation rhetoric of European Central Bank President Jean-Claude Trichet, who shocked the market last week by saying the ECB may move next month.

While most investors are pricing in a BoE rate move in June or July, there is increased speculation the ECB could make good on Trichet’s threat in April as well as the risk that the BoE will delay due to risks to Britain’s economic growth.

US crude dropped for a second day, dipping below $105 on Wednesday, after reassurances from Opec members of ample spare capacity eased anxiety about export losses from Libya, Africa’s third-largest oil producer.

The Organization of the Petroleum Exporting Countries is in talks about boosting oil supplies, Kuwait’s oil minister said on Tuesday, but some in the group were reluctant to open the taps, saying world supply is comfortable despite the loss of around one million barrels of Libyan crude per day.

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD. Monday February 21 2011

The noticeable trend last week came from the bullish euro which was further boosted on speculation that the ECB will hike interest rates. Will the Euro continue with its bullish theme this week?

Last week the U.S.D fell against most of its major currency counterparts. It fell 300 pips against the euro and 250 pips vs. the pound. This was due to the disappointing economic releases from the U.S, such as the Long Term Purchases report which showed that global demand for U.S stocks, bonds and other financial assets fell in December.

Retail sales in the U.S had increased less than projected in January with purchases increasing by 0.3%, the smallest gain since a drop in June. Sales of retails were depressed by a drop in demand at building material stores and restaurants in the U.S.

This week, we have the consumer confidence, existing home sales and the preliminary GDP which will provide volatility for the USD. Today, U.S banks are closed in observance of Presidents Day.

The euro strengthened vs. it rivals on the back of an increase in risk appetite following a U.S stock market rally. This rally has boosted risk appetite in the market, and as result, increased demand for higher yielding assets such as the euro and the British pound.

The gain in the euro was also affected by a bearish dollar due to several economic reports showing that the U.S economy is recovering at a slower pace than estimated.

Lastly, the euro strength continued after ECB board member, Lorenzo Smaghi, hinted that an interest rate hike may take place soon in order to fight the rising inflation.

The Japanese Yen fell against most of its currency rivals during last week’s session, dropping about 180 pips vs. the euro and 240 pips against the GBP.

This fall was due to last weeks reduced risk aversion caused by a rally of U.S stocks boosting demand for higher yielding assets and weakened demand for safe haven currencies such as the yen.

Additionally, last week showed that Japan’s economy contracted for the first time in five quarters. GDP shrank an annualised 1.1% in the 3 months ended in Dec 31^st. As a result, China’s economy overtook Japan’s as the worlds second largest for 2010.

Crude oil was back above $90 a barrel on Mid-East unrest arresting a decline which began last week reaching a low of $83.85. The trend reversed and crude gained to 90.95 by Friday with the rally expected to continue as the violence in Libya escalates.

NEAR TERM RATE OUTLOOK FOR THE UK BY LANE CLARK, BETA 2 LTD, Friday February 18 2011

As I stated previously, BoE Governor King suggested that the inflation report committee does not have a pre-conceived idea of where rates are heading in the near term.

I am not convinced that that any rate rise will mark the start of a normal tightening cycle, however, the minutes of the MPC will provide indicators of just how likely a near term rate hike now is. If anyone joined Andrew Sentence and Martin Weale in voting for a hike, a near term rate rise will obviously look more likely.

During King’s report, his overall tone remained pretty dovish and he went to great lengths to stress the temporary nature of the factors pushing up inflation and highlighting how a single rate rise to try and pull inflation down more rapidly would be futile.

It is clear the King is at one end of the spectrum so his comments may not necessarily represent those of the committee as a whole.

Like many of my peers, I am not convinced that the inflation report should not be interpreted too literally, especially not when so much uncertainty about the outlook for inflation and growth remains. I am of the opinion that a small rise in rates would do little to boost the MPC’s credibility, but could damage the recovery.

Next weeks minutes of the recent MPC meeting will be particularly important, if it turns out the hawkish camp gathered more support in February, it may be obvious that a rate rise is on the way.

