Currency
Earlier this week, the U.S. currency erased some losses against the euro, yen and Swiss franc. However, the greenback moved lower against the British after data showed that construction output in the U.K. rose at the fastest rate since August 2007 in January, suggesting that the economic recovery is continuing. The U.S. dollar also declined against its Australian counterpart after the Reserve Bank of Australia left rates on hold at 2.5%. What impact did these numbers have on major currency pairs? If you want to know our take on this question, we invite you to read the following part of this Forex Trading Alert.
In our opinion the following forex trading positions are justified – summary:
- EUR/USD: none
- GBP/USD: none
- USD/JPY: none
- USD/CAD: none
- USD/CHF: none
- AUD/USD: long (stop-loss order: 0.8728 and an upside target: slightly below 0.9075)
EUR/USD
Looking at the above chart, we see that the situation hasn’t changed much as EUR/USD remains slightly below yesterday’s high. As you see on the daily chart, recent days have formed a consolidation (marked with blue). From this perspective, it seems that as long as the pair is trading in this area, further gains and declines seem limited. Please note that the lower border of this formation is reinforced by 70.7% Fibonacci retracement level and the 200-day moving average. Additionally, the CCI and Stochastic Oscillator generated buy signals, which will likely trigger an upward move (and a breakout above the upper line of the consolidation range) in the coming day (or days).
- Very short-term outlook: mixed with bullish bias
- Short-term outlook: mixed
- MT outlook: mixed
- LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.
GBP/USD
Quoting our last Forex Trading Alert:
(…) the breakdown below the lower border of the rising wedge, (…) triggered a sharp decline that took GBP/USD to its first downside target. (…) If this support level (…) is broken, we will see further deterioration and the next target for the sellers will be the long-term declining support line (marked with red). (…) Please note that the latter (bearish case) is reinforced by the position of the indicators.
On the above chart, we see that GBP/USD reached its next downside target – the long-term declining support line (marked with red) and rebounded earlier today. If this strong support line encourages the buyers to push the order button, we will likely see a corrective upswing and the first upside target will be yesterday’s high. However, if it is broken, we will see further deterioration and the next target for the sellers will be around 1.5985 where the price target for the breakdown below the lower border of the rising wedge is. Such price action might make us consider opening short positions. Nevertheless, taking into account the position of the indicators (which are oversold), it seems that the first scenario is more likely in the coming day (or days).
- Very short-term outlook: bearish
- Short-term outlook: mixed with bearish bias
- MT outlook: mixed
- LT outlook: mixed
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.
USD/JPY
In our last Forex Trading Alert, we wrote:
(…) the pair broke below the January low and almost reached the 50% Fibonacci retracement level. (…) USD/JPY also reached the declining support line (marked with green) based on recent lows. If this support zone encourages buyers, we may see a corrective upswing.
As you see on the above chart, we noticed such price action earlier today. USD/JPY rebounded after two small drops below the support zone. Despite this drop, the buyers didn’t give up and managed to push the exchange rate higher. Please note that, the CCI and Stochastic Oscillator are close to generating buy signals, which is a positive signal. Nevertheless, we should keep in mind that the pair remains below the previous lows and the size of an upward correction is still quite small. Therefore, it seems justified to wait for further improvement (for instance a comeback above the previous low) before opening long positions.
- Very short-term outlook: bearish
- Short-term outlook: mixed with bearish bias
- MT outlook: bullish
- LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.
USD/CAD
On the above chart, we see that the situation has deteriorated slightly as USD/CAD declined below the upper line of the rising trend channel once again. As you see on the daily chart, we saw similar price action yesterday, but the pair quickly invalidated the breakdown. Although this was a positive sign, as it turned out earlier today, the improvement was only temporary. From this perspective, what we wrote in our last Forex Trading Alert remains up-to-date.
(…) the breakdown is not confirmed at the moment. It seems that if the pair closes the day below this strong support line, we will likely see further deterioration and the first downside target for the sellers will be around 1.0952 where the Jan.22 low is. On the other hand, if the buyers managed to push the exchange rate above this line once again, we may see an upswing to Friday’s high. Nevertheless, taking into account sell signals generated by the indicators it seems that the first scenario is more likely.
