TALK IS CHEAP
INCLUDING
THE WEEKLY FX PREMIUM:
REVIEW OF THE NOVEMBER 2021 PERFORMANCE

We are now in the final 30 days of 2021 and whilst I always prefer to look forward, there is the matter of the WEEKLY FX PREMIUM November performance to look back on. It was a positive month, and it could have been much, much better than it was had it not been for the B.1.1.529 Covid-19 variant now called Omicron hitting the markets and creating huge FX chaos and volatility over the U.S. Thanksgiving holiday.

In the final days of the month two BIG events transpired; Firstly, Jerome Powell was retained as FED Chair for a second term and Lael Brainard was appointed Deputy FED Chair. In addition, we ended the month with Jerome Powell, FED Chair and Janet Yellen, Treasury Secretary testifying to the Senate Banking Committee vis-à-vis the CARES Act, during which, Powell announced that: -

1. The word TRANSITORY would be retired from FED language as INFLATION is more permanent.
2. The FED TAPERING program would be completed much quicker than originally envisaged

Well, there you go...

Eventually the FED smells the coffee and Powell turns HAWKISH ...WTF.

This all makes the next FOMC meeting and Press Conference on the 15^th   December very interesting to watch and listen. Unfortunately, I fear that hanging over the markets at this time could be the uncertainty of the effect the Omicron variant.

The timetable moving forward looks desperate to get full traction in FX.

• It will take about 2 weeks or so for the WTO and Pharmaceutical Vaccine companies to get the full scope of intensity, transmission ease and efficacy of the Omicron variant.
• This projected timetable coincides with the week commencing the 13th of December, which has CENTRAL BANK Monetary Policy Statements due from the FOMC, BOE, and the ECB to name just three out of 6 announcements that are scheduled.
• I just can’t see these meetings being as HAWKISH as the markets expect because of Omicron.
• The week after we have the start of the “Silly Season”, Christmas and New Year holidays. Hardly a time for the major financial institutions to get positioned up.

I hate to be a killjoy but there is more to consider.

• What happens if the Omicron variant requires an updated vaccine to maintain a decent efficacy rate?
• I read that will take about 90-100 days to produce and test.
• We are now at best at the end of Q1 2022.
• To get the updated vaccine in “arms” to a number that is adequate for increased protection, given previous rollouts we are looking at least 6 months., maybe longer. At the very best timewise we are now at the end of Q3 2022.

Should the above 1-4 be in play, 2022 will be a completely different year to the one that the markets were anticipating from Q3 2021 up to now.

Until we have the actual data, we are all in the unknown, no one knows its all 100% speculation. Get ready for FAKE NEWS and as always there will be institutional “Book Selling”.

To trade with conviction, we need consensus on the pandemic.

Finally, the reaction to Omicron and how we deal with future variants, will be the playbook moving forward. Given HERD IMMUNITY will just never happen, we will all have to live with the consequences of our actions over the coming weeks as I truly believe this will define the planet for the foreseeable future.

Moving on...

The final monthly pip totals were as follows: -

NOVEMBER 2021:
Total net pips = +1,405 pips

YEAR TO DATE 2021:
Total net pips = +17,560 pips
(113.44% of my 2021 objective of +15,480 net pips)

 

1: THE WEEKLY FX PREMIUM – NOVEMBER 2021 PERFORMANCE:

1.1: MONTHLY TRADE STYLE PERFORMANCE:

 

Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Mini lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.

Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.

Therefore, on the spreadsheet using the highlighted reference points: -:

A: - This represents at USD$1.00 (Mini Lots) per trade a USD$ income of $1,405.00 which, correlates to my reporting of net pips for the month of +1,405 pips.

B: - Costs trade reflects the fact that 45 Mini lot trades in total were undertaken at a cost of 45 x USD1.00 = USD$45.00.

C: - When subtracting B from A this gives a net income total based on single Mini lot trades of USD$1,360.00.

I am of course grateful to have produced a positive “pip” result for the month.

One aspect of my trading in November that I do want to blow my own trumpet on is that I took just over 300 pips in profit on EUR/JPY trades. I lost 155 pips on CAD/JPY but the fact that I took pips from a pair that previously I had struggled with gives me immense pleasure.

On a pip gain perspective as you can see from the completed TRADE STYLE, completed trade by trade spreadsheets below almost 66% of my pips profits emanated from POSITION TRADES with the remainder from RADAR TRADES.

Over 800 pips of losses were taken on EUR/NZD short trades at the end of the month on the back of the Omicron variant headlines which brought RISK OFF to the markets.