I will wait and see, though other members of my team think it is not entirely implausible that the Q4 drop in GDP may have prompted Weale to retract his call for a rate hike.

The MPC Minutes will show just how likely a near term hike is and give an accurate reading of the feelings of the committee as a whole.

If others have indeed joined the camp of Sentence and Weale, the next month could start to look pretty likely. I am expecting a vote of 3 to increase, 5 no change and Posen voting for more QE. My Director of trading, Jovi Overo, sees it as 1-7-1.

Game on.

 

market Commentary by Jovi Overo, Friday February 18 2011

The combination of Mid-East tensions, euro zone debt concerns and a poor U.S Unemployment claims led to huge gains for the Swiss franc. The Swissie held near two week highs as U.S yields dipped from their peaks hit earlier in the month. As long as these three factors remain then the Swiss franc should continue to remain bullish.

Gold demand climbed by 11% in the 4^th quarter helping push annual demand to a 10 year high as jewellery purchases in India and China rose and investment increased, the World Gold Council said.

Global demand gained to 9555.5 metric tonnes in the quarter, compared to 858 tonnes a year earlier.

Gold prices jumped 30% last year after governments spent trillions of dollars and kept interest rates low to boost economies. Concerns over rising inflation eroding currency values pushed prices and holdings in exchange traded products.

Continued uncertainty in the global economic recovery and currency tensions are the reason why Beta 2 project higher gold prices in the long term.

Gold has continued to trade near its strongest level in five weeks, heading for its best weekly gain since early January, due to inflation fears sparked by rising oil and food prices as well as the tensions in Middle East.

Jewellers seem to have left the physical sector, but the slack is being picked up by safe haven buying.

Gold climbed to a record of $1431.25 an ounce on December 7^th and is currently at $1386. The average in the 4^th quarter was £1370, up 24% from a year earlier and 12% more than the 3^rd quarter.

The U.S.D dropped against all its major counterparts after the release of a disappointing unemployment claims figure, signalling wages were unlikely to pick up anytime soon, although the latest reading on the CPI and business activity in the U.S Mid Atlantic region came in stronger than expected.

The dollar index dipped to a one week low of 77.96 before edging back up to 78. Against the CHF it was down over 100 pips in the last 24 hours and against the euro it lost 70 pips before regain some its losses.

UK retail sales bounced back in January’s official UK retail sales figures show that high street spending, like the rest of the economy, bounced back at the start of the year. Indeed, the 1.9% monthly rise easily beat the consensus forecast of a 0.5% increase. However, December’s fall was revised from 0.8% to a bigger 1.4%. Accordingly, the picture over the two months as a whole – i.e. a 0.5% increase in sales between November and January – is one of positive, but unspectacular, underlying growth. What’s more, other evidence (e.g. John Lewis weekly sales figures, the BRC survey) suggests that after a strong start to January, spending growth has slowed to pretty sluggish rates and has yet to recover. Accordingly, we wouldn’t take January’s rise in sales as evidence that the consumer recovery is firmly back on track. Indeed, with real household incomes set to fall significantly this year, we find it hard to see consumer spending doing at all well. What’s more, note that this morning’s Lending Panel figures from the Bank of England show that mortgage approvals failed to recover in January, remaining at just 41,000. 

The Euro made moderate gains vs. the U.S.D and was flat vs. the Yen and British Pound but showed a steep decline vs. the Swissie.

The Euro’s sluggish behaviour due to a combination of global events that are keeping investors away from riskier assets, chief among them is the prolonged doubt that the euro zone will be able to effectively tackle its sovereign woes.

The Aussie dollar has recent data that showed long AUD positions jumped to its highest level since April 2010, back then it traded sideways for much of the month but then fell 12% and touched its lowest level of the year in May. Some market players think that a lot of good news is baked into the currency exchange rate and the weight of positions may start to impact the currency.

