Every time I sit down to piece together a blog, I sift through a folder where I re-examine notes and clippings taken from a variety of sources from which, I see which note or combination of notes resonate the most at the end of a trading week to build my blog from.
This week, I have a collection of great notes that upon a first glance, and dare I say even on a supplemental second glance as well, do not knit together as seamlessly as I would like. Not ideal, so please bear with me and my potential meanderings in “THE SOAPBOX” this week.
Good Lord... this FX market shows little volatility and moves are so range bound it really makes it quite difficult for SWING and LONGER-TERM traders to operate in with real success. It really is a case of picking levels on a least a 240-minute (4 hour) chart and waiting. This is NOT the type of market within which to try and short cut or operate from small time-framed charts unless you are skilled in that style, which I am not. Adapting to trading the 15-minute charts is fraught with danger in these rangebound markets, for the un-skilled trader being eaten up in the small-time framed noise.
It will change. I can guarantee that for a fact but my commentary below in “THE SOAPBOX” will, or should, give you some pointers as to why the FX market is the way it is.
And on again...
I am adding pips to my yearly FX PREMIUM targets, but they are NOT daily, and now pips are primarily taken on profits from my core positions. With my shorter-term flash trades, I have not been taking pips as I should be, I am letting them run a little and they swing from profit to loss quite regularly. I am sitting patiently for now with the flash trades but at some point, they must be realized or covered. As stated, before it is a difficult market to operate in unless you are basically a 100% scalper.
This market does, however, focus the mind with any new trade set-ups to make you very disciplined with regards to entry levels. I am adding set-ups, sitting, and waiting. The key thing is not to get too drawn into shorter-term trades.
1. THE SOAPBOX:
FED: TAPER ANNOUNCEMENT NOVEMBER
I feel that for months now all that I write about, all that I talk about on “ZOOM’s” is the USD, the FED, and President BIDEN’S struggles to get his policies over the line. Over the recent years, my blogs have been GBP focused during BREXIT and EUR focused during the GFC following the EUROZONE bailouts etc.
“TO TAPER OR NOT TO TAPER” that is the question
I have written extensively about my timetable ideas for the FED on TAPERING, initially I was September, then I moved to November for the announcement with a January 2022 start. I am not moving from this view.
What I do want to do in this blog, however, is to try to knit together a cluster of issues, a shopping list of my thoughts that I believe that the FED has in its inbox that requires deleting prior to any TAPER announcement.
Some of this may appear, maybe too trivial, but having read and listened to FED speak in addition to the POWELL Press Conferences there is a tendency towards fine details to make 100% certain before a shift in Monetary Policy is announced.
Let me also note here two huge caveats that I believe are uppermost in the minds of JEROME POWELL and his colleagues.
- The FED is looking to ensure that they do NOT make a false move that they may need to correct almost immediately vis-à-vis the U.S. economic recovery.The FEDs dual mandate covers Jobs and Inflation.Jobs via full employment is the concern.Inflation they are prepared to let run hot. Whether TRANSITORY or not.
- The Covid-19 pandemic is still a massive overhang on the U.S. economy. America is polarized in most things.BIDEN beat TRUMP in the election, but it was close to a 50% / 50% split in votes, Republican versus Democrat.The Republican / Democrat political split is reflected in almost everything in the U.S. at the moment: -
Mask Mandates 50%/50%
Guns Control 50% / 50%
Mask Mandates throughout the “States” 50% / 50%Guess what percentages of the U.S. population is double vaccinated;
53%, well that is almost 50% pro vaccination and 50% anti-vaccers.
I believe that anything that is said and ultimately acted upon by the FED will have these caveats attached should policy need to be reversed in a hurry.
So, what do I believe that they FED wants almost 100% perfect and what obvious and maybe not so obvious off-the-wall issues are they perhaps looking at?
My list is short and sweet.
