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Cliff Wachtel
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Cliff Wachtel, CPA, is currently the Director of Market Research, New Media and Training for Caesartrade.com, a fast growing forex and CFD broker. He covers a variety of topics including global market drivers, forex, currency hedged and diversified income investing, and is currently working on a... More
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  • COMING WEEK MARCH 7-11: CALENDAR HIGHLIGHTS, THEMES, SHORT TERM TRENDS & TRADES 0 comments
    Mar 6, 2011 6:16 AM | about stocks: FEZ, FDD, EZU, EPP, ADRA, FNI, PAF, ASEA, AIA, UUP, UDN, FXA, FXB, FXC, FXD, FXE, EUO, FXF, FXEN, FXY, JYF, AUNZ, CYB, GLD, CNY, USO, DUG, DBV, ICI, CEW, SLV, OIL, SPY, SDS, RSW, BXDC, SPXU, SH, QQQ, DIA, EWC, EWA, TLT, XHB, ITM, ERO, IGOV, VGK, TBT, GSG, DBC, CORN, ICN, SZR, BZF, GRU, DAX, FRC, DB, SAN, USL, BNO
     How To Play The Trends Via Forex Binary Options, Spot Forex, Stock Index and Stock Binary Options, and Traditional Short Term Trading  Vehicles For TheseCOMING WEEK MARKET DRIVERSMENA UNREST & SPIKING OIL PRICES, ROCKS ALL MARKETS – THE ARAB AWAKENING (PART II)

    The original book by this title was published in 1939, is considered to be among the seminal works on Palestinian nationalism. Yet the title may yet prove a good fit well for the popular upheavals spreading to the oil producing nations. Regardless of where these lead, the spiking oil prices that have followed over uncertainty about supply, and their concomitant  threat to the global recovery,  has become the primary driver of international asset markets for the second straight week. Already THE dominant market driver, as it has spread from Libya to other, more important oil producing states, it appears to be gaining momentum and is likely to become a central influence on global markets for the foreseeable future.

    ECB ANNOUNCES NEW HAWKISH POLICY SHIFT, GREAT FOR THE EURO, DISASTER FOR EUROPE?

    Fulfilling the expectations of forex markets that have been building for weeks, the ECB used the expected verbal cues to tell markets that rate hikes may come as early as April in response to inflation threats. While the news is great for the value of the Euro, it is of questionable benefit in fighting European inflation, and is an unqualified disaster for the PIIGS nations fading hopes of economic recovery. Their already unbearable debt burdens are now likely to get worse, barring a major aid package from the EU that actually somehow reduces their debt burden.

    However that will require, one way or another, the EU agrees to accept either:

    • Risk of future devaluation of the EUR Via Fed-Style Stimulus/Debt Monetization: The ECB prints money to pay off the debt similar to what the US Fed has tried to do
    • Risk of Destabilizing EU Banks: In simple terms, to reduce PIIGS debt load, some creditor somewhere has to ultimately suffer a loss on the PIIGS bonds, most of which are held by the EU banking system. That  essentially transfers some of the insolvency risk from the PIIGS to the EU banks, and casts uncertainty over the stability of these banks. The EU could get around this problem by some kind of bailout mechanism, this time for banks.

    For more on this topic see:

    on Feb 10, 2011 • FXE • 8 Comments

    on Feb 06, 2011 • EUFNFXEIMF • 36 Comments

    For full details on the above see: COMING WEEK TOP MARKET MOVERS, LESSONS, TRADING RAMIFICATIONS

    Other Potential Market Movers: US Retail Sales, BoE Rate Statement, EU Summit: For details on these see below.

    For details on implied likely trends and how to trade them over the coming week, see: COMING WEEK TOP MARKET MOVERS, LESSONS, TRADING RAMIFICATIONS

    Big Economic Calendar Themes & Key Risk EventsASIA

    Ongoing political deadlock in Japan, tightening and slowdown in China

    US FRIDAY MARCH 11 – RETAIL SALES

    Until it admits that inflation may be a real threat in the US, the Fed will not move towards monetary tightening or raising interest rates until, at very minimum, both jobs and spending show clear signs of sustainable recovery. This past Friday we got our first respectable increase in the official figures (leave aside underemployment and the real unemployment rate for now) and will now need to see confirmation that rising employment is actually helping consumer spending, the single largest component of US GDP.

    True, even after the required 3 months of steady solid improvement in these reports, there is still the concern that a rate hike might mean deeper weakness in housing and thus in the US banks, but that concern isn’t even an issue until jobs and spending start to truly recover at a robust pace

    Likely Short Term Trend And How To Trade It

    IF: Report beats the 1% forecasted improvement, THEN the likely trend over the coming hours is up for risk assets and, unusually, up for the safe haven USD.  Note that the USD tends to trade in the opposite direction of most risk assets, but in cases of strong US data on jobs or spending that might move up rate increases, the USD is capable of moving with risk assets.