Crude futures edged up in early Asian trade on Friday as concerns grew those escalating citizen protests in oil-producing regions could cause supply disruptions, while narrowing a record deficit to Brent crude.  Unrest spread across the Middle East and North Africa as Bahrain’s military cracked down on anti-government protesters and clashes were reported in Libya and Yemen. US consumer prices and unemployment benefits rose, but factory activity in the mid-Atlantic region jumped. Combined with recent indicators, the latest reports signalled the economy was struggling to speed up recovery.

The yen saw moderate gains against the greenback yesterday following a disappointing US Unemployment Claims figure. The USD/JPY dropped over 50 pips following the release of the figure, reaching as low as 83.15. The pair was able to stage a slight upward correction during the Asian session, and is currently trading just above the 83.30 level.

Against the Swiss franc, the yen remains decidedly bearish. Investors have been turning to the franc as a safe haven due to a number of global events. In the last 24-hours, the CHF/JPY has shot up close to 70 pips, and is currently trading right around the 87.70 level.

Today, investors will want to pay attention to a speech from the US Fed Chairman. While it is not known exactly what he will say, any mention of the poor state of the employment sector in the US will likely lead to further downward movement for the USD/JPY pair.

Market Commentary by Jovi Overo, Monday February 14 2011

Investors moving assets to safer, lower yielding currencies appear to be playing a factor in the correction of major currencies. The USD and the JPY, which are seen as a safer bet than other currencies in terms of market stress, will likely keep drawing demands as investors stay away from riskier assets this week.

Gold continued to hold steady with prices hovering below $1,360 an ounce as the resignation of the Egyptian President took some heat out of risk aversion.

The Egyptian Army have started asserting their command over the country and have suspended the constitution and dissolved Parliament on Sunday.

The Gold physical market activity remains subdued as Chinese buyers are yet to jump in. We still remain positive on the long term outlook for gold and target a price range of $1450 to $1500 dollars an ounce by year end.

The Euro teeters on a key technical level against the dollar and a break of that support is likely to deepen it’s decline as the markets turns cautious ahead of a host of events this week.

Among them, fund raising by Italy and Spain in the bond market will be closely watched especially after Portuguese government bond yields recently jumped to Euro era high renewed concerns about the funding costs of highly indebted euro zone countries.

The U.S. Dollar index stood at 78.347, compared with the high of 78.69 that it hit on Friday. Vs. the yen the dollar slipped 0.3% to 83.16 as Japanese exporters took advantage of its rise last week to a 3 week high of 83.68 yen.

Data from the CFTC showed speculators raised bets against the dollar to the highest level since October for the week to February 8th meaning there could be scope for further dollar gains if the markets cut short positions.

The Japanese yen finished last week’s trading session with mixed results vs. the major currencies and extended gains vs. the Euro on Friday to trade around 112.60 amid a broad based sell off in the euro.

Further strength could be seen in the yen if other nations begin to raise interest rates in order to ward of inflation. While many emerging nations have declared war on rising interest rates, timid growth has prevented the central banks of the US, UK and the euro zone from embarking on the path of normalising rates. This could potentially wreck havoc in the Japanese economy by making price exports more expensive when compared to their foreign exports.

MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD. 18/11/2010

US dollar
The US dollar’s rally to seven-week highs stalled after subdued US inflation data reinforced the Federal Reserve’s case for easing, making dollar short-covering pause. Uncertainty about Ireland’s debt crisis, which also helped support the dollar recently, looked to be loosening its grip on markets after Dublin agreed to work with a European Union-IMF mission on urgent steps to shore up its shattered banking sector. Currencies are see-sawing as year-end book-closing has prompted a lot of short-dollar positions built up over the past couple of months to unwind and as Europe’s debt problems have returned to the fore, exacerbating losses in the euro.

The dollar weakened to $1.3529 at the end of trading in New York, from $1.3489 Tuesday, when it touched $1.3448, the strongest level since Sept. 28. It is currently trading around $1.3643. The dollar stayed relatively unchanged versus the yen and is currently trading around 83.14.