- The FED balance Sheet:If the FED does not TAPER soon the FED Balance Sheet will be close to USD$9 trillion. In the past few months, its holdings have risen by over USD$380 million to c. USD$8.50 trillion.
- Maximum Employment:At his last speech POWELL stated that 5.3 million fewer Americans were in work than pre-pandemic February 2020.August NFP data was poor. Only 235k versus 733k jobs as per the consensus.POWELL has been consistent that basically, he wants to be behind the curve before shifting FED policy.In my opinion, this fact alone feeds a November announcement at the earliest.
- U.S. Inflation:Inflation slowed in August, annualized it now sits at 5.3%.So much talk of inflation, companies are finding it very easy to up prices, which fuels the inflation spiral, and this will ultimately effect jobs, but this consequence is a long way down the road.The figures I believe that will have the FED attention are food prices up 4% and energy up again this month at 2%. Housing costs are also up, especially rental costs.This places pressure on the FED as rather than TRANSITORY the U.S. economy could see inflation higher for much longer than the FED would like to admit.
- Consumer Sentiment:I find this mixed.Firstly, from pre-pandemic levels retail sales have gained 17.4%. This shows that U.S. consumers are covid resilient, brushing off the resurgence of the covid spread in the U.S.The August consensus was a negative 0.7% month on month number, instead we saw a positive 0.7%... go figure that one out!I think that the FED will be glued to the services data.then,
Secondly, we had The University of Michigan consumer sentiment number show a small increase from 70.3 to 71.0 but it missed the consensus of 72.0. This data tells me that U.S. households know it’s NOT a good time to buy but they keep doing it anyway!
- IYT (Transport ETF):This is a great barometer to use to ascertain the state of the U.S. economy.As you can see from the above chart without reading or analyzing in detail, visually alone, it looks bearish, negative not expansionary at all.I have noted on the chart: -Economic Slowdown?
Supply Chain Issues?
Take from this what you want, it is not pretty. It is a PIG and remains a PIG even if you put lipstick on this chart.
I rest my case. I believe the above points are enough to keep the FED on hold.
I also want to amplify a point here regarding rising wages.
“Rising wages are a double-edged sword. One person’s pay rise is another person’s bigger wage bill, which then feeds into higher prices for goods and services driving inflation, which in turns hits everyone with a higher cost of living”.
So, sit back, enjoy the volatility this coming Wednesday 22nd September as JEROME POWELL takes centre stage and announces an update or no change in FED policy. I will be astonished if he announces anything on TAPERING at this juncture; but never say never, be prepared to be astonished!
For the record as I have stated on several occasions via this blog and Social Media I am fully committed to the Central Bank divergence trade and I have been building positions and setting up trades in readiness to take advantage of what I believe will be great opportunist and longer-term trades.
2. THE MACRO / FUNDAMENTAL VIEW:
This section contains no changes from last week’s overview: -
This short section of the blog looks forward, and I share my macro / fundamental thoughts and views for the coming 3-6 months on factors to consider from a Macro, Fundamental and Geo-Political perspective.
The push to get back to normal, is simply taking longer than usual. A global pandemic in the 21st century has shown very clearly that “A HERD MENTALITY” simply does NOT exist when it comes to vaccines. There are extreme views either side of the those set in the centre.
Vaccine and Mask wearing mandates are getting closer to full scale implementation in several countries. The Covid-19 pandemic has NOT gone away. To be frank it is NEVER going away in the short to medium term. Suck it up and get your head around this fact. More variants will be noted over time as the virus mutates and vaccine efficacies will be tested to the limit.
The pandemic has had and is still having a choking effect on supply chains of goods shipped around the world. I see this just continuing as infection rates dive lower and then spike back in areas of the world that create local trade and supply issues. It is a full-on domino effect.
I could add in a Climate Crisis as well.
The bottom line is that the issues noted above are here to stay. If the uncertainty exists, the moves by the bigger Central Banks to normalize are just potentially going to be pushed out.