    Binary options traders: Those trading hourly expirations maintain bias to call options on risk assets. Take care to check resistance and support levels on 1-10 minute charts and also daily charts for the bigger picture support and resistance. Those trading binary options with daily expirations should check for support and resistance levels using 30-120 hour charts and daily charts.

    The opposite applies to the EURUSD, AUDJPY and other assets that would move opposite the USD and/or risk appetite.

    IF: Report misses expectations, the opposite applies to the above

    EUROPE

    Friday brings another summit of EU leaders, in which at least some of the latest plan to rescue the PIIGS economies is due to be worked out. Good luck.

    On the one hand: Ireland’s new government now has to deliver on its campaign promises to reduce Ireland’s debt load to a level it might actually be able to repay without decades of voluntary depression, or risk being replaced by more militant leaders. Of course whatever Ireland gets, so goes for Greece, Portugal, and anyone else who shows up looking for a handout.

    On the other hand, much of the bill for whoever gets a bailout (the PIIGS, their creditors, etc) ultimately comes from German taxpayers who are, ahem, reluctant to do so. With German elections later this month German officials wishing to keep their jobs are in no position to make concessions, at least not until a wave of PIIGS defaults becomes enough of a threat to risk the second annual EU Spring Break(down) & market crisis. That allows German officials to give away more taxpayer funds while claiming the alternative would be a global crash that would hurt Germany even more.

    Likely Short Term Trend And How To Trade It

    The likely result is inaction or inadequate action, which is bearish for the PIIGS , risk assets in general and especially the Euro and European stocks. Bias to the short side.

    Forex traders: Short the EURUSD, EURJPY, and EURCHF.

    Stock traders: Short the major indexes and their individual components, or their related ETFs

    US: SPY, DIA, QQQQ

    Europe: FEZ, FDD, EZU, etc. See here for more EU stock index ETFs.

    Asia: EPP, ADRA, FNI, PAF, ASEA, AIA, etc. See here for more Asia stock ETFs

    Binary options traders maintain bias to put options on the EURUSD, EURJPY, and major stock indexes and their components, after checking for resistance and support levels in shorter and longer time frames as noted above.

    If somehow the summit actually produces genuine progress, the opposite positioning applies.

    UK

    The BoE has a monthly rate announcement coming. As with the EUR, the GBP has rallied in past weeks based on a combination of both rising risk appetite and rising expectations of rate increases. Risk appetite has largely hit a wall from spiking oil prices, and the unrest behind them appears to be getting worse as it spreads to more and more important oil producers. That leaves rate expectations as the sole pillar holding up the GBP at its current levels. The announcement on Thursday will clarify whether expectations have been justified.

    IF the BoE suggests a more hawkish stance, THEN

    Forex Traders: Long positions on the GBP, especially vs. the lower yielding USD and JPY, the GBPUSD and  GBP JPY.

    Stock Traders: Higher rates are bad for stocks. Short the UK indexes and their components, or play via shorting UK stock index ETFs like:

    EWU, ISF-LSE, MIDD –LSE. See here for more.

    Binary options traders buy calls on the GBPUSD and GBP JPY, puts on UK stocks and stock indexes like the FTSE 100.

    IF the BoE sounds cautious, (as we suspect they will given that the growth dampening effects of new austerity measures and oil prices have yet to be fully played out in the UK), THEN short the GBPUSD, GBPJPY, long UK stocks stock indexes

    Binary options traders maintain bias to puts on the above forex pairs, calls on the UK stocks and stock indexes.

    Conclusions & Ramifications

    With all of the above, however, it’s critical to keep an eye on oil prices and the major global stock indexes of your choice, to gauge the short term direction of overall risk appetite. Sharp swings higher in risk appetite will usually show, regardless of news on a specific asset,  the stock indexes moving higher, and, while oil prices remain elevated, lower oil prices. That will mean long positions in risk assets, and binary option traders buying calls on these asses.

    If risk appetite moves lower, we short those assets, binary options traders maintain bias to put options in their chosen time frame.

    For a full listing of calendar events, their relative importance, previous and forecasted results, see www.forexfactory.com >> calendar tab.

    or binary options, see:

    For more on our recent take on markets and trading them via traditional instruments and an introduction to binary options see:

    on Mar 06, 2011 • DIASPYQQQQ

    on Mar 04, 2011 • UUPUDNFXA

    on Mar 03, 2011 • FXAFXBFXC

    on Feb 27, 2011 • DIASPYQQQQ

    on Feb 27, 2011 • DIASPYQQQQ • 41 Comments

    DISCLOSURE & DISCLAIMER: AUTHOR SHORT THE EUR FOR PERSONAL PORTFOLIO. THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER

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