The dollar negative trend may continue today as well as the Unemployment Claims report expected today at 13:30 GMT will likely show the number of Americans filing initial jobless claims increased by 7,000 last week. Along with the unemployment data traders are advised to follow the release of the Philly Fed Manufacturing Index at 15:00 GMT.

Euro
The euro recovered from a 7-week low versus the greenback after surprisingly weak U.S. economic data defended the Fed’s recent decision to embark on further stimulus efforts. The euro also benefited as talks of European support for debt-laden Ireland calmed the markets and reduced demand for the safe heaven dollar.

Despite the modest rise, the common currency continues to trade near a 7-week low versus the USD as investors are eagerly awaiting the resolution of the euro-zone’s recent debt crisis.

The Irish debt crisis is likely to set the direction for the EUR for the rest of the week and investors are advised to follow any developments that arise from this region.

Sterling
Sterling inched up on Wednesday, bolstered by an unexpected fall in UK jobless benefit claims and Bank of England minutes which suggested the central bank remains some way from implementing more quantitative easing. Data showed the number of Britons claiming unemployment benefit fell by 3,700 in October, the first fall since July and confounding expectations of a rise of 5,000. Separately, minutes from the Nov. 3-4 BoE Monetary Policy Committee meeting showed one member wanting more stimulus, another voting for a rate hike and the remaining seven keeping policy on hold and ready to act in either direction. The minutes reflected an improvement in UK fundamentals from the last meeting as well as stubborn inflation risks, and reinforced expectations policy would remain on hold until the outlook for the economy became clearer.

JPY
The yen is mainly unchanged versus the dollar and is currently range trading between 83.00 and 83.50. With the uncertainty over the euro-zone debt crisis on the one hand and the Federal Reserve’s asset buying program on the other the yen remains as a reliable safe haven currency.

The New Zealand and Australian dollars held yesterday’s gains on speculation Ireland will accept aid restoring demand for higher-yielding assets.

New Zealand’s dollar is currently trading at 77.41 U.S. cents from 77.03 cents in New York yesterday when it climbed 0.3 percent. It bought 64.33 yen from 64.10 yen. Australia’s currency rose to 98.40 U.S. cents from 97.97 cents, and 81.85 yen from 81.49 yen.

Gold
Gold rose nearly one percent on Thursday, buoyed by a pause in a dollar rally after soft US inflation, while short-covering buying also helped. U.S. core consumer inflation climbed 0.6 percent from a year ago, marking the smallest increase since records started in 1957 and arguing in favour of the Fed delivering all of its $600 billion of quantitative easing, after stronger data had fuelled doubts it would need to follow through on the entire programme. Silver rose as much as 2.8 percent to $26.55 an ounce, Silver is likely to rise above $30 and average $28 in 2011, lifted by strong investment buying and recovering fabrication demand, precious metals research and consulting firm GFMS said.

Gold had fallen 0. 3% to $1,332 an ounce extending a further 2% fall in the previous session, as Ireland had weighed heavily on gold with investors offloading heavy long positions that had been built up over the past couple of months.

However, the uncertainties in the global economic recovery and the persistent worries over inflation have continued to attract investors into gold. Both the medium and long term bullish sentiment remains intact in my opinion and it was expected that gold would have corrected as the market was heavily one sided. This has seen the RSI on gold fall to 44.39 it’s lowest since early August. In early October, the RSI hit an 11 year high of 86.24 concluding the market was well overbought.

Written by Jovi Overo Beta 2

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MARKET COMMENTARY BY JOVI OVERO, BETA 2 LTD. 09/11/2010

European Debt Concerns Drag EUR, Equities Lower

The debt concerns to arise from the euro zone over the past few trading days has put some downward pressure on the 16-nation single currency and reduced demand for other high-yielding investments. After Ireland opened its books to the European Union, worries began to grow that some governments throughout the region may struggle to pay off debts; this in turn has dampened demand for the region’s assets.

USD

The US dollar appears to still be gaining ground this week on last Friday’s optimistic Non-Farm Payroll data. With a surge in employment rearing its head at such a crucial point for the USD; it appears now like the dollar is beginning to regain some much needed support.