We are potentially going to see very extended timelines to get back to “Normal”.
If we have uncertainty the likes of the FED and ECB will just not update Monetary Policy. During this period, FEAR & GREED prevails in the markets as usual.
It is very clear to me that until the pandemic is controlled or eradicated nothing really changes, we continue to drift in a state of limbo vis-à-vis moving forward. There will always be reasons for remaining cautious. We may see Tapering, but a return to interest rate normalization, at times seems to be somewhat of a dream, the way things appear at the moment.
3. TRADING PSYCHOLOGY:
For me, TRADING PSYCHOLOGY is a very important key aspect of trading that is often misunderstood or just ignored. How we use our conscious and unconscious minds when trading is crucial to our longer-term trading successes.
Over the coming weeks, it is my intention to cover areas and aspects of trading that may be new to many readers. Sometimes things can be right in front of us, and we cannot see it.
HEAD MANAGEMENT and HEAD MANAGEMENT strategies for consistent success in trading is crucial to long-term success.
WHY TRADING PSYCHOLOGY MATTERS!
As I always mention at the end of my blog every week. Trading longevity is the key to FX trading over the long-term. To be successful it is often more than not a long arduous journey. To get you there at your destination, you will need to master many skills: -
- Reading and Understanding Charts
- Understanding Chart Patterns
- Understanding volume and flows
- Analyzing Fundamentals
- Reading and understanding Monetary Policy Statements
- Understanding and Interpretation of Economic Dataand much, much more.Plus, and never forget the big one MINDSET.
We are rational beings? Maybe less than 20% of the time for some of us. A huge amount of time we are irrational in our behaviour especially when we feel the emotions of FEAR and GREED.
We become emotionally attached to our trades. Remember trading is lonely. No-one is there to help you. It is you versus the world. You must bear the weight of your trading decisions on your own. Sooner or later because of the isolation, emotions seep into your trading behaviour, even for those who believe they are cold-blooded traders.
There really is no way to avoid this. However, if you devote time to learning and understanding how emotions and irrationality play a role in your trading, you’re going to be much better equipped to handle these issues.
This is where TRADING PSYCHOLOGY enters. It is the topic that deals with the emotional highs and lows of trading and how they impact your successes and failures. By understanding it, one can overcome the irrational failings we have as traders and safeguard ourselves from unnecessary costly errors, mostly knee-jerk mistakes.
As a trader you will go through a complete spectrum of emotions: -
I see it simply as when you are “Feeling you are NOT Thinking”. To be successful in trading FX, I believe that is it simply a thinking person’s business. You need a specific disciplined MINDSET to remain cool and calm to stick to your plans.
Basically, when you can identify with your trading traits and patterns that should be avoided, then and only then, can you begin to steer yourself away from the turbulent trading spiral of failure.
4. THE WEEKLY FX PREMIUM - PERFORMANCE:
THE WEEKLY FX PREMIUM: MONTHLY PERFORMANCE:
THE WEEKLY FX PREMIUM: SUBSCRIPTION INFORMATION:
The WEEKLY FX PREMIUM is my subscriber-based FX support option, which offers, subscribers’ full access to my suggested trade set-ups and my market commentaries.
Further information about how to subscribe to the WEEKLY FX PREMIUM is also located at the top of my welcome page at https://www.weeklyfxdrivethru.com under the “SUBSCRIBE” tab.
5. CLOSING THOUGHTS:
Always remember longevity in Forex trading can only be achieved through trading with a good MINDSET, RISK, TRADE and HEAD MANAGEMENT, and above all set your position sizes in accordance with the size of your account and allow for some flexibility. Trade with a TRADE PLAN, basically, plan your trades and Trade your Plan.
Finally, be GRATEFUL for your wins and COUNT THEM. Keep a POSITIVE MINDSET in play at all times, regardless of the market conditions.
The Pip Accumulator
BLOG VERSION: #424 FREE NEWSLETTER
DATE: 19th September 2021