Big Week – and Volatility Ahead – CIT Chapter 11?

by Jerry Furst – Sr Analyst  - Investors Education Network.com  

Last Week the  VIX closed over 30 spiking to an intraday high of over 31 on Friday with the DOW dropping 250 points and the S&P 500 dropping over 30 points and the S&P 500 breaking trend line support.

Looking at chart patterns is often called an art and a science. Eventually technical traders will build up a photographic memory of patterns and quickly recognize similarities.  I present to you an example.

The Daily charts of the Euro and the Weekly chart of the VIX  (S&P 500 Volatility Index) may give technical traders time to pause over the next two images I show.  

Chart Pattern Similarities - Euro and Vix - Sr Analyst - Jerry Furst - IEN - Click to Enlarge

Image 1 Above – On the Left – EURO – Daily Chart of March 18, 2009

The Past May Help Us Determine The FutureSimilar Patterns  - Note the Triangle – Failing Head and Shoulders and Trend Line Break which is practically identical to the current Weekly chart of the VIX as of October 30, 2009 – on the Right

Euro-USD Daily - October 30, 2009 - Shows Failed Head and Shoulder Pattern

Image 2 – Euro-USD Daily - October 30, 2009 – Shows the Failed Head and Shoulder completed – extending above and Beyond the Head and Shoulder Pattern. If this pattern is to be repeated on the VIX – Look Out Below!

Lots of News Scheduled as VIX Picks Up

Currency traders may want to consider shifting to tactics and strategies that work best in high volatility markets. Correlations between the equity markets and Forex may fluctuate if fundamentals get in the way.

Last weeks move up in the VIX and triple digit losses on the DOW are looming large over an extended equity market. (Click here to register and tune  into my webinar  on FX Street at 12 Noon Eastern (GMT -5)

Wow – What a Week Ahead Coming Up!

Monday: – Watch the Asian Markets into the US Open. us Data Includes Home Sales  - ISM and Construction Spending.

Tuesday: GBP: PMI , and US Consumer Confidence

Wednesday: – FOMC announcement - leading into Fridays NFP Employment Report

Thursday: BOE and ECB Central Bank Announcements – watch for signs of policy change statements. US Weekly Jobless claims and Fed Balance Sheet data. (click here to register and tune into my webinar on FX Street starting at 1:30pm Eastern (GMT -5)

Friday: NFP-Non Farm Payroll – US Trade and Consumer Credit Data

Traders Be Aware This Sunday – CIT Chapter 11?

CIT Group is reportedly ready to file a “prepackaged bankruptcy plan”. Sources indicate this may occur as early as this Sunday Nov 1. If Chapter 11 is filed – it would qualify as the 5^th largest bankruptcy filing ever ($71 Billion in Assets) in the US.

CNBC’s David Faber broke the news on Friday afternoon Oct 30, and he speculated that preferred shareholders are likely to be “wiped out”. These “preferred Shareholders include the US Taxpayer that had injected $2.3 Billion.

Tune in to Monday’s Free Week Ahead Webinar and FOMC on Wed - Click Here to Register

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Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

By Jerry Furst - Sr Analyst “1st on Forex” -  Investors Education Network.com

The Dollar Index and Gold

The Dollar Index has a history, and indeed the charts show we have been at and below current levels before. So now the question is, Will price “Bounce or Break” off of familiar levels?

Looking at the Charts of the US Dollar Index and Gold ETF

US Dollar Index (Symbol DX - eSignal) Monthly and Daily Charts

US - DX: The Monthly Chart (click to enlarge) gives us a text book lesson in Fibonacci retracements and extensions. The Trade Weighted Index made a double bottom which coincides at the 75% Fibonacci retracement level .

Drawing the Fibonacci retracements from the 1993 low to the 1994 high gives us a 38.2 retracement that held the March 2009 high of 89.60 and the 138.2 Extension 0f 70.70.

So this monthly chart looks ominous as a drop to the 1993 lows looks possible.

US - DX: The Daily Chart (click to enlarge) of the US Dollar Index shows  the decision point quite clearly. We have extremely strong support at the current level of 76 - which is a 75% retracement of July 2008’s low to the March 2009 high.

78 Would Be Great - 72 What Would You Do?

We can now Bounce or break off of this level - with targets of 78 for a bounce up to the 61.8 Retracement - OR - a drop down to retest the July 2008 low of about 72.

