The Best Currency to Short Right Now

By Sean Hyman

There's never been a better time to be a short-seller.

Right now stocks are slipping and sliding all over the place, overall trending downward. And it doesn't look like this downtrend is going anywhere soon.

Short-selling can help you protect your overall portfolio when stocks start sliding off the map. Also, you can earn some of the fastest profits from short-selling in "down" markets because markets drop a lot faster than they rise.

We saw that over the last few weeks as the Dow Jones Industrial Average and Standard & Poor's 500 Index erased all their 2011 gains in a couple of days. That's pretty common. In fact, it usually takes an index all year to gain 10% to 20%. Then it can drop as much as 30% in a week.

So if you were able to short stocks during those times, you would make a decent return for a full year within weeks, or even days.

However, it's not always easy to execute short- sells in the stock market - which is why I always look for the best short-selling opportunities in foreign currencies first.

And I just found the ideal short-sell in the f orex market to play as markets fall.

Why to Use the Forex Market for Short-Selling

Many countries are instituting a ban on short-selling some stocks, making it hard to take advantage of market downtrends.

France, Spain, Italy, Belgium, Greece, Turkey and South Korea recently have created some rules against short-selling.

With a short-selling ban in effect, it means even if you believe a stock will drop in value, you can't try to profit off that decline by simply shorting stocks.

Luckily, there will never be any short-selling bans in the f orex market.

You see, currencies are traded in pairs. When you buy the first currency listed in the pair, by default you're also shorting the second currency in the pair. And if you short the first currency listed in the pair, you're automatically buying the second currency.

So if I bought the EUR/USD (the euro vs. the U.S. dollar), I'm buying euros and shorting dollars at the same time. If I shorted EUR/USD, I'm short the euro and long the dollar.

In other words, you're always shorting something. That's why there will never be "short-selling bans" in the spot f orex market.

It also means that with currencies, you can just as easily profit in a "down market" as you can in an "up" market.

Even better - what if there was a "stock-market sensitive" currency in the forex market: As stocks dive, this currency would dive; as stocks rise, it would rise.

Thankfully, that pair does exist.

The Currency Short Sale to Make Now

It's the AUD/USD (Australian dollar vs. the U.S. dollar). Take a look at the accompanying chart .

The AUD/USD has been in an uptrend as long as stocks have. This pair also traded sideways just like stocks did. That caused it to form a chart pattern called a "double-top" at the same time that stocks did.

Now it's started its downtrend, just like stocks.

Simply shorting this AUD/USD pair is like shorting the Dow or S&P 500. And since it's a currency pair, it's much easier to short-sell it in the f orex market.

It's one of the best hedges you can use to take the sting out of your portfolio as stocks drop. If the Dow really starts falling, your AUD/USD short position will grab even more profits.

Most people don't realize that such a simple solution is out there, but it is. Therefore, take advantage of this time in market history. Simply shorting the Aussie dollar in the f orex market is the easiest way to do that.

See the original article >>

Aussie Dollar Risk Trade About to Crack

By: readtheticker

The Aussie dollar has been the show pony for the risk on trade. Ben Bernanke endorsed the risk off trade today, yip thats right, he speaks stocks sell off and the dollar rallies. Who would have thought ! All the Aussie dollar longs will be a tad nervous to say the least.

The Aussie dollar (FXA Etf) has been expecting to top out in mid 2011. It maybe here this week! The perma $AUD bulla may (but very unlikely) keep it up for a while yet, but we are hoping to sell it on a break out south. The boomerang is coming back.

Here is a chart showing the cycle top expected in 2011. Just like clock work (created at 04/2011)

See the original article >>

AUSSIE DOLLAR VOLUME VERSUS PRICE

By Rohan Clarke

We knew that the times were extraordinary – but looking at the rapid ascent of the Aussie dollar this week is enough to get one questioning whether something else is going on.

Quickfire movements such as we have seen are uncommon enough events, though the most recent decade seems to have had its fair share. The last time that the Aussie was able to sustain this type of move without at least a reflexive correction was in the 70′s and the world was a very different place then…

Or was it? After Nixon ripped the USD from the last vestiges of gold convertibility in 1971 (some background here), the USD was pummeled relentlessly.

