- THE FIRST SHOT:
Just like last week, there are many options on subjects to write about. We are trading in strange times.
One-night last week I went back through PDF files that I have stored under the EDUCATION (Trading Essentials) TAB that is inside the PREMIUM SERVICE subscriber section of my website. There are about 60 PDF files in that area, some of them are maybe 4 years old. I was checking for relevance, which is a six-month diary alert.
Not only are they relevant, but they are as useful today as they were when I first wrote them. The intention was to build up an EDUCATION area for newbie traders and those who had less than 2-3 years’ experience. Reading through some them once again, it prompted me to send out the following 5-part tweet to PREMIUM SERVICE subscribers last Wednesday, just prior to the US close (Wednesday was the day of the massive USD reversal after the CPi data).
To read the tweet start from the bottom up!
The purpose of placing these tweets in the blog is that after 10 years of trading, I was unsure what to do next. What I had seen during that day, took me by complete surprise and I needed to re-set. It is NOT a crime or weakness to say that you are uncertain of what to do next.
We are trading in strange times. Correlations are off. Trying not to be too cynical, but to me at times it seems like algorithms, computer bots and machine-driven theories are driving the markets one way then the other. If this is the case they are NOT interested in any correlations, inter-market or not! Fundamentals count, Technicals are very often ignored and we are trading in a dangerous news driven market. Sometimes, regardless of your experience in front of screens, your best trades are the ones you do NOT take.
If you are relatively new to Forex Trading or trading with limited funds, now, may be a good time to take a break for a while until some sense of normality returns.
Stocks are rising, in spite of a fast approaching 3% 10-year treasury yield, inflation entering the U.S. economy placing the FED on a well-advertised increasing interest rate cycle, commodity prices are elevated and the JPY strengthening. Something has got to give but until it does we are on for a crazy ride.
Many traders lost huge amounts from their broker accounts over the past two weeks. You can talk about RISK MANAGEMENT, POSITION SIZING, TRADING PSYCHOLOGY and “HEAD” MANAGEMENT as reasons. The bottom line is we all stretch the limits from time to time, however, as a Forex Trader, trading longevity will never be achieved unless we trade a TRADE PLAN.
I want to repeat a section that was in last week’s blog.
I have blogged about this so many times over the past 5 years or so and you can obviously draw your own conclusions, but, I am now more than ever of the belief after 10 years of trading that in FOREX: -
It is all about you
You have your machines
You have your charts
You have your analysis
It is you versus the world
It is all down to you
You will rise or fall on your decisions
Whether you are a Fundamental or Technical trader
- The media is biased. It only wants to promote “GOOD NEWS” because “BAD NEWS” does not get advertising revenue.
- Banking analysts SELL their latest book. They do this whether it’s the right thing to do or not.
- Twitter feeds and other Social media can be a very dangerous place to ascertain quality data.
Finally, in this section…
From last week’s blog I must follow up on the sell -off in the DOW / S&P / Nasdaq, when I called the sell-off THE IMMACULATE CORRECTION. I have found a company that shorted and made money. I have only heard of one, others must be known by now but: -
IBEX INVESTORS based in Denver, Colorado.
Ari Rubin, IBEX Investors Director announced on BLOOMBERG TV 17.02.2018.
HEDGE FUND made 8,600% profit from the move with the “VIX SURGE”.
Obviously, millions of retail investors had huge drawdowns in their investment balances. Many went to cash and never re-entered. I would say that there are still retail investors picking up trading statements and sobbing. These markets are brutal at the moment.
Trading in this market has been challenging from the get go in 2018.
It takes an understanding of what currency pairs to trade and when. Timing is everything. As we head into a period when the FED looks likely to be raising rates, the day to day challenges of trading FX will only intensify.
I am doing nothing different in 2018 than I was doing in 2014. My daily routine is the same. So, what’s made the start of trading in 2018 so explosive over recent years. I still listen to lots of people’s opinions each day about the FX market. I read as many bank reports and analysts thoughts each day and to be honest some of them I use as ideas to trade against!
What I am trying to say is that for 10 years now, I watch, listen and read the market every day. I hate to think how many thousands of hours I have spent in front of my screens observing how prices move.
All this time involved in research and observing price movements must count for something. This year, is the best start for the PREMIUM SERVICE since it started in 2014.
Get on board and join from as little as CAD$150.00 per month, conversions are roughly as follows: -
GBP £90 per month
EUR €100 per month
USD $120 per month
JPY 12,700 per month
AUD $150 per month
This represents great value.
You can subscribe for periods as well. Go to my website www.weeklyfxdrivethru.com for more details under the TAB – “SUBSCRIBE HERE”.
The PREMIUM SERVICE performance so far in 2018 is as follows: -
February 2018 so far: +1,609 pips
Year to date 2018: +3,087 pips
- MARKET OVERVIEW – MY THOUGHTS:
I THINK OIL IS ABOUT TO HEAD MUCH LOWER ONCE AGAIN
When I first started trading FX, I used to listen to a short 5-minute segment in a LIVE TV webinar presentation by a commodities trader. Not a catchphrase, but he would often say “IT’S ALL ABOUT COMMODITIES”. So, taken with this phrase, I used it to title a blog a few years ago. Not important, but it stuck in my mind because I wrote it while in a Caesar’s Palace hotel bedroom in Vegas.
I believe that it will be OIL that will, for the want of a better phrase “Sort these markets out”.
Every morning as I set myself up for the day, screens go on and with coffee in hand I look through my charts for my key indicators one by one GOLD, COPPER, OIL, 10-YEAR U.S. BONDS, DXY, USD/CAD, AUD/USD and USD/SEK.
I think to myself almost every day: -
- OIL is a dying commodity.