- Very short-term outlook: mixed with bearish bias
- Short-term outlook: bullish
- MT outlook: bullish
- LT outlook: bearish
Trading position (short-term): In our opinion, if the pair closes the day below the upper line of the rising trend channel and declines below the Jan. 27 low at 1.1030, we might consider going short.
USD/CHF
Looking at the above chart, we see that the situation hasn’t changed much as USD/CHF remains in a consolidation range (marked with blue) slightly below the upper line of the trend channel. From this perspective, what we wrote in our last Forex Trading Alert is still up-to-date also today.
(..) an invalidation of the breakout above this support/resistance line is a bearish signal – especially when we factor in the position of the Stochastic Oscillator, which generated a sell signal (…) it seems that further deterioration is just around the corner, and the downside target for the sellers would be the lower border of the trend channel, which intersects with the previously-broken short-term support/resistance line (marked with dark blue) at the moment.
- Very short-term outlook: mixed with bearish bias
- Short-term outlook: mixed
- MT outlook: bearish
- LT outlook: bearish
Trading position (short-term): In our opinion no positions are justified from the risk/reward perspective.
AUD/USD
Quoting our last Forex Trading Alert:
(…) in our opinion, the first signal of an improvement will be a breakout above the short-term declining resistance line based on the Oct.23 and Jan.13 highs (marked with dark blue) and an increase above the very short-term blue rising resistance line.
As you see on the above chart, we see that AUD/USD rebounded sharply and broke not only above the resistance zone created by December lows and the Jan.22 high, but also above the 23.6% Fibonacci retracement level (based on the entire Oct.-Jan. decline) and the short-term declining resistance line. This is a strong bullish signal. Please note that with this upswing, the pair reached the very short-term blue rising resistance line. If it is broken, we will likely see further improvement and the next upside target will be the 38.2% Fibonacci retracement level, which corresponds to the Jan. 13 high. Looking at the position of the indicators, we see that they still support the bullish case.
- Very short-term outlook: bullish
- Short-term outlook: mixed with bullish bias
- MT outlook: bearish
- LT outlook: bearish
Trading position (short-term): In our opinion, opening long positions is a good idea: stop-loss order: 0.8728 and an upside target: slightly below 0.9075. The above is not an investment / trading advice and please note that trading (especially using leveraged instruments such as futures or on the Forex market) involves risk.
Thank you.
Nadia Simmons
Forex & Oil Trading Strategist
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Disclaimer
All essays, research and information found above represent analyses and opinions of Nadia Simmons and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Nadia Simmons and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Nadia Simmons is not a Registered Securities Advisor. By reading Nadia Simmons’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Nadia Simmons, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
While everyone is focused on the massive outflows in COMEX registered gold inventories and the gold ETF, GLD, it seems that an important evolution in silver is passing unnoticed. In what follows, Ted Butler, precious metals analyst specialized in COT analysis, reveals a remarkable insight in the physical silver market.
Butler’s calculations show that JPMorgan (JPM) has piled up the largest holding of physical silver in modern world. Since the silver price peak in May 2011, the bank has accumulated between 100 and 200 million ounces of physical silver (if not more). The equivalent in metric tonnes is between 3,110 and 6,220 tonnes.
To put that number in perspective, it surpasses the amounts held by the Hunt Brothers or Warren Buffett (in his investment company Berkshire Hathaway).
On a yearly basis, some 100 million ounces of silver reach the investment market, which translates into 250 million ounces between May 2011 and December 2013. That has a value of approximately $5 billion. Given the size of the too-big-to-fail bank, that amount of silver, how large it may seem, is easily affordable:
- JP Morgan’s quarterly profit is $5 billion (approximately 200 million ounces of silver).
- In 2013, the closing of the gold short position, as well as the 20,000 contract reduction in the silver short position, netted JPM more than $3 billion.
- In COMEX silver, JPM was the largest buyer in 2013.
These facts make it reasonable for JPM to be a big buyer in physical silver.
