Written by Barry Battista
Tuesday, November 23rd, 2010
Of the 4 trades today, Nov 23, the 2 least likely to hit did and the moves were muted. The Pending Home Sales trade actually spiked the wrong way. I will stop doing some of the less meaningful trades, like Home Sales, for awhile. Before going into tomorrows trades here is a note of caution. When things are relatively quiet and stable in the world, trades tend to move the best. But yesterday Ireland went to the EU asking for 100 billion euros to be able to meet its obligations. Though everyone knew this was coming, it sent shock waves and speculation throughout the world. It is anticipated that Spain will come looking for 500 billion at some point soon. Experience has taught us that when this kind of stuff is going on, the world doesn’t much care about home sales or any other trade as much as it would have had this not happened. And here is another piece of info we will use to our advantage. Any time the world is shocked, it runs to the dollar. Look back at the Fall 2008 meltdown as an example. The dollar went through the roof for 4 or 5 months until it became clear the earth wasn’t going to spin out of orbit. As a consequence, we will lean toward deviations that favor dollar strength in the upcoming releases.
Now, for tomorrow we have:
4:30 AM EST
GBP GDP q/q Revised – Change in the value of all goods and services.
GBP/USD
This is a quarterly release and is the second in importance of the 3 GDP releases. In May it came out at 0 and 0 (2 rows of data) with no movement. In August it was .1 and .1, with a small 9 pip spike and immediate reversal for 30 pips the other way. Ugh. Given the situation we find the world in, I will bump my triggers to .3 medium and .4 safe on the OT trading 1/4 lots on a med and 1/2 on a safe. Will use a maxspread of 5 on the Straddle and trade lightly. If this hits our triggers, and we get a Sell (a negative deviation), you might want to hold the trade for a few extra minutes due to the heavy pressure down on this pair, or at least close 1/2 and hold the other half. If it is a buy, I will get out fast.
8:30 AM EST
US Durable Goods – Change in the total value of new purchase orders placed with manufacturers for durable goods, excluding transportation.
EUR/JPY or USD/CHF
This doesn’t often deviate enough to hit our triggers but it did in August. It came out at -4.3 and -2.7, with an anemic 15 pip spike. No meaningful deviation since. Again, due to world conditions I would be real cautions with this and particularly if it is a Sell. Given the August price action, I would recommend 4 medium and 6 safe on the OT, trading 1/5 your normal lots on a med and maybe 1/3 on a safe. If it is a Sell, get out fast. For a Buy, you could close 1/2 your trade immediately if you are above 20 pips positive and hold the rest for a bit to see if we get any follow through. Otherwise close the whole thing and hopefully you got enough to buy your turkey dinner.
This will be the last trade for the week. For those that celebrate it, I hope you all have a peaceful and happy Thanksgiving.
Barry