- OPEC as a cartel is not what it was. It no longer has the power it once had. OPEC controls 40% of the production and holds about 60% of the distribution
- Data from OPEC cannot be trusted, and OPEC members are very loosely united.
- The OIL market is basically corrupt; it is heavily manipulated by several large players.
- In the name of sanity why is WTi priced above $60 per barrel?
- I still laugh at how such a FREE TRADE world gives such an open cartel so much media time.
I know it’s crazy, but I just cannot wrap my head around the way OIL prices and OPEC carry so much weight. The fact is that they do, and, it is what it is…. suck it up!
Here are my thoughts moving forward…
The U.S. is NOT an OPEC member and I seriously doubt it ever will be. The U.S. is now the biggest producer of OIL in the world on the basis that Saudi Arabia is subject to OPEC production quotas, and Russia, also NOT in OPEC, but, has aligned with OPEC to limit production output.
The IEA (International Energy Agency) and the US EIA (Energy Information Administration) have both ramped up numbers based on US shale production for 2018. In fact, most noticeably, the EIA stated recently that US shale production would increase by 1.3 million barrels per day by March 2018 over the March 2017 levels.
I have no doubts in my continuing beliefs that OPEC is a fragile coalition. The likes of Nigeria, Iran, Iraq, Angola and Libya are known to be in need of greater production to meet internal economic needs and requirements. The production cut agreement is, in my opinion, hanging by the thread. Many countries who signed up for the production cuts are NOT in OPEC and have no loyalty to the cause other than price fixing benefits and greed. I also believe these non OPEC affiliates did not believe that they were signing up on a 2-3 year deal!
Looking at prices…
Looking at the charts above, technically below $58.00 and OIL looks like a move lower towards the low $50’s would be in view once again. OIL is always about supply and demand. It is the classic economic supply and demand theory discussed in every classroom.
It is noted though that the move higher is impressive and the recent move lower may in fact just be technical.
The weaker USD has kept OIL prices inflated. The price of Oil has skyrocketed 40% since the middle of 2017, but the greed of OPEC opened the door for the US shale producers to step back in with improved methods in extracting OIL from shale for less cost than before. It has been well documented this time around that every dollar above $40-$45 and US shale producers are making money.
Moving forward; what if…
- The USD bounces off lows and spikes higher.
- The price of OIL falls back to say the region of $53-$55 per barrel.
- The supply and demand curves show that supply outweighs demand based on flows being increased by the US.
- With US interest rate hikes due this year, this alone will have an effect on Oil pricing vis-à-vis it’s USD relationship.
I know that the above are “what if’s”, but do I think that OPEC would remain united if one or two cracks appeared? Not in a month of Sunday’s, there would be more cracks on view than one would see on a fully operational building site.
In my opinion, the fundamentals with higher OIL prices have too many cracks that have huge potential to appear and OPEC could not, faced with these issues, remain united.
If you do NOT like the “what if’s”… what about the bigger picture…
- US production keeps rising
- Rig counts continue to increase which in turn increases production output and supply. Up by 7 last week. 4 weeks in a row of increases. Over 30% more than this time last year.
- Inventories just keep on building (Supply and Demand)
- This creates price pressure
- This places heat on the OPEC members to stay in line
- The weaker participants move away from the herd
If the OPEC agreement breaks and a free for all ensues, the OIL price would plummet.
Will this happen pre-US interest rate increases? I doubt it, but it could.
The OPEC production limit agreement consists of such a bizarre collection of countries united by greed to artificially keep OIL prices inflated, when cracks appear they will become gaping cracks very quickly as greed rules this commodity.
I believe that when the OIL price moves lower it will be the catalyst that beings back inter-market correlations once again. OIL is integral to correlations in several markets; FX, Commodities, Futures and Stocks.
Is the price of OIL about to collapse?
We are not far away from this in my opinion and with it we should have another bout of serious volatility as we find new equilibriums. Below $50.00, we will see another race to the bottom.
It is highly inflated at the moment but technical reasons as well as greed will spiral the price lower.
From an FX perspective this gives us long USD/CAD, USD/NOK and USD/MXN opportunities.
These are trades that offer huge retracement potentials in 2018. Keep this on your RADAR.
- USD SUPPORT and RESISTANCE with my BIAS:
- THE PREMIUM SERVICE TRADING SUMMARY:
PREMIUM SERVICE PERFORMANCE YEAR TO DATE:
(Incorporating the last 5 PREMIUM SERVICE TRADES)
- PREMIUM SERVICE SUBSCRIBERS:
(This section is for PREMIUM SUBSCRIBERS ONLY)
5.1. TRADING REVIEW:
5.2. SENTIMENT, FUNDAMENTAL & MACRO THOUGHTS:
5.3. THE WEEK AHEAD:
5.3.1. ECONOMIC DATA RELEASES THAT INTEREST ME:
5.3.2. MY KEY EVENTS ON THIS WEEK’S CALENDAR AND WHY:
5.3.3. HOW I WILL APPROACH and TRADE THE MARKET THIS WEEK:
5.3.4. MY “MACRO” TRADING PLAN FOR THE WEEK AHEAD:
5.4. CURRENT LIVE TRADES & LIMIT ORDERS:
5.4.1. CURRENT LIVE TRADES:
5.4.2. CURRENT LIMIT ORDER TRADES:
5.5. FX BROKER NEWS and MARKET FEEDBACK:
- THE FINAL SHOT:
Nothing more to add here, I have said enough except,
Always remember longevity in Forex trading can only be achieved through trading with good RISK and MONEY MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility.
The Pip Accumulator
BLOG VERSION: #FREE NEWSLETTER
DATE: 17th February 2018