JP Morgan knows the financial markets better than anyone else. It is no coincidence that the bank is (ab)using that knowledge to their own benefit. Evidence of that lies in the record number of penalties for which they have been accused because of market manipulation.
Butler explains that JPM was able to accumulate so much silver without being noticed through the big silver ETF, SLV. In his weekly commentaries to his premium subscribers, he has explained on numerous occasions that the physical silver holdings in SLV have been largely intact on a net basis, but there was a large “churn” in the holdings, which allows for a large buyer to go unnoticed. For instance, 60 million oz were liquidated in the two months after the price smash in May 2011; they were right away absorbed by a big buyer. The data are available on this site http://about.ag/SLV/.
Furthermore, the conclusion that JPM has been the big buyer in physical silver is confirmed by the following facts:
- The growth of metal in the JPM COMEX silver warehouse over the past three years was 45 million oz.
- The recent delivery stopped by the bank in December/January COMEX deliveries was 15 million oz.
JPM, being a master in manipulating financial markets, has also (ab)used their ability to set the silver price in the leveraged paper COMEX market, while simultaneously benefiting from lower prices to accumulate the physical metal. In Butler’s own words:
“Causing the price of silver to be depressed via a concentrated short position on the COMEX along with the ability to crush prices in an HFT second, to then scooping up physical metal (and covering paper shorts) at the self-created depressed prices.
What this also highlights is the madness and illegality of having the paper price on the COMEX setting the price in the physical market. If JPM hadn’t been capable of rigging silver prices lower in 2013, it would never have been able to buy back 100 million ounces of short paper contracts and buy many tens of millions of physical silver as well.”
The underlying motive for JPM to accumulate such a large amount of silver is most likely related to the fact that the bank was on the wrong side of the market when the silver price exploded.
When silver went through its historic rally in March and April 2011, the weekly COT data indicated that speculators did not rush into COMEX futures, which means that the peak in the silver price was not driven by speculation in silver futures. On the other hand, there was buying in the big silver ETFs, including record short selling in SLV.
“So, if it was not highly leveraged speculative paper buying on the COMEX that drove silver prices to the peak, it had to be buying in the physical market (including the ETFs). Therein resides my conviction that we were on the cusp of the first wholesale physical silver shortage in history in April 2011. And clearly it was the investment side of silver’s unique dual physical demand (investment/industrial) that pushed prices higher, as there was no great rush by industrial users into physical silver.
JPM was on the wrong side of the silver market: neither the total commercial net short position nor the concentrated short position of the four largest shorts (including JPM) increased in any way and, in fact, both began to decline in April. This implies that speculators, particularly the technical funds, not only didn’t add to long positions, but reduced long positions on the $15 price jump from March 1, 2011.”
What does this indicate? The explanation that makes most sense is that JPM realized that it was on the wrong side of the trade, after having discovered how tight the physical silver market was. Consequently, the bank had to crush the silver price with their HFT tricks in order to reverse the trend. By doing so, JPM could regain control over the silver market.
Meantime, JPM has built the longest position in physical silver in recorded history. It holds its grip on the silver price through its short corner in COMEX silver.
Ted Butler has written time and time again that the extent to which JPM adds new short contracts on the next silver rally will determine the strength of the rally. Simply put – if JPM doesn’t add new short positions, the manipulation is over. Someday, JPM won’t add to silver short positions and they, more than anyone else, will be best positioned to realize massive gains.
Further reading
JP Morgan Holds 2 Corners In The Gold And Silver Market
JP Morgan’s Perfect Silver Manipulation Cannot Last Forever
Highest Concentrated Position In Silver In History
The Great Disconnect Between Paper & Physical Silver
This article is based on a previous commentary of Ted Butler’s premium service. Readers are highly recommended to subscribe to the service on www.butlerresearch.com as it contains the highest quality of gold and silver market analysis. Ted Butler is specialized in precious metals markets analysis for 4 decades.
Japanese stocks are in a “correction”. U.S. stocks plummeted yesterday and are down 5% in 2014. Emerging markets are a mess. The VIX, a “fear” indicator, jumped 9% yesterday to its highest level in months.
