My Wealth Blog - Take Control of Your Finances

We're Changing!

instructor@mywealth.com (MyWealth.com) — Wed, 16 Dec 2009 09:23:47 PST

Due in part to the over-whelming response we have received from you, our subscriber base, we have decided to turn the brunt of our focus to the currency market. The currency market, otherwise known as Forex or FX, is one of the most misunderstood markets out there. So we have decided to focus exclusively on providing education in this market as we realize that this is the biggest need our subscribers have.

In that regard, we are pleased to announce that myWealth.com will now be known as FXEDU.com!

To celebrate this change and the holidays, we offering our biggest discount of the year to our introductory currency trading course—over 50% off! That’s right, 50% off the regular price!

This is simply a notification that we are re-branding and that you can continue to expect the same quality and content that you have come to expect from myWealth.

It is our opinion that the investing landscape is changing and now more than ever is it imperative that you have a basic understanding of the Forex markets! As the world economy is constantly evolving and becoming more intertwined, those who take the time to get themselves ahead of the curve will be best prepared to take advantage of investing opportunities.

But wait—there’s more! In addition to 50% off, we are offering you the opportunity to begin the course in the New Year! We know that you’re busy around the holidays, that’s why we’re going to give you access to the instructors for all of 2010! Simply email us the date you would like your course to start and we will accommodate you!

So what are you waiting for??? Take advantage of this opportunity NOW, and prepare yourself to make profits for life!

We have enjoyed servicing you as myWealth.com, and look forward to continuing our tradition of excellence as FXEDU.com.

Sincerely,

The FXEDU Instructors

Gold Reversal?

instructor@mywealth.com (MyWealth.com) — Tue, 15 Dec 2009 09:42:21 PST

With all of the frenzy surrounding gold, it is sometimes good to examine contrarian opinions to understand how different market participants can view the same thing. Today we have a guest post from Donald W. Pendergast Jr., technical analyst of ETF Trading Partner. Enjoy!

Gold: Expecting More Downside

By Donald W. Pendergast Jr.

Technical Market Analyst

So, we’ve seen a substantial correction in the Gold market over the past couple of weeks, and that means that Gold is now ready to rocket higher to fresh highs, isn’t it? Probably not, at least not right away, and patient and wise traders/investors will want to wait a bit to see what Gold does as it interacts with any number of key support levels. Let’s take a closer look, hoping to ascertain when/where this current downdraft might expect to meet up with major support.

Graphic credits:

Metastock v.11
Metastock Profitunity (Bill Williams) expert advisor

The weekly chart of cash Gold suggests that the fresh wave of selling, although getting close to significant daily chart support (near 1100-1100), is very likely to keep heading south toward the more significant weekly support levels depicted on the chart above. Here are some of the key technical highlights:

The Parabolic Stop and Reverse system (J. Welles Wilder’s famed ‘ParaSar’ system), although still in ‘long’ mode, is getting precariously close to a stop and reverse (to short) signal (see the trailing string of ParaSar dots beneath the price bars). If it does go into short mode, existing speculative longs should consider closing their positions ASAP.
The spread between the 21- and 50-month exponential moving averages (EMA’s) is flattening out for the first time in nearly five months, confirming the loss of upside momentum.
The recent Commitment of Traders report from the CFTC suggests that commercial interests in the Gold futures market are still heavily short even as the large speculators (hedge funds and the like) are still overwhelmingly long. The action on the price chart means essentially one thing – the commercials are selling the large specs all the Gold they can handle, hoping to cover their short positions at lower prices in the weeks and months to come.

The Path of Least Resistance

While it is true that a market that has completed a move from $700 to $1,200 in the course of a year should be given every benefit of the doubt, the odds strongly suggest that the path of least resistance – given all of the aspects discussed above – in the Gold market remains toward lower prices. As shown on the chart, the next major confluence area of chart support, Fibonacci support and EMA support all converge near the area of 1070 to 1050. At that price zone we find the 50% Fib retracement of the July 2009 to December 2009 weekly upswing, along with the October 2009 swing highs (former resistance which may provide future support). Finally, we also find that the 21-month EMA also coincides with the same support zone. In other words, expect to see major weekly support near 1070-1050, followed by a tradable bounce on the daily time frame. I’ve taken the liberty of drawing a hypothetical ‘A-B-C’ corrective wave (purple zigzag line on chart), one that may be proportional to the size of the major up thrust that preceded it. While no one knows exactly how this correction will play out, this ‘projection’ of how prices may respond might help keep trader’s focus on the importance of keeping on the right side of this highly volatile market.

Finally, there is also a very strong support area spanning the range from 979 to 990; this one is also characterized by another ‘three-fold cord’ (which cannot be easily broken) comprised of the 79% Fibonacci retracement, the 50-month EMA and the September 2009 swing low. This could be a vital support area for Gold – a significant breach beneath it could really unleash a tidal wave of mindless selling that could take months to repair. Essentially, traders need to see how Gold responds as it meets the first support barrier (1070 to 1050); some questions they need to consider are these:

How far does Gold retrace the plunge from $1,215 before falling lower again? And if Gold moves sharply lower from the initial support level (1070 to 1050) down toward the sub-$1,000 level, just how panicked are the sellers as they unload their long holdings? Are the commercials eagerly scooping up Gold from these discouraged longs or are they waiting for more opportune prices at which to rebuild their long positions?

