AVAFX Market Analysis

Here on the west coast of the good ol’  U.S. of A, I am waiting for our Frankfurt and London counter parts to get going. With that another profitable trading week will begin. At the moment, we are about 10 minutes from the Frankfurt open. Our main trading pair, the Pound/Dollar looks like it has an upside bias. It has broken resistance at the 1.5390 area. And has broken further resistance at the 1.5466 area. Everything appears to be shaping up to go long. With that said, as a trader I now implement my chosen strategy that will express my opinion. It may be right or it may be wrong. You know my m.o., just trade what you see and in the end, if your chosen method of expression has proven itself. You would have joined the ranks of the ever elusive 5% of consistently profitable traders.

May the pips be at your back – PowerTrader

(Price on 1st pane, Slow Stochastics on 2nd pane; horizontal support/resistance levels in yellow; uptrend lines in green; downtrend lines in red; chart patterns in white; 50-period simple moving average in light blue.)
4/06/2010 – EUR/USD – Price action on EUR/USD, a daily chart of which is shown, has once again tentatively broken down below a countertrend bullish retracement and the key 1.3400 support/resistance level in its bid potentially to continue the strong downtrend that has been in place since the early December high. Since that high, this currency pair has been characterized by short-term bullish retracements and consolidations followed by substantial breakdowns in the direction of the overall downtrend. The most recent breakdown occurred just today (4/06/2010) as a steep short-term parallel channel that reached a high near 1.3600 has been broken strongly to the downside. With continued bearish momentum off this channel breakdown and the tentative breach of the key 1.3400 level, the next downside support target resides around the 1.3266 level, which represents the 10-month low hit in late March. A further breakdown below that level would confirm an overall downtrend continuation and potentially target further downside support in the 1.3100 price region.

Dollar Edges Higher on Strong NFPs through Thin Liquidity, Expect a True Reaction Monday

I happen to admire George Soros quite a bit. The poor guy gets a lot of flack from many who think he doesn’t deserve the credit and admiration that has been bestowed upon him.  Yeah I know that Jim Rogers had a hand in the success of the Quantum fund for the 10 years he was there. But you have got to admit, for an immigrant who narrowly escaped his native Hungary to accomplish what he has, is absolutely a triumph in my book. Anyway here is a fantastic article that i hope you enjoy. It is from globalguru.com

George Soros’s #1 Investment Secret Revealed

George Soros — alongside Warren Buffett — is considered to be one of the greatest investors of all time. In 1994, George Soros wrote a book about his investment philosophy called the The Alchemy of Finance in which he proposes his “Theory of Reflexivity.” Soros gave his theory such a grand-sounding name so that it would sound like Einstein’s “General Theory Of Relativity.” Soros thought it would be that important.

I read it once… I didn’t get it…
I read it again…I still didn’t get it…
Now, keep in mind that I had been through Harvard Law School…
…So I was used to stirring concrete with my eyelashes…
…And getting through more turgid and bombastic doublespeak than you could shake a stick at…
But Soros made federal court cases seem like nursery rhymes.
Then one day I ran across a quote from Soros’s own son. It made everything crystal clear, but not in the way that I expected.
“My father will sit down and give you theories to explain why he does this or that. But I remember seeing it as a kid and thinking, Jesus Christ, at least half of this is bulls**t, I mean, you know the reason he changes his position in the market or whatever is because his back starts killing him. It has nothing to do with reason. He literally goes into a spasm, and it’s his early warning sign.”

Soros himself essentially went on to criticize his own theory in the next edition of the book — admitting that it was essentially incomprehensible. Those who had claimed to have understood it in the first place were just fooling themselves.

So if no one has a theory to explain the market — not even George Soros — what chance do you have to make money consistently in the markets? It turns out there is a secret to George Soros’s success. But it’s not one that you will find in books that discuss Soros’s investment philosophy — and certainly not in The Alchemy of Finance. But once you understand and apply this secret, it will make your trading life much easier — and certainly less stressful.
The “secret” to Soros’s success is not the ability of the “Theory of Reflexivity” to explain or predict the market. In fact, the secret to Soros’s success is quite the opposite. I found it buried in an interview with Soros in John Train’s The New Money Masters, in what was almost a throwaway comment:

Now I could get into how this all has to do with Soros’s admiration for the philosopher Karl Popper and the limits of human understanding, but there is no room for that here. Comments from traders who have worked with Soros are more relevant.
From James Marquez, a former Soros Chief Investment Officer (CIO):
“Soros would be the first one to tell you that sometimes his actions… look like the most rookie, odd-lot, wrong-way kind of thing, selling at the lows, and buying at the highs. But it’s much easier to understand in light of his avowed mission: to be able to come and fight another day. He says: “I don’t want to wake up broke.”
And then, Alan Raphael, yet another Soros CIO:
“When George is wrong, he gets the hell out. He doesn’t say, ‘I’m right, they’re wrong.’ He says, ‘I’m wrong,’ and he gets out, because if you have a bad position on, it eats you away. All you do is think about it — at night, at your home. It consumes you. Your eye is off the ball completely. This is a tough business. If it were easy, meter maids would be doing it.”
Contrast that with how most of us think of trading or investing:

• We develop an opinion on a stock.
• We take a position.
• We convince ourselves that we made the right decision. This is when a bad investment turns into a “long-term investment.”
• And the “smarter” we are, the worse it is. We “know” we’re right. We “know” our investments will eventually “come back.”

Now, let’s examine how Soros would look at the same situation. Here’s my take on what Soros believes.
“The secret to my success is that I know that I will be wrong. I consider it a strength to admit my mistakes. That allows me to stay in the game and fight another day.”

So how can you apply this approach in your own trading and investing? Understand that making money in the markets has much more to do with having proper exits and position-sizing (bet size) than it does the “Theory of Reflexivity” or any other hypothesis that claims to explain the market.
So the next time you come across a “can’t fail” investment idea, here’s what you should do:

• Listen carefully and see if it “makes sense” to you.
• If it reflects your own beliefs, then consider taking a position in it.
• But no matter how terrific sounding the pick, make sure that you have your exits and position-sizing strategies in place.

If the position goes against you — which some inevitably will — reframe in your mind the idea that taking a loss is a strength. Make sure you cut your losses. And like George Soros, this will keep you from “waking up broke.”

By Inyoung Hwang

Bloomberg.com

The U.S. dollar is the favorite currency of hedge-fund managers, with the Brazilian real a “distant second,” according to a survey by TrimTabs Investment Research and BarclayHedge. Fifty-nine percent of hedge fund managers say Greece’s sovereign debt crisis may spread to other European countries, though they don’t expect it to endanger the unity of the euro- region, the TrimTabs/BarclayHedge Currency Survey of Hedge Fund Managers also showed. Almost 15 percent see a “full breakup” of the zone. “Hedge fund managers overwhelmingly favor the U.S. dollar in the short term,” the report said. “This confirms other sentiment surveys and is consistent with aggressive buying of U.S. dollar index futures by speculative traders.” Fifty-seven percent of survey respondents were bullish on the greenback over the next three months, while 11.5 percent favored the real, the survey said. The yen and an “other” category led by the Australian dollar were each preferred by 8.2 percent, and the Canadian dollar was favored by 6.6 percent. The euro was preferred by 4.9 percent. The TrimTabs/BarclayHedge currency survey was completed between Feb. 11 and Feb. 22. Sixty-one managers, with average assets under management of $113 million, responded. TrimTabs is based in Sausalito, California. BarclayHedge is a research firm based in Fairfield, Iowa. To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net Last Updated: March 9, 2010 10:02 EST

For a while now I have been writting about the growing political imbalance with our largest trading partner, China. In a nut shell at this moment in history this country of 1.3 billion people ( which represents a solid 20% of the total population of earth) has the definite upper hand. Yes I know many are saying that that they still need the U.S. consumer. That may be, but we for sure very much need them to a larger degree. You see they can always find a market for their cheap wares. Now the question is can we find anyone else with the capacity of China to borrow as much as we already have. I think not.  With President Obama making his rounds through Asia. It is plain to see that both sides are defining there relationship with one another. In the coming years we will see where it all goes.

Powertrader

Foreign central banks US debt holdings fell in week-Fed

NEW YORK, Oct 8 (Reuters) – Foreign central banks’ holdings of U.S. Treasuries at the Federal Reserve fell in the latest week while agency debt holdings rose, data from the U.S. central bank showed on Thursday.

The combined holdings of Treasuries and agency securities by foreign central banks at the Fed fell by $123 million to total $2.856 trillion in the week ended October 7, 2009.

Treasuries held by overseas central banks at the Fed fell $634 million to total $2.093 trillion.

Foreign central banks’ holdings of securities issued or guaranteed by the two biggest U.S. mortgage financing agencies, Fannie Mae (FNM.P) and Freddie Mac (FRE.P), rose by $512 millionto $763.39 billion in the latest week.

Overseas central banks, particularly in Asia, have been huge buyers of U.S. debt in recent years and own more than a quarter of marketable Treasuries. China recently overtook Japan as the biggest such buyer.