And in real terms:

Now we are faced with a similiar dynamic. Whatever the why’s and wherefore’s, the USD has few friends. Expectations of its imminent demise are widely held. Short positions dominate. Ultimately, consensus is its own worst enemy – the weak side becomes the counter-trend trade. But that is what drives a market correction not a change in trend. Looking at history, the USD could have a year or three of heavy weather before the trend is exhausted.

Still with the Aussie overbought, and overvalued by ~40% on PPP measures, we should pay attention to the breadth measures that are suggesting that volume continues to undermine this latest rally.

With the domestic economy having all the bouyancy of overripe cheese, I remain of the view that the AUSDUSD is at risk of a material correction on a global tightening of liquidity (as QE2 fades into the distance and China continues its tightening ways – note there is risk to this view as Japan has kicked it monetary stimulus machine back into gear). If the Aussie signals technical weakness, I expect to add to our short AUDUSD position (here).

For clarity, the short AUDUSD position is part of a portfolio that includes long gold and oil positions (that generally benefit from weakness in the USD). Also, as an Australian based investor, my equity portfolio is natively long Australian dollars.

Having said all this – it is what it is – a short AUDUSD position. And well out of the money at an exchange rate of 1.09…

3May10 - Added to the short position after the dollar reversed off 1.10. With weakness in copper, gold and equities starting to creep in – there is gathering momentum for a USD rally and risk selloff.

See the original article >>

Aussie Dollar and Gold Stocks

By: Neil_Charnock

The rising Aussie dollar is limiting the gold stocks at present in addition to hurting about half of the Australian economy. Exporters (manufacturing) are suffering, so are tourism & education. This article examines the recent history of the AUD gold price and gold stock valuations and profitability in this context.

Some offshore investors may be selling down their carry trade positions at present and this is currently muting gold stock rises here. Why not borrow cheap money in Japan, Europe and the US before investing it in a resource economy as strong as Australia? Especially in gold stocks which are gradually being recognized as an amazing investment opportunity. A great move however when the currency appreciates too fast it attaches a down side risk, which is being covered at present. Traders are locking profits because this is what traders do.

To support my argument; Eldorado Gold Corporation and AngloGold Ashanti are the only gold stocks not down here on the ASX as I write this article. This is because the ASX is not their primary listing; we trade the CDI's (Chess Depositary Interests) down here for these two stocks. Does this mean Aussie gold stocks are a "sell" right now? Unless you are a short term trader the answer is no. I shall explain why.

So how extreme is this AUD movement? Bollinger Bands (BB's) measure extreme magnitude divergences of price against the moving average - big moves in other words. This current AUD: USD move is an extreme move, more extreme than we have seen for some time. Even the upper monthly BB of the AUD: USD ratio has been exceeded to the upside by over 2.5c (at C), a feat last reached in October 2007 and only the second monthly close at this extreme end of this magnitude reached in 20 years. Here is a 20 year monthly chart of the AUD: USD ratio:

We saw a 10% pullback after that 2007 event ( at B) as this ratio headed for an important pre-GFC top. This ratio exceeded the top BB two other times to this degree, only intra-month during 2007. In the first half of 2003 we saw three tops above the Monthly BB of nearly 2c (at A) a similar magnitude and a 7.35% correction followed.

At the start of a new month often associated with seasonal negativity (May), and with the AUD: USD at an important psychological level (1.10) it is not surprising that some carry trade capital is being taken off the table. My Educational Portfolio did the same last week just in case we do not immediately break the 8400 double top on the XGD (more for subscribers only). We are also sitting on a range of quality growth oriented gold stocks in the Portfolio ahead of a move in the second half of 2011 in this sector. What is going to drive the move?

Before I have to listen to theories that the AUD and gold might keep moving in lockstep take a look at this chart:

My first point is that is hasn't moved in lock step, well not since late 2005 which all Aussie gold bugs remember with frustration. Before that gold was not really in a bull market in most currencies, it was merely recovering from distorted lows below US$420 caused by Central Bank selling and Barrick shorting the blazes out of hoards of un-mined gold. They had a very special deal indeed and this whole chapter is well behind us now so I will leave it there. Many other companies had to join the shorting frenzy that added downward pressure to gold and caused major harm to the industry as the positions had to be unwound at much higher prices. But gold only really started to take off with any gusto in late 2005 in Aussie dollar terms and this is at the end of the large black ellipse on the chart provided above.

