Apr 22 2009

How to take Advantage of the “Eager Beavers” and Early “False Breakouts”!

Category: Economy,My Web Log — Admin @ 00:25

Guest Article by Joseph Bridges, founder and CEO of Capital Research and Trading, LLC

visit Joe at www.treasuryincomeengine.com

Trading volatility breakouts has been around for a long time, and if you think about it carefully that’s really what you’re trading regardless of what you think you’re trading.

Volatility, assuming it’s in the direction of your position, is what validates your decision. Lack of it almost assuredly means your assumptions are incorrect.

At the moment, I’m almost entirely consumed by the Treasury futures markets and I’ve noticed a simple pattern that, for lack of a better term, we’ll call it the “Eager Beaver”.

“Eager Beavers” are the eternal optimist of the trading world; all they see is sunshine and rainbows at the beginning of each day. “Eager Beavers” want to enter early and ride the wave for the big profits that will come at the end of the day.

Well folks, it happens that way some of the time, in fact just enough to keep them coming back to the trough and believing in the Easter Bunny, but not as often as you may think.

What I want you to do is focus on the highlighted area of the chart above. There are a couple of things to notice. First, we opened lower and immediately traded to the end of the previous day’s range and then went into a consolidation phase establishing a range 128-28 for a high and 129-17 for a low. At the moment you’re looking at both buyers and sellers at a standstill neither having the upper hand and are waiting to see what will happen next.

Now we can see that it was the sellers who were on the wrong side as the market breakouts to the upside and begins to head higher, obviously you don’t want to be short this market at the moment and this where the trap is laid. The buyers are happy and confident at this point.

Most traders think in directional terms, they either want to buy or sell. They have a bias for one side or the other. There are a few that want to play both sides repeatedly during the day, but they are a minority.

Here’s what happens next: the breakout buyers are neither rewarded nor punished by their decision. They’re either up by a few or down by a few ticks. There’s no urgency on either side.

Once the apex is broken off the consolidation phase, the breakout buyers start to run for cover plus new sellers start to come under 129-24 – of which I’m one.

Here’s what’s happening: the pros are smoking the retail trader’s with this gimmick. Somehow, someway the ordinary folks get tricked into a position early in the day by a false breakout.

Then later in the day they get caught equity wise because they HAVE to run for cover for margin reasons.

That’s where the opportunity is now, trading against the guy who HAS to trade because of his limited capital.

That’s the antimony of trading against a “False Breakout”.

(c) 2009 Capital Research & Trading, LLC All Rights Reserved

Apr 14 2009

Where’s The Fineprint?

Category: Economy,My Web Log — Admin @ 00:01

“Invest at your own risk” is my caveat to investors shopping in the United State’s financial sector. Despite expectations for the financial sector to lead our economy out of the subsiding recession, I am very much skeptical of the forthcoming earnings season in this sector. Wells Fargo and Goldman Sachs are two banking powerhouses that have released better-than-expected preliminary numbers for the first quarter and I believe many more banks will follow suit. My issue with all this good news is this: what’s the real story behind the earnings?

Should financial performance really be the determining factor for restoring credibility and stability in the banking system or should we look more into the intangibles? If we are only going by the numbers and not the risk management or other intangibles, then aren’t we only resetting the domino stack? I bring this up because Goldman Sachs’ reported earnings on Monday were highly positive due to their increased appetite for higher trading risks and self-imposed priority to prematurely return the government’s TARP loan. In essence, Goldman Sachs is so terrified of the government’s regulatory stronghold on bank holding companies that the company is essentially putting more money at risk in its trading activities in order to reap higher returns on investment and pay off it’s debt faster. The problem with this, other than the obvious potential losses, is that Goldman Sachs could consequently face damaging scrutiny from the government for alleged insider trading practices due to its overconfidence in the markets.

Profits and earnings do not equate to long term financial stability, but only short term wealth, and many of the world’s most successful banks are not always the biggest. This was very evident in the most recent list of global banks with the highest credit ratings in the world. An American bank holding company was nowhere to be found in a top 20 position but Wells Fargo came in for the home team at number 21. Banking conglomerates, Bank of America and Citigroup, did not make the top 50 list; JP Morgan Chase captured the number 45 spot. Although asset size was a factor in the ranking methodology, banks such as #18 ASB Bank (New Zealand) and #28 Pohjola Bank (Finland) with asset sizes of $45 billion and $38 billion, respectively, were ranked far more higher than some of their larger counterparts, including #44 UBS ($2 trillion) and #47 Credit Suisse ($1.2 trillion).

Size isn’t always the key and American banks must refrain from that mentality of “bigger is better” if credibility is to be restored in the global financial marketplace. Banks, especially investment banks, have flourished on the principles of better risk management and this practice must be revived in the American financial sector now more than ever as global competition increases.

Below is a list of some of the world’s safest bank holding companies along with their credit ratings:

top10 list of safest banks

Apr 01 2009

Table for party of 20, please

Category: Economy,My Web Log,Politics — Admin @ 01:49

“The urge to save humanity is almost always a false front for the urge to rule.” – H.L. Mencken

The bureaucrats from the world’s twenty largest economies did not want to pick a more obvious day for the G20′s facetious attempt at tackling on the world’s economic woes in London, so April 2nd became the consensus, rather than April Fools’ Day. Despite the anticipation of the forum and amid the peaceful protests from the public to coerce the world leaders’ actions, I am still having a hard time determining which of the following actions, executed by the international community this year, is more pointless: last month’s arrest warrant issued by the International Criminal Court for Sudanese President Omar al-Bashir or the forums to be held by the Group of 20 and the Group of 8 this year?

The Group of 20, originally created as a forum for public-sector financial executives, is now visited by heads of states looking for an excuse and opportunity to wine and dine with the very cash-flow controlling cohort whom could not prevent the world’s domino-effect economic collapse. The designations, G-20 and the G-8, are exactly as they sound: elitist and exclusive; this is not the approach to solving the world’s economic woes. The best way to approach the status quo is to first eliminate the designations, G-5, G-7, G-8, G-10, G-20, or any other arbitrary grouping of countries. Manufacturers of private jets and companies like Gatorade should be the only entities permitted to use the prefix, G, for branding purposes.

Secondly, I propose replacing these grouping of countries with the already established annual economic forum, the World Economic Forum or WEF. The Swiss forum is older than the G-20 establishment and operates in an open forum manner. It is attended not only by the industrialized world’s bureaucrats, but by business leaders, activists, and representatives from virtually every country, big or small. Unlike the G-20, growing the world’s economy isn’t the only focus of the WEF; there are a myriad of issues brought to the forefront including human rights violations, global terrorism and violence, and social development. To read my recap about this year’s World Economic Forum in February please visit this link: http://www.kevinwoghiren.com/2009/02/2009-wef-annual-meeting-recap/. The WEF continues to garner more respect each year from the international community for its inclusiveness and efforts towards social responsibility, thus making it a credible and viable replacement for the current grouping of countries based solely on economic prowess.

Despite my criticism of the G-20, I will be following it closely this week as frameworks for future major financial developments, such as a universal currency and global accounting principles, could be established in this year’s London Summit.

Image is everything. You be the judge and decide for yourself which website looks like it really cares about the world’s economic and social  development: http://www.weforum.org/ (World Economic Forum) or http://www.g20.org/ (G20).