General Notes:
Today is Memorial Day in the States and A Bank holiday in the UK. Big movements should not happen today but we never know with the extra energy of the rating agencies these days.
For this last piece we would like to talk about the role these agencies are playing now. The CDOs rating debacle have caused one thing: In fear of being blamed one more time, the agencies are now acting in a preemptive manner. Their actions are quick and sometimes brutal.
Countries are downgraded on problems that were there for years just because the "market" is pushing them to do so. Who is the "market"? You guessed it: The CDS raiders and financial institutions that would like to profit from the demise of sovereign debt ridden countries.
Greece was small potatoes but Spain, Japan, the UK and even the US could be all in danger because of the same flaw: Too much debt and to little growth. The agencies are simply putting the "formal" stamp on it.
If anyone would like to solve the problem, they would do what they always did in this case for companies, individuals and even previous countries (Argentina, Russia) meaning restructuring the debt until the normal growth could cope with it. But for some reason, this simple, effective and back tested solution is not even mentioned. Only bailout after bailout that move more and more debt in addition to the old one.
Leadership is lacking in this area, even if we can see some points of lights (like the ban on the NAKED short selling). In short, the rating agencies are one more piece in the puzzle of the current monetary system foundation destruction.
We are hopeful that in the attempt to create a better system, these agencies could be localized enough so that they would not accentuate global economic problems.
On a private note: It was a pleasure to write for you all, and we hope that we could do it again in the past. All the best and success in all your trading endeavors.
AUD/USD Visual Trading Update
Price and Indicators Technical Overview:
The double bottom did hold and we see now the starting phase of a corrective move. Will it go very high? It depends on the EURO and China but also on the short covering action in the pair. A normal correction is between a third and two third, so they are the probable targets. Look at the Fibonacci ladder for levels. The pair has already achieved the 1/3 of the distance but the speed of this move is quite disturbing. No trend.
The recurring feature in many risky assets is the positive divergence between price and the RSI-ADX combination: When you see a double bottom (or a new low in price) with a positive divergence in the RSI, while we had already an extreme in the ADX (trend acceleration indicator), it is usually a very good sign for a change in direction (daily chart).
EUR/USD Visual Trading Update
Price and Indicators Technical Overview:
Short covering or not, it is still a fractured pair and we need to see some more upside action before we know that the trend has changed. Maybe double bottom here also? We look at the ADX for the main guidance here because the extremes in it (and the reversal) are showing that the pair could have reached and passed the highest conviction level for shorting. A move up (conviction for the other side) could take a while…
The recurring feature in many risky assets is the positive divergence between price and the RSI-ADX combination: When you see a double bottom (or a new low in price) with a positive divergence in the RSI, while we had already an extreme in the ADX (trend acceleration indicator), it is usually a very good sign for a change in direction (daily chart).
USD/JPY Visual Trading Update
Price and Indicators Technical Overview:
You can see the exact correlation between the stock (risk) markets and this pair. It is the "funding" carry trade game that is moving the pair these days and the technicals are quite bad. In principle, we should see a test of the lows at least. Maybe a double bottom was found here? 88-95 is the very big trading range here.
The pair has found some stabilization and is creating the trending HH-HL pattern expected, but only in the 4H chart. Another positive is the return of the pair inside the weekly ascending channel. This is the factor that should be followed the most for the LONGS.
Charts Legend:
3 Price Windows: Main (Daily), Right Side (Up: 4 Hours, Down: Weekly)
INDICATORS:
Simple Moving Average (20): Green
Average of Average (9 weighted): Violet
Price Channel (20): Orange
Volume: Black
Daily separations: Black Dots
Support & Resistance price areas: Light Blue Areas
Trend lines and Channel Boundaries: Blue
Elliott Waves Counts: Black and Blue numbers
RSI (10): Blue, ADX(20): Blue
Green Wave Capital LTD (c) INFO@GreenWaveCap.com
