Tuesday, September 27, 2005

NZD Forex Revisited (Again)

About five weeks ago, I posted about shorting the New Zealand Dollar here.

The timing just was about perfect. The market "topped out" the very next day, sank, recovered some, and then really starting sinking.

So the NZD/USD market moved from about 71 cents to 68 cents. Three pennies. So what, right? Well, the FOREX market is so highly leveraged, that three penny move would have resulted in a three hundred percent return over the course of those five weeks (e.g. a $10,000 account would be worth about $40,000).

What's exciting to me about this graph is how cleanly it played within the Fibonacci retracement. NZD/USD is considered an exotic currency market. But it's a terrific-looking graph. I'd step aside at this point, although long-term I can see this graph heading much lower.

Tuesday, September 20, 2005

Eleven Steps then a Stumble

Finally, some direction! It's about time.

There's an old saying about the market - "three steps and a stumble" - which implies that if the Fed raises rates three times in a row, the market will fall. Well, the Fed has raised rates ELEVEN times in a row, and finally the market looks like it is starting to take notice.

Below are three charts of the largest ETFs - our old favorites SPY, QQQQ, and DIA. Each of them tells a similar story of a slow shift from upward market to downward market.

The first chart of the SPY (the S&P 500 "spiders") shows the ascending trendline which the prices are approaching. This trendline is still a ways away, but if it's cracked, it bodes well for the bears out there (like me).

Next are the "cubes" (QQQQ, the NASDAQ 100 ETF) which have already broken their ascending trendline. This market has never recovered quite as well as the other markets (especially the Mid Caps and the Russell 2000, which hit lifetime highs not long ago). All the same, it's just as vulnerable as everything else. I've drawn the ascending and descending trends to make it more clear. You can see where the ascending channel has been clearly violated.

Finally are the "diamonds" (DIA, the Dow 30 ETFs). As with the SPY, the ascending trendline has yet to be violated. But if it is, bulls need to watch out. The shifting tide continues to work its way in favor of the bears.

Friday, September 09, 2005

Redback Recovery

Just one stock to mention for this post (which is my 50th one, by the way! Did anyone bring a cake?) Redback Networks - RBAK - is in a fantastic inverted head & shoulders pattern, with good volume to boot. This is a terrific long opportunity (as always, click on this image to get a much bigger picture):