 

1.2: MONTHLY TRADE BY TRADE REVIEW:

 

 

 

 

2: THE WEEKLY FX PREMIUM – YEAR TO DATE 2021 PERFORMANCE:

2.1: YEAR TO DATE TRADE STYLE PERFORMANCE
(including the net WEEKLY FX PREMIUM returns):

 

Basically, referring to the spreadsheet above, this reports on potential income for single-lot trades and for simplicity I have valued Micro lots at USD$0.10 per trade, Micro lots at USD$1.00 per trade and finally Standard lots at USD$10.00 per trade.

Obviously, you trade your position size to the levels you can comfortably trade your broker account without creating margin calls etc.

Referring to the year-to-date spreadsheet above and using the highlighted reference points: -

D: - The gross year to date income from all three trade styles is USD$17,560.00. This is based upon single Mini lot trades valued at USD$1.00 which, correlates with my reporting of net pips year to date of +17,560 pips.

E: - Costs trade reflects the fact that 452 Mini lot trades in total have completed so far this year at a cost of 452 x USD1.00 = USD$452.00.

F: - When subtracting B from A this gives a net income total based on single Mini lot trades of USD$17,108.00.

G: - An annual WEEKLY FX PREMIUM subscription costs CAD$1,500.00, which is approximately USD$1,200.00.

H: - After the annual subscription cost is deducted, the net income after all costs is USD$15,908.00 based off single Mini lot trades.

There is a huge amount of additional monthly and year to date trading information and reports available on my website https://www.weeklyfxdrivethru.com This can be found on my home / landing page under the tab at the top of the page titled HISTORY / PERFORMANCE, scroll down to “This year’s Performance”.

 

3: THE SOAPBOX:

TALK IS CHEAP

So, here we are, I have a few questions...

• Are we at the end of a cycle?
• Is this the end of FREE money?
• Have we witnessed nothing more than a delayed reaction from stocks?
• Has the FED really comes to terms with reality?

I have been studying a huge amount in 2020 and 2021 about mindset and how to keep positive, not overreacting to situations but being more qualified with my responses to situations. Obviously, I need a good deal of information to ensure that my reactions are justified.

I mention this because in the past, without being too cynical, the FED has always flattered the markets and then when push comes to shove, they more often than not, disappoint.

Are we back at the get ready to be disappointed crossroads once again?

Look, I get it...

The markets crapped the bed on the back of the Omicron variant. But at the back of my mind shouldn’t the markets have reacted this way when it was known that TAPERING would end, and a tightening cycle would start soon thereafter. Should this reaction have not been months ago?

I recall back in 2018 when we had the TAPER TANTRUM, I think we saw about a 25% pullback with the S&P. Are we off there again with the same pullback percentage?

 

 

 

Notes from the chart above:

1. We are at trend line support c.4,500.
2. From the 4,750 highs (November 2021) a 25% pullback based off the COVID lows of 2,180 (March 2020) would take the S&P lower to 4,100.
3. Basically back to the 161.8% Fib from the last move up from October 21st, 2021, to the highs of 4,744 on November 21st, 2021.
4. This move is entirely possible. But is it likely?

At the back of my mind, there is the niggle about “Market Confidence” and how inter-twined the FED is in supporting equities. The Fed has fucked up every other market, this is possibly the one that they simply cannot afford to screw with.

I always feel that if a “Sell-Off” or a “Pullback” is done in a disciplined way the market reactions are nicely contained. A couple of big volatile moves screws with the heads of consumers on Main Street, if they perceive that there is a problem it shatters their confidence to spend. With the ultimate consumer society, the consumers need confidence to keep flashing the plastic.

Whilst the remaining move lower to meet with a 25% pullback is not that far off based upon current pricing:

What happens if the pullback extends much lower?

This is the $64,000.00 question.

I believe that the FED will step in. I believe the FED will do whatever it takes to encourage a BUY THE DIP....

All we are hearing at the moment is all FED speakers talking HAWKISH... TALK IS CHEAP.

Given we have an Omicron presence, the FED along with other Central Banks has the reason of the century to delay any tightening. I always believe that Central Bankers are in the main DOVES. They will always find a reason to cut interest rates and a problem associated with raising interest rates.

Out on Twitter last week, I saw the following tweet.

 

 

I read the tweet above and thought that process sums up the mentality of the equity market traders and is probably 100% what the FED hopes will happen. The only factor that plays here is that there is a belief that the FED will actually act.

Last Friday we had the U.S. Jobs Data via the Non-Farm Payrolls report (NFP). The headline numbers upon initial glance did NOT get the juices flowing: -

• Jobs Gained in November 2021: +210,000 versus 550,000 expected
• Unemployment Rate 4.2% versus 4.5% expected
• Participation Rate 61.8% versus 61.6% expected
• Wage Growth 4.8% versus 5.0% expected
  Previous was 4.9%

Overall, the above gives a quite positive picture BUT people just aren’t returning fast enough to fill job vacancies and for many companies desperate to hire this is a big problem. By implication this results in constraints growth and wages offered to fill vacancies are increased, with those costs passed onto consumers and thus we have an inflation spiral.