Fellow investors, there’s a lot out there to make us anxious. A lot of uncertainty. A lot that could go wrong …
In a moment, I’ll share with you how me and my team at Stock Advisor Canadaare preparing for what happens next — be it a “correction” or a “crash” or something else — and how you can join us.
But first, I want to share an epiphany I had yesterday …
Just as the sell-off in the markets began heating up yesterday, I kissed my wife and kids and set off for Toronto’s Pearson airport. My destination: Fool Global Headquarters, located outside Washington, D.C.
I’ve been to Fool HQ plenty of times. What struck me this morning as I was talking stocks with Andy Cross, the Fool’s Chief Investment Officer, is that among Foolish investors, good days and bad days elicit the same reaction.
In good times and bad, Fools keep perspective. There’s no panicking among the analysts when sell-offs happen. It’s all about calmness and composure.
Which is how you can take advantage of terrific opportunities when they present themselves …
A quick quiz for you: Is the following true or false?
- (Poor Chinese manufacturing data) + (Weak Argentinian Peso) + (Fed tapering) = S&P/TSX Composite down 447 points over a 7-day stretch
The answer: We don’t know!
Nobody does. But that’s the equation that many are using to explain the market’s tumble over the past week or so.
In our mind, there’s really only one thing to do when the market goes into one of these slides. It’s the secret to how, at Stock Advisor Canada, we’re preparing for a market correction.
We’re hoping and praying that it continues!
The Stock Advisor Canada team loves it when this happens!
You may be scratching your head right now and wondering what’s gotten into me. Let me explain …
As long-term investors that plan to be buying and holding stocks for many, many years, it shouldn’t take a Fool to see that buying when prices are low(er) is better than putting our hard-earned savings to work at higher prices.
What we’re doing
Earlier, I promised to detail how my team and I at Stock Advisor Canada are preparing for what happens next, whether or not a correction comes … as well as how you can do the same:
1. We’re loading up our watch list
I have several stocks I’m “watching” — businesses that I like, but would like a lot more in a pullback! — and I’m adding more as the markets drop.
You see, in a declining market, stocks are often sold indiscriminately.
As a stock owner, it can be frustrating to see great businesses fall just as hard as lousy ones. But as a stock buyer, falling markets present a fantastic opportunity.
Stock Advisor Canada analysts have identified a half-dozen terrific stocks that we believe will beat the market over the long haul. If you’re looking to take advantage of a falling market, these two resources are a great place to start:
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In it, you’ll get the “buy thesis” for this dynamic growth stock that started small in 1970s Toronto — and is now a major player in the entertainment industry.
2. We’re NOT trying to time the market
The only thing tougher than trying to predict a stock market crash is predicting a stock market rebound.
Or to put it more eloquently: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” That’s according to famed mutual fund manager Peter Lynch, one of the legends of the money management industry.
As Fools, we believe in bottom-up, long-term investing. We believe in adding money to stocks when you have it — not when you think we’re at a “bottom” or have hit some momentum landmark.
As another famous investor said, the best time to invest is when you have the money.
That’s why our Stock Advisor Canada service presents our two TOP stock ideas every single month. Our analysts will provide you the information you’re looking for … with our two top stock recommendations of that month — fully vetted and fully explained. So you can decide for yourself whether you want to own the companies we’ve recommended.
But Foolish investing isn’t just “buy and forget.” Stock Advisor Canadafeatures Weekly Updates — so that once a stock’s been recommended, we keep you up to date on our views and deliver them directly to your inbox.
That’s right. We don’t simply throw you ideas and forget about them. We keep you up to date with what you own.
Occasionally, for good reasons or bad, we’ll also issue official sell recommendations – because we don’t only want you to know what to buy… We also want you to know when you should sell what we’ve recommended. So we provide our members with timely sell recommendations whenever we decide a stock is no longer worth owning.
3. We’re seeking “motley” opinions and perspectives
Community is core to The Motley Fool. In times of market turmoil, we like to seek out others to get perspectives we may not be considering. In other words, we want “motley” opinions on our stocks and our investment thinking.