Against the EUR, the dollar has been performing better than against most other currencies. The EUR/USD cross fell from its recent high around 1.4270 to now sit just below 1.3960. Against the British pound, the dollar also gained roughly 150 pips to trade near the 1.6140 mark. The USD/JPY also saw a minor boost Friday as the pair jumped to as high as 81.49 before coming back down somewhat and finding stability in yesterday’s market near the 81.00 price level.

The US dollar will be absent from the economic calendar today with most market news cantering on Britain. The UK will publish two impacting reports: manufacturing production and the British trade balance figures.

On the other hand, the US IBD/TIPP Economic Optimism gauge will be published today and may show some movement towards an optimistic reading. Above the 50.0 line on this report represents market optimism, below represents pessimism. The forecast is for a continuation of the pessimism of previous readings, but after last week’s NFP data, there is a chance that this figure could read higher than expected and drive the USD slightly higher.

Australian dollar

The Australian dollar, which tends to suffer if risk appetite retreats, was steady on the day at $1.0133, having retreated from a 28-year peak around $1.0180 set last week. But it fell 0.4 percent against the yen to 81.88 yen. The market is also watching this week’s meeting of G20 leaders in South Korea. The summit has been pitched as a chance for leaders of the countries that account for 85 percent of world output to prevent a currency row escalating into a rush to protectionism that could imperil the global recovery. But there is little sign of consensus and the meeting has been overshadowed by disagreements over the Fed’s quantitative easing policy. The move has helped depress the dollar and raised fears it may cause a destabilising flow of money into emerging economies

EUR

The debt concerns to arise from the euro zone over the past few trading days has put some downward pressure on the 16-nation single currency. After Ireland opened its books to the European Union, worries began to grow that some governments throughout the region will struggle to pay off some debts, which have dampened demand for the region’s assets.

The single currency suffered as yield spreads on Irish, Greek and Portuguese Government bonds widened over their German counterparts.

The EUR fell against the US dollar to recent low of 1.3940 as of this morning. The euro zone currency doesn’t seem to be fairing too well against other major currencies either. The EUR/JPY fell as much as 1.2% to trade near 112.00, while the EUR/GBP declined towards the 0.8600 price mark, which it reached earlier this morning.

With only a handful of minor news events expected from the euro zone today, there is little chance the currency will find support in today’s trading. However, Britain will be publishing its measure of manufacturing output today at 9:30 GMT and may end up adding support for a stable pound.

GBP

Sterling rose to a five-week high against a broadly weaker euro on Monday as worries about euro zone debt dented the single currency, while the pound ceded ground against the dollar which was lifted on short covering. The euro was under pressure on mounting worries about Irish debt. The main opposition party said on Sunday it would not back next month’s budget, sparking concerns whether it will be passed in the coming months. Markets believe that the pound was likely to be supported by a run of generally positive economic data, including unexpected rises in the UK manufacturing and services sectors. 

But most traders are likely to bide their time ahead of Wednesday’s inflation report from the Bank

JPY

Japanese stock indices experienced rapid growth yesterday as the yen finally began to weaken against the US dollar. Following the Federal Reserve’s announcement to implement the quantitative easing program, known as QE2, the lagging market began to pick up momentum. The boost in confidence for riskier assets helped to put much-needed sell pressure on the yen.

The USD/JPY climbed towards 81.50, a price not seen for over a week, but appears to be correcting downward somewhat as of this morning. Outlook for the yen remains bearish as Japanese equities gain in value. The Nikkei 225, which had been lagging behind other equities on concerns over the strengthening yen’s impact on exports, was trading roughly 1.1% higher yesterday, outpacing most of its counterparts. If QE2 has the positive effects expected, we could be seeing the beginning of a turning point for the yen.

Crude Oil

Crude Oil prices appear to have stabilized in a range-trading pattern between $86.00 and $87.50 a barrel. Rising demand from China may have had a hand in oil’s recent rises, but a wider global recovery has created the conditions for a steadily climbing price of crude.

