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Jay Norris is a 20-year CBOT floor veteran, author of the Best Seller "The Secret to Trading Forex, Futures, and ETFs: Risk Tolerance Threshold Theory", "Mastering the Currency Market", McGraw-Hill, 2009, and "Mastering Trade Selection and Management", McGraw-Hill,... More
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The Secret to Trading Forex, Futures, and ETF's: Risk Tolerance Threshold
  • Aussie In, Gold Out 7 comments
    Apr 10, 2013 7:04 PM | about stocks: FXA, GOLD

    Correlations are arguably just as important in today's macro market place as the economics of individual commodities, currencies, or stock indices. Of the stories I've put out lately the one I appreciated the most was the one that saw the least traffic, which is definitely apropos given the contrarian nature of market analysis.

    On April 4th,, in a piece titled: "Capital Market Correlations: Strong USDJPY = Status Quo", regarding the move by the Bank of Japan and the subsequent collapse of the Yen, I wrote, "Because of the current long-term price pattern set by underlying economics - namely coordinated central banker policies…we favor the Australian Dollar to join U.S. blue chip stocks and re-assume a leadership role."

    What is cool about market analysis is the pattern we see on the chart is always going to be a reflection of underlying fundamentals. So when we see a large move, such as we saw in the Yen last week, we know that the news is in-line with the overall trend, and just as important, this will support the overall trends in the other financial markets, which, in the case of both U.S. stock indices, and the Australian Dollar were bullish. The overall pattern in gold however, as determined by the direction of the Day to Day and Secondary Pattern was bearish. Given the objective direction of the patterns in place prior to last week's collapse of the Yen, the subsequent rally in the Australian Dollar and U.S. stock indices, and today's sharp sell-off in gold make plenty of sense to us.

    As for the future direction of these markets? It is gospel to us that markets patterns are not only a reflection of the underlying fundamentals --which are unlikely to change any time soon-- but also repetitive. For our money we like buying dips in markets where that has been working, and selling rallies in markets where that has been working.

    Jay Norris is the author of The Secret to Trading: Risk Tolerance Threshold Theory. To see Jay highlight trade set-ups and signals in live markets go to Live Market Analysis

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Comments (7)
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  • Hi jay, does that mean you are buying Gold and selling Aussie?
    11 Apr 2013, 09:55 AM Reply Like
  • Author’s reply » Hi Kangiwa,

     

    NO! The opposite. Find what works and stick to it!
    12 Apr 2013, 08:49 AM Reply Like
  • Today I lost a thousand bucks in selling Gold! I have been deceived by yesterday's news on Cyprus not selling €400 million worth of Gold so I took the advantage of that not knowing that the Bears are waiting for me. I don't think am going to trade on commodities anytime soon.
    12 Apr 2013, 05:21 PM Reply Like
  • Lost money by selling gold? how is that possible?Cyprus news or Goldman Sachs lowering gold price forecast $1450 for 2013 and $1270 for 2014 doesn't matter.
    If you look at the weekly chart, daily chart...Its more bearish than bullish since last year October...

     

    Im not making trade recommendations...but surely it would be safer to sell the rallies...(for now)

     

    anywho...Gold is a different animal so trade with caution (or not all)
    All the best :)
    15 Apr 2013, 01:46 AM Reply Like
  • Thanks buddy! I mean i lost money in buying Gold!
    15 Apr 2013, 02:07 PM Reply Like
  • Thanks jay, you have been a mentor!
    12 Apr 2013, 05:22 PM Reply Like
  • Author’s reply » Your welcome Kangiwa, come see us in live markets at: http://bit.ly/ZvviMr
    16 Apr 2013, 04:20 PM Reply Like
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