GOLD - GLD ETF - October 9, 2009 Makes Weekly All Time High

GLD - The Weekly Chart above (click to enlarge) shows the GLD Gold ETF shows some text book lessons for technical analysis. The GLD ETF hit a high of 104.15 while spot Gold traded at over $1,060 an ounce.  

 An inverse Head and Shoulder pattern with a broken resistance “Neck Line” and a Triangle Pattern at the Right Shoulder that is already in play is heading towards the 125% Fibonacci Extension of 108. This would correspond with Spot Gold prices of about $1,100

The Head and Shoulder Pattern has a target at approximately 120, that is convergent with a significant Fibonacci extension of 161.8%  This would correspond with Spot Gold prices of about $1,300

 The Headline Indicator - Explained

The front page of the Financial Times on Thursday Oct 8, 2009 featured the US Dollar Index “as fear grows over currency”.  There is a fundamental-news type indicator that is sometimes quite handy to keep in mind of, the concept being: “If it’s on the front page of the paper and on the lips of people that rarely speak about it… it’s probably over bought - or oversold.

My trading methodology is what I call 90% technical-charting and 20% Fundamental-News but exponentially weighted. (meaning that the fundamental news has a half life of 5-30 minutes for things like GDP reports,  and even Non Farm Payroll - Unemployment Numbers).

Headline Surprise - or Expected?

The Headline Indicator has different connotations that traders pick up on after a while. If there is an  unexpected event of either extreme negative or positive news that has no precedent, and no one knows just how bad the repercussions can be - then the Headline Indicator may be a catalyst for an extreme move yet to come. However, if Walmart (for example)  is picked to be the “Stock of the Year” and it is seen on the checkout line of your favorite shopping place - the likelihood is that it’s made a top.

US Dollar Down - But Not Out!

So, in conclusion: Yes - the US Dollar is being shed - but perhaps it has been punished enough for now, and a retracement is in order. As for Gold, well the paper money has to go somewhere - and hard commodities that are easily exchangeable might just be the new currency of choice for a little while.

The question really is….. Where would you park your money?

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Tune in to the “1^st on Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here

Wednesday has lots of news ahead of NFP

US News Scheduled For Wednesday is loaded  as we lead up to Friday’s Non Farm Payroll report. ADP Job numbers come out at 8:15 followed by the GDP and Corporate Profits report at 8:30am. Chicago PMI then follows at 9:45am.

Tune in to my US GDP report  webinar here on FX Street starting at 7:30am where we will look at the fundamentals and technical’s  before during and after the news!   See Link Below to register

Charts of Future Past - Before and After - Click to Enlarge Chart Images

Below are three of my recent posted charts before and after - side by side.  

GBP-Yen Sept 18-29 Daily Chart - Shows the completion of the Double Top and “M” pattern that is continuing to trade to the downside inside a nice trend channel.

GBP –USD Sept  18 – 29 Daily Chart - Shows the Head and Shoulder Pattern completing the formation that was in progress back on Sept 18 has now gone “to and through”  the “Neck Line”.  The question now is: Will the Sterling bounce and correct to retest the neckline, or continue to the 200% extension target of the Pattern… or go sideways..?

AUD-JPY Sept 23-29 4 Hour Chart – Triangle with Inverse Head and Shoulder Pattern worked out beautifully to the Downside as it now looks more like a Double Top and “M” formation – The previous post from September 23 is now complete! Price has now retraced quickly back to the trend line.

Tune in to the “1^ston Forex” Webinars on FX Street

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FOMC Announcement - Live Webinar This Wed Sept 23 Click Here to Register

US GDP Report – Live Webinar – Wed Sep 30 Click Here to Register

Text Watch from the Fed - Watch Live Webinar Coverage

Ben Bernanke and team are widely expected to leave interest rates unchanged

But the reaction will likely take place about 5 minutes after the text statement is digested.

Click Here to Register for Live Webinar Coverage

This comes a week after Bernanke went out on the limb by stating that the recession in the US is probably over and that we have seen the bottom. He then heads out to Pittsburgh for the G20 meeting

Triangle and Inverse Head and Shoulders on the Aussie – Yen

Sept 22, 2009 Aussie Yen shows a Triangle and Inverse Head and Shoulder on the 4 hour chart as we await the FOMC interest rate - policy announcement (Click to Enlarge)

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FOMC Announcement - Live Webinar This Wed Sept 23 Click Here to Register

US GDP Report – Live Webinar – Wed Sep 30 Click Here to Register

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Search for Safe Havens - Dollar Again?