All the data points to a more persistent inflation, which means you can understand the thought process resulting in the outcome that equals that the FED needs to act.

One can be cynical of course.

Had the NFP numbers been really strong above 550,000 the requirement for the FED to act sooner on tightening would have been understood greater. We got a weak number, which I can imagine many pundits would pass off as it’s all just a SUPPLY PROBLEM.

Basically, there are always two ways to look at the facts and multiple possible outcomes. Right now, it has been decided it's a “Done Deal” that the FED will TAPER faster and that the tightening process will start sooner than maybe thought. The simple truth is the NFP numbers could have been anything.... we are TAPERING.

So we TAPER but are we going to tighten in line with what the market expects. Without doubt there are some HAWKISH tones in the FED and even greater HAWKISH tones in the markets.

I am just not 100% believing that the FED will entertain a timetable on Monetary Policy Tightening until the TAPER is over and that more data is provided over Omicron.

Over the past week, Jerome Powell and fellow FOMC members, Mary Daly, Randy Quarles, and Raphael Bostic have all talked about a faster TAPER even with Omicron in the picture.  With U.S. inflation set to hit 7% probably this coming week, I would imagine we should be TAPERING at least USD$30Billion per month.

The markets are expecting at least 3 interest rate hikes in 2022. In normal circumstances one would agree to that number of rate increases given the backdrop. Omicron is the concern, so I do think TALK IS CHEAP with FED officials.

No responsible Central Banker is going to leap in raising rates and then reverse them quickly, that would show poor understanding of the data, weakness and it would create a lack of confidence in the FED from the market that they cannot effectively manage.

DOVES are DOVES and will always remain DOVES... TALK IS CHEAP. The fear of a f*ck up with policy will drive their actions. I believe Powell will when push comes to shove be very cautious.

 

4: THE EDGE:
(SOME OF WHAT’S ON THE OTHER SIDE)
(This section of the blog is exclusive for WEEKLY FX PREMIUM subscribers)

4.1:  CURRENCY PAIRS (CHARTS) ON MY RADAR:

4.1.1. AUD/CAD:

4.1.2. NZD/CAD:

4.1.3. EUR/JPY:

4.2: JEROME POWELL GETS THE NOD & FLEXES:

4.3: EUROPE – THE COVID RESURCHANGE, INFLATION & SUPPLY ISSUES:

4.3.1. COVID-19 GERMANY:

4.3.2. COVID & POLITICS - AUSTRIA:

4.3.3. COVID AROUND THE EUROZONE:

4.3.4. INFLATION & SUPPLY CHAIN ISSUES:

4.4: THE BANK OF ENGLAND TO ACT?

4.5: WHAT NOW REGARDING TRADING INTO THE YEAR END?

 

5: THE MACRO / FUNDAMENTAL VIEW:

This short section of the blog looks forward.  I share my macro / fundamental thoughts and views for the coming 3-6 months on factors to consider from my Macro, Fundamental and Geo-Political perspective.

Below are a list of bullet points, that are as relevant today as they were several weeks ago.

• Supply Chain issues continue
  No end in sight soon
  Omicron variant potentially exacerbates this issue.
• Shortages risks
• Inflation risks appear far from TRANSITORY
  Powell has now deleted TRANSITORY from the FED dictionary.
• Energy Crisis continues
• Zero Growth
• Credit Default risks are rising
• Debt issues are intensifying
• Unemployment / Jobs
• Pandemic 4^th wave lockdowns in Europe
  (Austria, The Netherlands, Belgium, Norway, and Germany)
• Compulsory Vaccinations in Austria and soon in Germany.
• Pandemic cases numbers rising once again
• Pandemic death rates increasing
• ICU Beds in shorter supply
• Lots of Health Workers leaving industry due to stress issues.

A little more meat to add to the bullet points...

The timetable moving forward looks desperate to get full traction in FX.

• It will take about 2 weeks or so for the WTO and Pharmaceutical Vaccine companies to get the full scope of intensity, transmission ease and efficacy of the Omicron variant.
• This projected timetable coincides with the week commencing 1th December, which has CENTRAL BANK Monetary Policy Statements due from the FOMC, BOE, and the ECB to name just three out of 6 announcements that are scheduled.
• I just can’t see these meetings being as HAWKISH as the markets expect because of Omicron.
• The week after we have the start of the “Silly Season”, Christmas and New Year holidays. Hardly a time for the major financial institutions to get positioned up.