Once we cleared that first red line A it was off to the races, in fact the larger producers took off in March 2005 well ahead of the AUD gold break out. Since the original launch we can see a fairly orderly rise of gold in AUD just as we have in most other currencies. Line B was the first level up and you can see that the break to level C preceded a correction back to B which had now become the new support. This pattern has been repeated ever since.

Line C was reached at the early 2008 high for gold and that would have been the high for a time however then we experienced the GFC distortion. The AUD crashed to US60c so I have not bothered to cover this wild spike; it was an extreme currency distortion, a statistical anomaly.

Line D was the next logical step up based on gold in AUD and at the last level over a year ago we reached A$1500 gold (at E) for the first time with gold high in USD as well - a broad gold rally in all currencies is underway. Judging by previous AUD POG consolidation periods this is no longer than the last 3 but you have to take that GFC distortion out of view to see it. The important thing to spot is that after reaching a new undistorted high at E, the old top D has been tested, firstly right to the exact line and then a further test that did not reach as deep.

How undervalued are Australian Gold Stocks?

I have written before that the Australian gold sector is undervalued, if you live in Australia the stocks carry less risk in the short term because you hold Aussie dollars. In other words no carry trade risk. The Aussie gold stocks are trading well below levels reached back in 2006; the Producers we track are at 500 today compared to nearly 900 in 2006, a 44% discount to when AUD gold was only $900 per ounce. The Emerging Producers are at 105 compared to 200 in 2006 which is a whopping 47.5% discount, and finally the Juniors are trading at 52 compared to their later high of 78 in 2007. Need I say anymore these statistics are raw and speak for themselves.

US investors may like to hold off investment in this sector until the AUD sees a short pull back as indicated above. After that I would expect massive currency appreciation by the AUD against the dying USD over the next few years. This will add to stellar investment returns when combined with rising Australian gold stock prices. The story will be different for each currency, however if you time your entry to your currencies exchange rate against the AUD and you will gain a double bonanza profit.

Given the risk on the world's major economies over the coming years I consider this a prudent hedge in addition to an opportunity. As you repatriate your returns at the end of this coming cycle you will be one of the wealthy, but you have to get your research right and select the right stocks - as always, some will fail completely and some will fail to follow through. Speaking of risk I have to ask if things get as dire in the US and Japan as we fear then will the Governments nationalize the domestic gold miners stealing well deserved profits from investors?

Americans will see their gold stocks within the USA earn massive returns in USD terms which will become less and less valuable offshore. This will be the negative effect of the sinking USD, reducing purchasing power outside the USA in addition to US inflation as all imported goods rise and rise in price. This is a tragedy in the making and I can only hope US citizens can protect themselves in greater and greater numbers.

Now back to Aussie gold stocks. We have to take the uptrend in the AUD price of gold seriously. After a strong move in this chart for over 6 years now it is clear this is a long term trend and can be trusted. Many of these producers are very profitable at the current levels of circa A$1400 gold and at A$1300 as well for that matter. Any of these can see upward share price movement on solid organic growth and move against a mild correctional trend at any time.

Most gold stocks are not going to see significant margin pressure if we go back to A$1300 POG however their margins would certainly shrink pulling back their share prices. The lower cost producers would be expected to do the best during such a consolidation but it also depends on who has to sell and how heavily exposed they are. Remember that the largest stakes tend to be fairly stable because it is hard to accumulate a position of magnitude. The explorers, small developers and high cost producers would do worst.

Before you think I have decided this is happening right now let me also state that given the Fed speech the other night gold can keep going up here. Continued negative real rates will continue to put a fire under gold. Add a flare up in Europe or the Middle East (take Syria for instance) and we could see a perfect storm merge for gold right now. It could still roar in all currencies taking the US POG straight to US$2000 and the AUD POG up to the next logical step of A$1700 gold. Each step so far has seen an A$200 POG step up so I consider the trend is clear and intact. Is there any other possible conclusion from this chart?

In this event the XGD and the Aussie gold sector will perform strongly because the market is gradually waking up to what I have been saying for quite some time. The buying under Goldman Sachs nominees and JP Morgan nominees indicates large fund buying - the big boys are getting set for this now - building a large stake. I greatly admire Sprott Asset Management as well and they are doing the same.