However, Saudi Oil Minister Ali al-Naimi stated in Singapore recently that oil prices appear to have found their comfort zone between $70 and $90 per barrel. If the US dollar becomes resurgent as the EUR falls, then chances are we could see a diminished price of oil in the coming trading days. Depending on the length and duration of the USD’s short-term recovery, oil prices could fall to as low as $80 a barrel over the course of this week.

Gold

Gold prices shot past $1400 an ounce setting a fresh nominal all time high after Robert Zoellick, World Bank president, said leading economies should look at a modified global gold standard to guide currency movements.

Mr Zoellick’s call for gold to form part of a new co-operative monetary system comes amid growing concerns ahead of the G20 meeting in South Korea that leading governments might pursue competitive devaluations among their currencies.

Gold’s sharp rise is also seeing huge profits to some of the world’s largest hedge fund managers, including David Einhorn of Greenlight Capital and John Paulson of Paulson and Paulson and Co, in addition Beta 2 have also been very bullish on the price of gold and silver with huge profits for our clients involved. We have been betting that central banks would fail to preserve the value of paper currencies.

Gold has moved higher by 12% since the beginning of September with the current inflationary fears adding to gold’s lustre. Gold is hard and it seems money is getting soft with the IMF suggesting that by 2011 the ratio of debt to gross domestic product in advanced economies will have risen by 29 percentage points since the crisis. With the US Federal Reserve willing to dilute the value of dollars by creating $600bn more of them this has led to calls that you should stay bold and hold your gold.

Written by Jovi Overo Beta 2

MARKET REPORT BY LANE CLARK, BETA 2 LTD – 19/05/2010

WHAT NOW???

After last nights shock announcement that Germany with immediate effect were banning naked short selling on Eurozone Sovereign Bonds, as well as 10 of its biggest financial institutions- we witnessed Tsunami proportion waves of shock run through the markets.

What seemed like a quiet Evening monitoring positions became a frenzied opportunity to sell Euro.

Moving forward, if you can’t short bonds, and you can’t short equities, what can you do if like me you have a negative outlook on the Euro region? SHORT THE EURO……

This is why many traders now think that even though the Euro is at 4 year lows already, 1.17 or 1.15 within a couple of weeks against the dollar is certainly a possibility.

SELL SELL SELL…..

When the announcement was made last night, as expected we seen all “risk on” trades take a hit (a big one), and “risk off” trades became the theme for the Evening…Equities plundered, the Dow actually fell 114 points after the announcement, and higher yielding currencies sold off, as well as Euro and GBP (well what else would you expect??).

The ban will run for almost a year until March 31^st 2011.

Most people are asking why it was done when the markets seemed relatively calm? Was the timing right? Are the problems bigger than we thought? Do they know something we don’t??

The more questions that are asked, the more uncertainty gathers momentum, and in theory- the more Euro sells off…

To compound the pain, Ms Merkel has been talking this morning, and I quote her here- “If the Euro fails, then Europe fails”, and “The Euro is in danger”. Wow…..

Be careful though, the obvious trades are often the wrong trades. Although shorting Euro seems a cert- these markets can be volatile…This morning it is currently sitting at its Euro session lows, and if it breaks it and momentum picks up- it could be a tough day for the Euro. Keep a very close eye on a pullback though…..

Staying on the theme of uncertainty, the best quote of the day for me has to have been the one I read in the Daily Telegraph by Nassim Taleb. This gent is a New York university professor and made his name predicting the credit crunch. Well, he’s came out now and said the current global economy is in worse shape than it was during the subprime crisis, and we could be on the verge of another meltdown.

He’s recommending investors to stay away from Equities, stay away from bonds and look for alternative “hard assets”…Gold springs to mind.

On a final note, UK inflation came out at 3.7% yesterday. Happy trading, and be careful out there.

Written by Lane Clark Beta 2

TRADING WITH MULTIPLE TIME FRAMES, BY LANE CLARK, BETA 2 LTD.

Trading With Multiple Timeframes.