I hate to be a killjoy but there is more to consider.

• What happens if the Omicron variant requires an updated vaccine to maintain a decent efficacy rate?
• I read that will take about 90-100 days to produce and test.
• We are now at best at the end of Q1 2022.
• To get the updated vaccine in “arms” to a number that is adequate for increased protection. Given previous rollouts we are looking at least 6 months., maybe longer. At the very best timewise we are now at the end of Q3 2022.

Should the above 1-4 be in play 2022 will be a completely different year to the one that the markets were anticipating from Q3 2021 up to now.

Any future increase in lockdowns will only fuel the SUPPLY CHAIN issues and drive-up inflation pressures. The question for me revolves around the consumers desire to spend once the Christmas holidays are gone.

INFLATION, SUPPLY CHAIN ISSUES and ENERGY PRICES will be under intense scrutiny moving forward and will in my opinion drive the media headlines in between the pandemic news.

The Central Bank interest rate hiking cycles that have been the only headline in town over the past few weeks, I think will take a back seat given the pandemic uncertainty.

Although it will be delayed, inflation pressures will intensify however, THE CENTRAL BANK DIVERGENCE TRADE is the way forward for me as a long-term trader. The only issue is, I have will now to face a RACE TO THE TOP, instead of the previous 12 years of the Central Bank interest rate policy competition of THE RACE TO THE BOTTOM?

It is too early to say, but if the recovery stalls. Travel and Hospitality will be hit very hard. Market accommodative policies will be back again. With Job vacancies at all-time highs those who may have to leave hospitality may switch and never go back, which will be a huge problem further down the road.

CAVEAT:

Markets do overreact.

To quote a phrase well used in the “Wild West” – “Shoot first asked questions later”. The markets feed on FEAR and GREED. Right now, we have a FEAR driven market driven by uncertainty.

The news cycle is moving fast, and many will use the Omicron strain as an excuse to wind back positions and commentaries about both market expectations and possible FED tightening.

So, we will probably be on hold and trade mostly sideways thru the end of the year once the dust settles. BUT, never rule out the BUY THE DIP mentality that exists on Wall Street.

If you resonate with my long-term MACRO THOUGHTS and want to get into the trades with me as I develop positions, you will need to subscribe to the WEEKLY FX PREMIUM at https://www.weeklyfxdrivethru.com

 

6: 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.

 

AVERAGE GAINS ARE WHAT MATTERS

 

 

We all tend to get swept up in the moment, experienced traders if being truthful aren’t immune to this reaction. If you have strung together a recent good streak in positive profitable trades, it means that you are naturally going to feel good about yourself and that everything around you is fine.

On the other hand, with a few bad days in a row, you feel in a different zone and your mindset is far from positive, it is decidedly negative.

Neither of these sentiments whether they be positive or negative is accurate.

The emotional effects that ensue when things go strongly in a particular direction are fascinating. Whether it be the high of a positive trading streak or the low of a negative desperation period of trading, they both cause tunnel vision. You possibly end up focusing on the little picture because its more recent and vivid, but this perception leaves out the big picture and doesn’t give an accurate idea as to how you are really performing as a trader.

Always focus on the BIG PICTURE and the LONGER-TERM.

It really doesn’t matter if you have had 100+ positive trades back to back and at some time in the future all those profits are wiped out. In the same vein, it doesn’t matter if you’ve had a bad week, as long as you recover from your losses.

The way I look at things is LONGER-TERM.

If you really want to see how your trading is doing, look at your monthly performance.

Look at your year-on-year performances.

As long as they are positive and growing you are moving forward.

Bad months, and we all have them can be excused if you have made an overall profit on an annual basis.

My approach now is smaller positions wider stops, greater flexibility, which allows for an increased more consistent return. Not for everyone BUT it works for me and fits nicely into my style of trading.

As always... Trust your TRADE PLAN. Always PLAN YOUR TRADES and TRADE your PLAN. This drives consistency and trading longevity.

 

7: CLOSING THOUGHTS:

7.1: THE WEEKLY FX PREMIUM – SUBSCRIPTION INFORMATION

If you like my approach to the market and are wondering what my trades are like from, a live perspective and what is the WEEKLY FX PREMIUM all about, check out my website https://wwww.weeklyfxdrivethru.com

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 via Twitter, TwitLonger and ZOOM.

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.

 

7.2: THE LAST DROP

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

 

Scott Pickering
The Pip Accumulator
Twitter: @pipaccumulator
https://weeklyfxdrivethru.com/disclaimer/

BLOG VERSION: #434 FREE NEWSLETTER
DATE: 5^th December 2021