Although the US Dollar has been under pressure for the past few months - Is it time for a greenback rebound? The search for safe haven leaves little hiding places. Gold has now settled comfortably above the $1,000 mark and predictions of $1,250 are now being bantered around.

Pound Sterling Technical Analysis - September 19, 2009

The Sterling -Dollar and Sterling Yen are showing some bearish patterns on the Daily charts.

Pound Sterling - US Dollar - Daily Chart September 18, 2009

GBP-USD Daily Chart shows a “Head and Shoulder” pattern nearing completion with potential targets after the Neck Line is Hit. (Click to enlarge)

Pound Yen - Daily Chart - September 18, 2009

GBP-JPY Daily Chart has more room to go down before completeing this pattern - but this daily chart might be viewed as bearish to aggressive traders of the Sterling Yen pair. (Click to enlarge)

Tune in to the “1^ston Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here

FOMC Announcement - Live Webinar This Wed Sept 23 Click Here to Register

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Asian Markets in the Drivers Seat

The FX week began Sunday evening in New York with the China Equity markets selling off. Initially the US Dollar gained ground - but then gave it back over the past few days. China’s equity markets have shed over 4% in the past two days as signs of exports and lack of internal demand are weighing heavily on the low cost producer. Most likely the weak consumer demand is continuing to trickle back to the manufacturing floors around the Asian markets.

S&P Chops Around - FX Markets Go Sideways

The SP 500 and Futures markets have been consolidating during most of the New York sesssions Monday and Tuesday. This has been keeping the FX Sessions quite choppy. The Yen crosses regained some of their strength and are currently poised at around a 50% retracement at mid week.

Watching Paint Dry – Continuing Consolidation?

Interest Rate and Trichet Watch

As the Dollar Index slides to fresh lows, the Pound and the Euro have been painting a sideways market ahead of the BoE and ECB announcements tomorrow. Jean Claud Trichet will have his press conference as the US releases Weekly Jobless Claims, and then the Non Farm Payroll on Friday.

It is being hypothesized that the FOMC will allow the Treasury purchase programs to expire in September, and the $1.23 Trillion of mortgage backed securities and other programs may be left to expire at the end of the year – so reports Bloomberg’s Steve Mathews, quoting Laurence Meyer of Macroeconomic Advisers.

The FOMC interest rate announcement on Wed August 12  and I will be conducting a Live Webinar on FX Street – Click Below  to register – Free!

Register to Tune in to the “1^st on Forex” Webinars on FX Street

The Week Ahead Every Monday at 16:00 GMT (12 Noon Eastern) - Click Here

FOMC Interest Rate Announcement – Aug 12 17:30 GMT (1:30pm EDT) Click Here

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

By Jerry Furst - Sr Analyst “1st on Forex”

US Economy Going and Growing Up Fast? -  Not So… Fast!

The Consensus Range for Friday’s  US GDP  is -2.8 to 0.7, with a consensus number of -0.7%  growth . This is highly optimistic since last month’s GDP number came in at a negative -5.5%. The “rose colored glasses and windows” crowd would love to claim the worst is over.

Jobs is the Answer

The reality is that the jobless rate is still ugly and new jobless claims are still rising. Anecdotal  talk of extended benefits being pulled back may soon paint a inaccurate picture that the jobless rate could be artificially made to look better - sooner – as continuing unemployment claims will be dropping soon as benefits expire and people fall off the unemployment benefits list as “no longer seeking employment”.

S&P 500 test of 1,000 Imminent ? and then Lookout Below?

The S&P 500 is flirting with 1,000 – A significant psychological support – resistance level.

My previous post of July 16^th showed the S&P 500 grinding towards the 956 neckline of a massive Inverse Head and Shoulder Pattern going back to January, and the Failed Head and Shoulder of the past few months.  That target was quickly achieved a few days later and promptly blasted up targeting the 1,000 mark.

S&P 500 4 Hour Chart (click to Enlarge)

This may indeed have been a significant short squeeze. If this 1,000 level is not significantly breached to the upside, then the weaker short positions that were just squeezed may have been removed – possibly clearing the way for a massive move down?