This is the only worthwhile game in town. Forget bonds and real estate - no upside potential just downside risk. This is now becoming evident to the general market and I don't want to see investors get burnt. Forget underperforming gold stocks - same story so there is plenty of work to be done here at GoldOz and at your end too for us all to make the best of a really poor situation for the general economy.

At present in May 2011 the US POG (Price of Gold) is going up because of the continued Fed policy to deliberately debase the currency. It is keeping interest rates (Fed only) at super low levels causing negative real interest rates - inflation is higher than current rates. This level of AUD appreciation may not continue against other currencies however it is likely to continue against a slowly dying USD. The point is that gold will rise against all currencies over time as it has for several years to date - the trend is clear. Until fundamentals change the trend will not change.

My conclusion is that there are times where the currency moves can temporarily hurt the Aussie gold stocks and this is currently a testing time for sure. This is an effect right now; potentially with some offshore selling to lock in share price movement combined with AUD strength gives them a double whammy profit bonanza. A quick 10% correction in the AUD would be a great re-entry if you are confident enough to pull this move off. The trend in gold and AUD gold is clear - and the stocks are still drastically undervalued by this metric.

But we are near a break point right now - poised to consolidate further or rise strongly. The May seasonal factor has not worked in the past few years - this is time to watch very very closely. The bellwether signal article I produced seems to indicate the stocks here would be inclined to churn or consolidate here for a while before resuming a strong uptrend into the second half of 2011 and beyond. Our Gold Membership is still on special at present if you want to take advantage of our extensive research and back issues of our Newsletter you need to act now.

See the original article >>

AUD/USD IS AS GOOD AS GOLD

By Stephen Cox

The Australian dollar has a lot of upside room against the U.S. dollar, but the charts, as I read them, may be hinting of a corrective lower move presently.

Certainly the Aussie’s technical strength is convincing.

The Australian dollar rose earlier Monday to $1.0780, a new post-1983 float high. That high in fact is the Aussie’s highest level against the dollar since it fell to the 2001 low of AUD0.4773.

On March 28 when the Aussie recorded a new high at $1.0318 I wrote in this column that the ten-year uptrend might be going for nothing less than a test of $1.1862 which I believe is target resistance on the annual chart.

On the other hand, traders with a less expansive outlook on this market might be preoccupied now with the fact that Monday’s long-term high of $1.0780 is little different with Thursday’s high of %1.0777.

In other words technical resistance is building on the daily chart.

I estimate that a decisive move below daily support at $1.0600, if it comes to that, would point the Aussie down to $1.0420-$1.0245 support band.

Observers note that the Aussie’s strength lately has been influenced by commodity prices. Comex June gold, which rose to a record $1,519.20 an ounce earlier, comes to mind in this case.

Presumably, the fire under the gold market is precisely the weak dollar, and so it goes.

See the original article >>

Our Super Commodity System Entered Short On Euro And Cotton

Qui sotto riportiamo gli screenshot relativi ai trades attualmente aperti dal nostro Super Commodity System su alcune valute, tra cui l’Euro, e sul Cotton. I risultati storici di Super Commodity sono a disposizione ai seguenti link: http://www.box.net/shared/static/xybqf6etyc.xls, http://www.box.net/shared/g6z56itu42. I risultati di alcuni altri nostri trading systems sono a disposizione al seguente link: http://www.box.net/shared/5vajnzc4cp

Below we have included the screenshots related to trades currently open from our Super Commodity System on some currencies, including Euro, and Cotton. Historical results of Super Commodity are available at the following links: http://www.box.net/shared/static/xybqf6etyc.xls, http://www.box.net/shared/g6z56itu42. Historical results of our some other trading systems are available at the following link: http://www.box.net/shared/5vajnzc4cp


Material in this post does not constitute investment advice or a recommendation and do not constitute solicitation to public savings. Operate with any financial instrument is safe, even higher if working on derivatives. Be sure to operate only with capital that you can lose. Past performance of the methods described on this blog do not constitute any guarantee for future earnings. The reader should be held responsible for the risks of their investments and for making use of the information contained in the pages of this blog. Trading Weeks should not be considered in any way responsible for any financial losses suffered by the user of the information contained on this blog.