And we can offer you the same. In fact, if you click here to become a member ofStock Advisor Canada today, you can participate in tomorrow’s “Stock Advisor Canada Analyst Town Hall,” an open, two-hour live chat during which YOU can ask our analysts any investment-related question on your mind.
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But there’s more than just this special event. Our service also offers discussion boards, where you are never alone as a Fool. On our boards, you can ask questions, post thoughts, and interact with our Foolish analysts and other members.
We also offer a members-only “Ask the Fool” feature, where you can send the team questions and have them answered directly via email.
Your next move
At Stock Advisor Canada, we don’t believe in predicting things that cannot be predicted. We focus on finding excellent businesses trading at fair prices.
We tell our members that if we can find great businesses, hold them for the long term, and have the right temperament along the way, we’ll put the astounding power of the stock market to work in our favour.
I hope you’ll join us today. If you click the button below, you’ll be on your way to downloading our terrific premium reports, Top Stocks 2014 and An Out-of-This-World Canadian Growth Stock. You’ll get an invitation to tomorrow’s Analyst Town Hall, our two-hour open chat during which you can ask our analyst team any investment-related question you please.
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Never fear
And when you subscribe to Stock Advisor Canada through this offer today, you’re immediately protected by The Motley Fool’s 30-day FULL money-back subscription guarantee.
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If you’re not bowled over by the service we provide — by our monthly recommendations, our premium reports, our Analyst Town Hall tomorrow, our discussion forums — simply cancel at any time within your first 30 days and we’ll refund your subscription fee in full. That’s how confident we are that you’ll be delighted by what Stock Advisor Canada has to offer you and your portfolio.
But I’m confident that once you have a closer look at Stock Advisor Canada, you’ll like what you see. Click below to find out:
Sincerely yours,
Iain Butler
Adviser, Stock Advisor Canada
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Rogers prefers gold over gold mining shares and divisible coins over bullion, but says “there’s nothing in precious metals that I’m tempted to buy at the moment.” Indian import tariffs he views as the single biggest drag on the gold market currently.
“They’ve got a huge balance of trade deficit and the three largest parts are oil, gold and cooking oil. They cannot do anything about oil or cooking oil, so they’re attacking gold, blaming their problems on gold. Gold has not caused their problems, gold is a symptom of their problems, but politicians are pretty simple-minded people and they look for the easy answer.”
For early 2014, Rogers is therefore long inflatable equities and neutral on gold, but longer term, he expects to short junk and government bonds and is ultra bullish on gold. “Gold will become one of the only refuges around,” he says. “That’s not this quarter.”
Jim Rogers started trading the stock market with $600 in 1968.In 1973 he formed the Quantum Fund with the legendary investor George Soros before retiring, a multi millionaire at the age of 37. Rogers and Soros helped steer the fund to a miraculous 4,200% return over the 10 year span of the fund while the S&P 500 returned just 47%.
Did you miss Michael Campbell’s World Outlook Financial Conference last weekend?
5:36pm – Friday, January 31st, Vancouver BC
I don’t remember being as excited about a program as I am about this year’s World Outlook Conference. There is big stuff happening. And you are at the right place, and this is clearly the right time. One of the things we’ve done at the Outlook Conference, I think, is given remarkable advice over the years – well, it’s been 25 years actually. You do that by bringing together the best analysts in the English speaking world. And that’s what I do.
Michael Campbell
Did you miss Michael Campbell’s World Outlook Financial Conference last weekend?
Don’t worry – we filmed it all, so you can watch – online, where and when you want – as often as you want. See short, mid and long term forecasts on world markets, gold, oil and gas, high tech, real estate and commodities. Plus you’ll get specific stock picks, favourite trades and portfolio protection ideas.
CLICK HERE for the complete agenda and list of speakers including Martin Armstrong, Peter Grandich, Ryan Irvine and 8 other speakers.
Or ORDER and start watching right now!
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I know Mike is a very solid investor and respect his opinions very much. So if he says pay attention to this or that - I will.
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I've started managing my own investments so view Michael's site as a one-stop shop from which to get information and perspectives.
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Michael offers easy reading, honest, common sense information that anyone can use in a practical manner.
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A sane voice in a scrambled investment world.
~ Ed R.
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