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US GDP Report This Friday 11:30GMT (7:30am Eastern) Click Here

The Week Ahead Every Monday at 16:00 GMT (12 Noon Eastern)- Click Here

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

By Jerry Furst - Sr Analyst “1st on Forex”

Investors Education Network.com

Currencies at the Crossroads - S&P - VIX to Show the Way?

The correlations of the currency markets tied to the SP 500 seem to be holding quite well.

There seems to be a major media campaign scrutinizing the “Head and Shoulders”  patterns on the S&P 500. CNBC’s Mark Haines smirkly quizzed some technical analysts on Thursday asking, “so what happened to your head and shoulder pattern?”  -

Childish Patterns - Misunderstood

 John Authers writes in the The Financial Times on Friday that, “It is absurd to look at childish patterns when weighty issues afflict us. ”  Ahhhh…. Pitty the fundamental, long term,  buy and hold,  MBA  clinging to their PE Ratios to understand the valuations of their paper. If one thing is clear, mis statements and re-statements of sales, earnings, and future guidance (not to mention analysts recommendations) etc…. mean barely anything compared to….

The Charts Don’t Lie - Statistically Speaking

The point at which buyers and sellers agree are plotted on the charts for all to see… and these plot points form recurring patterns over time that have certain degrees of predictive accuracy - statistically speaking…

Head and Shoulders on the S&P 500 - correlated to the VIX

Daily Chart above on the S&P (click to enlarge) is showing a Inverse Head and Shoulders Pattern with a Neck Line of 956 - (At least that’s where I draw it) which coincides with the 200 period moving average. This denotes 200 SMA is a strong Support and Resistance zone - all on it’s own.

The 4 Hour Chart brings into focus the head and Shoulders of Great Debate

Lot’s of Technical Analysis naysayers (Haines,  Authers) are smug about the failure of the Head and Shoulder pattern to complete.  The issue I have with most of their commentary is that they are missing a key point regarding technical analysis - price will either “Bounce or Break” off of these neck lines. Once this “B or B” is confirmed, we have “potential” targets.

4 Hour S&P 500 chart (click to enlarge) Note that “the Bounce” off the neck line has targets of the top of the right shoulder (already exceeded) and now has a “double top” target that coincides with the “neck line”  of the “inverse Head and Shoulder of the Daily Chart.

So What…s Next???

Everyone’s talkin about these Head and Shoulder patterns…. As they will be triggering lots of technical trades in the next week or two.  So what can we use for correlation?

Enter the VIX - Volatility Index & Fibonacci

The Fear Index on the Weekly chart tapped a May 2006 support level just above 24 - which coincides with a 38.2 Fibonacci retracement - If the naysayers don’t like Head and Shoulder Patterns - I wonder what they say about Fibonaccis!

Weekly VIX Chart (Click to Enlarge) - Shows a strong support level - that if it starts to “Bounce Up” could be the “Heads Up” for the Head and Shoulder pattern to “Head Down” - Possibly making a Double Bottom to the March Lows - But…. Watch the VIx to Point the Way….

Happy Pippin…

Tune in to the “1^st on Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here

This week may see more trading volatility again - as we have seen in the past. Last Weeks dismal unemployment numbers ahead of the July 4^th Holiday gave a boost to the US Dollar as money came out of equities and into the safe refuge of the “Holding Tank” of the Currency.

July 6 - 10 2009 - US Calendar

Not much news scheduled until the end of the week.

7-6: Monday - ISM Mfg Index and some Treasury Auctions

7-7: Tuesday - US Treasury Strips

7-8: Wednesday - 10 yr auction and Consumer Credit Report

7-9: Thursday - Weekly Jobless Claims - Wholesale Trade

7-10: Friday - Trade Data - Import-Export Prices - Consumer Sentiment

 July 6 - 10 2009 - International Calendar - Highlights

Interest Rate Announcements from Australia, and the UK, Employment Data from Canada - Stay Tuned

Yen Gains on the Majors

The Yen has made significant gains against the US Dollar, Euro and Pound as Asian stocks were falling as the week gets under way.

Jerry Furst  is an active trader, educator, and Founder of Investors Education Network (IEN), He is a Mentor and Trading Coach to Select Clients  Click Here for a Free Self Evaluation Survey.

Tune in to the “1^st on Forex” Webinars on FX Street

Every Monday - The Week Ahead at 16:00 GMT (12 Noon Eastern)- Click Here