Commodity and Financial Markets Cycles Analysis

By: readtheticker

Hugh Hendry of Eclectica Asset Management and Gary Shilling of A Gary Shilling Company are bearish on China, and the world. We must pay respect to both of these market players as they have had an abundance of correct market calls in the past. Their opinions are contrarian, so for trends to change, major cycles must be ready to roll over. Lets review a few...

First, how can market cycles roll over in a world undergoing massive quantitative easing (QE1 and QE2)? Is it possible that the US Federal Reserve as tamed the market so that there is no more pullbacks, swings or cycles. The US has experienced 'the before/during' quantitative easing (QE = money printing), and has yet undergo the 'after'.  A quick review of the 'before' and 'after' effects on the N225 from quantitative easing during Japanese great deflationary bust shows that the 'after' can be very unpleasant.

N225 Chart

We can see the N225 rallied hard during each of the Japanese quantitative easing (QE) periods. However when QE ended so did the rallies. The American QE programs have been back to back (2009 and 2010), unlike the Japanese experience. One can only imagine what will happen to the worlds financial markets when the American QE ends, if it is anything like the Japanese experience then I fear that the cycles rolling over will be very severe. Copper, Australian and Canadian dollar have all enjoyed strong bullish cycles. They will be our subjects.

The Australian Dollar and Copper are two securities that are aligned to China success story. Copper has been used heavily within Chinese construction industry, and Australia has supplied much of it to them, along with steel, coal, etc. Any hick up with China's story and these two securities will roll over hard. China cannot sustain 10% GDP growth without exports to both Europe and USA. Yet the America and Europe economies have lived off QE to support their GDP growth. What if the QE stops or paused for a few years, what then. If growth cant be maintained without QE, what will happen to the Australian, Canadian dollar and copper cycles, that is easy they will roll over hard !

We all now that the rise and fall of the US dollar as much to do with the cycles below, markets are very correlated. Comments on the US dollar can be found here: US Dollar currency, short term bullish, long term bearish not so sure

NOTE: The cycles found the charts that follow were found with RTT Cycle Finder Spectrum.

Australian Dollar (AUDUSD)

Copper in US Dollars

Canadian Dollar

For the world to avoid these cycles rolling over during 2011/12 quantitative easing would need to be continuous. Its too early to say how or when stimulus Keynesian polices will end, I fear that they never will. As the politicians and central bankers have enjoyed this economic power, and power does corrupt.

Continue reading this article >>

Australian Dollar

Nei giorni scorsi l'Australian Dollar ha segnato i massimi degli ultimi due anni e si sta avviando a completare onda cinque, la cui massima estensione arriva a 0.9600. 

In recent days Australian Dollar has reached the maximum of the last two years and is completing waves five, whose maximum extension reaches 0.9600.

Australian Dollar

Possibile fine ciclo sul Australian Dollar, andiamo Short. 

Possible end cycle on Australian Dollar, go Short.

Australian Dollar

Segnale Short sulla chart a 240 minuti dell'Australian Dollar, che potrebbe essere preso come occasione di alleggerimento del trade a rialzo di medio periodo ancora in corso. O come segnale di uscita per chi dovesse essere ancora in posizione con un contratto. Lo Stop Loss del segnale, posto sopra i massimi odierni, potrebbe invece costituire occasione per rientrare sul trade in corso.

Short signal on the 240 minutes chart of the Australian Dollar, which could be an opportunity to decrease the long trade still open. Or as the exitt signal for those who were open with a contract. Stop Loss of signal, placed above the today max, instead could be an opportunity to return on the trade in progress.

Australian Dollar

Quanto detto nel precedente post per quello che riguarda Palladium e Gold, vale esattamente allo stesso modo per l'Australian Dollar.

Quindi, assumere le stesse identiche decisioni, chiudere metà posizione alla riapertura del mercato e mantenere in essere i precedenti Stop Loss e Profit per l'altra metà.

Spostare lo Stop Loss sotto il minimo di venerdì scorso nel caso si sia in posizione con un solo contratto, od in alternativa prendere profitto.

Australian Dollar Super Star

Il Long trade in corso su Australian Dollar è bene impostato e sta producendo buoni utili. Lo Stop Loss è già stato spostato sul prezzo d'acquisto ed il nostro obiettivo è posto sopra gli ultimi massimi a 0.9360 c.a.