On a previous posting I mentioned the benefit of trading with multiple timeframes. Today I would like to elaborate on that, and attempt to explain how much you are hindering your opportunity to profit in these markets if you don’t utilise a variation of timeframes.

As I stated before- “Would a golfer play 18 holes with only a driver or a putter? Of course he wouldn’t. So why should you look at only one chart. The best trades are the trades that look good in multiple timeframes.”

It’s true. Tiger Woods wouldn’t win the Masters with only two clubs (even before he got embroiled in his recent extra curricular activities, and the subsequent fall out afterwards), and the best traders can’t find the best trades without viewing at least a few charts.

The reason being- what may look great in one time frame, may look awful in another. What may look like a screaming short position in one time frame could look like the long position you’ve been waiting all month for in another time frame.

In my opinion- UNLESS IT IS A GOOD TRADE IN ALL TIME FRAMES- DON’T TAKE THE TRADE.

A trader of the shorter term variety should look to view at least 3 different timeframes:

1)      The longest time frame offers the best indication of the trend.

2)      The mid term time frame narrows down your view and confirms the trend.

3)      The short term time frame should be used to time your entry.

My personal preference is to use a daily chart, an hourly chart, and a 5 minute chart.

The daily chart shows me if there is a trend, and if there is- what direction the trend is moving in. By taking this trade- I believe I am taking the high probability trade.

I then move onto my hourly charts, which if analysed correctly- give me the opportunity to work out where the markets will be moving in the shorter term, and if they don’t contradict what my daily charts are telling me- then my trade opportunity is there.

Now it’s all about timing that trade, and this is when I view my 5 minute chart.

On all of my charts I will utilise many technical instruments including Fibonacci, support and resistance, moving averages, ADX, RSI, trend lines, ranges, and slow stochastic’s.

Once you’ve entered a trade, it often makes sense to monitor the trade in a slightly larger timeframe than you utilised to enter the trade. If you use the same short term chart to exit as you use to enter- you’ll probably find yourself getting chopped out on a very regular basis. An example of doing this correctly is someone who uses a 5 minute chart to enter; and pending their risk tolerance- may use a 1 hour chart to exit.

To conclude- On entry, by looking for trading signals in multiple timeframes- you are trading with momentum and you are trading a high probability trade.

A successful trader knows the bigger picture.

TECHNICAL INDICATORS- WHAT IS THE ADX? BY LANE CLARK, BETA 2 LTD.

What is the ADX and how should a trader use it?

Firstly, the ADX stands for the Average Directional Index. But apart from knowing what it stands for, how can a trader take advantage of it?

I’m hopeful the following article will help to answer this.

The ADX indicator measures the strength of a trend and can be very useful to determine if the trend is strong or whether it is weak. What I mean by this is it will tell you if the market is ranging or trending. High readings on the indicator suggest it is a strong trend, whilst low readings suggest a weak trend and implies the markets are ranging.

It doesn’t tell you in what direction the trend is moving, it just tells you how strong (or not) the trend is.

If the ADX is between 0 and 25, then the chances are that the FX pair/commodity/stock is likely to be chopping around and trading sideways. If you’re looking to follow a trend- avoid this. If you are range trading though, the world is your oyster with these readings.

An above 30 reading is what trend followers should be looking for. This suggests there is a strong trend, and these sorts of trades are the ones you should aim to be involved in.

You won’t find many trends trading at 50 on the ADX indicator but if you do, be cautious about trading with the trend in this instance as the momentum may fade away.

Personally I find the ADX to be more useful on daily charts, and if the ADX is 30 plus- I look to trade with the trend, or 20 and under- then I’ll look to range trade. Many people use 25 and under to range trade but I see the levels of 20 and 30 to be the neutral zone.

A few other points of thought budding traders should keep in mind is that if the ADX is above 30 but starts to point down a little- this is still a momentum play. If it is under 30, then maybe not, but above 30- trade with that trend.

Also, have trading systems that you utilise when the ADX is above 30, and more than likely a different trading system when the ADX is below 20. Oscillators work great when the markets are ranging.

That my friends- are a few tips on getting the best from your ADX.