The current bottom line in cash Gold:

Expect a decline toward 1070-1050 before seeing a tradable daily-based long swing setup appear. Existing speculative long Gold positions should be closed out if the weekly ParaSar system goes into short mode. Aggressive traders might even attempt to go short on any bounces higher on daily and/or 30-60 minute intraday charts. If we see an eventual drop toward the lower support area of 990-970, those seeking to acquire more Gold for their long-term ‘core’ position might find that to be an especially attractive area in which to initiate further purchases.

To receive my Trading Partner Reports delivered via email: www.ETFTradingPartner.com.

To learn more about ETF trading, be sure to check out our ETF trading course!

Holiday Outlook!

instructor@mywealth.com (MyWealth.com) — Mon, 14 Dec 2009 08:26:23 PST

What’s Next for Stocks, Gold, Silver, Oil & Nat Gas?

The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.

DIA – Exchange Traded Fund

As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead, the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.

That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.

GLD – Gold Exchange Traded Fund

The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.

In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.

SLV – Exchange Traded Fund

Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.

USO – Oil Exchange Traded Fund

Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.

This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.

UNG - Natural Gas Exchange Traded Fund

The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact is that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.

I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.

Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.

The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.

ETF Trading Conclusion:

Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.

Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.

Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.

Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.

If you would like to receive my Free ETF Trading Newsletter visit my website: www.TheGoldAndOilGuy.com

To learn more about how to trade ETFs, be sure to check out our ETF trading course!

Disclosure: I currently own GLD exchange traded fund.

Use ETFs to Play Commodities!

instructor@mywealth.com (MyWealth.com) — Thu, 10 Dec 2009 09:20:10 PST

ETF Trading Gold, Silver, Oil, Natural Gas and the Index

ETF trading has made it so easy for traders and investors to get maximum exposure to the entire market without the high fees of mutual funds and a manager. There are now ETFs covering almost every investment type whether it’s stocks, indexes, sectors, commodities, bonds, real estate, currencies etc…

In this short report I will quickly show a few charts on what is happening for precious metals and energy ETFs.

HUI – Gold Stock

This monthly chart of the gold stocks index shows how easy it is to trade this market and avoid large sell offs when using technical analysis. Currently gold stocks are in a bull market, testing the 2008 highs. Until we are proven wrong, buying stocks after a pullback is a winning strategy.

Trading the GLD ETF

We have been in the GLD ETF for a few months as we ride this bull to new highs. This chart clearly shows how buying dips in a bull market can really pay off. I do have certain criteria which must be met before buying dips so I know the odds are in my favor.

ETF Trade Silver

Silver along with gold and oil are looking ready for an oversold bounce. I don’t think prices will jump and rally higher right out of the gate but eventually I feel they will head higher.

Crude Oil Fund Trade

Crude oil looks ripe for the picking. It is currently oversold and testing 2 support levels. The downside momentum is still strong so this selling could last another 1-2 days but I’m expecting it to soon.

This is not a low risk setup. This is more of a short term aggressive contrarian play, for those of you who like heart pounding plays!

Natural Gas Fund Chart

Natural gas has been taking its time to bottom. Virtually every bottom picker has been burned this year. I am starting to hear everyone get more bearish on it again which is great! It should bottom any day then! LOL….

Seriously it cannot get much more bearish for gas. We don’t have enough space to store it and companies are finding more natural gas in the ground every day. Because it sounds like a terrible investment it must be getting close to a bottom. If this is the start of a flat basing pattern, then I expect it could drag out for a few months before actually making a nice move up.

Dow Jones DIA ETF

The Dow looks similar to gold and silver. I feel we are ready for a 1-2 day bounce then we go a little lower to shake traders out of the market before heading higher.

ETF Trading Conclusion:

Gold stocks and the broad market are in a bull market. The recent pullback has many traders worried. I think this an opportunity to get into some positions before the next rally. Buying the dips in a bull market is a low risk trade until proven wrong. I think we still have more of a pullback to come, but then we could have a very profitable year end X-mas rally.

Natural Gas is just bumping along the bottom I think. I’m not expecting any trades for a few weeks anyways.

Crude Oil looks like its ready for a move whether it is a 1-2 day bounce or the start of a new leg higher. If you look at late Sept you can see USO broke down on heavy volume, shaking most traders out of their positions just before the next leg higher. This is what I feel it is doing now, but only time will tell.

Let’s see how the second half of this week unfolds.

Join my Free ETF Trading Newsletter: www.TheGoldAndOilGuy.com

To learn more about how to trade ETFs, please check out our ETF investing course!

Euro Dead Zone!

instructor@mywealth.com (MyWealth.com) — Wed, 09 Dec 2009 10:16:57 PST

What Lies Ahead (Below) for the Euro?

I feel like at times I neglect the Euro, as it’s sort of the “middle child” in the currency pecking order of the risk trade. So while my focus tends toward the more extreme pairs (Aussie & Kiwi for risk-taking, Dollar and Yen for risk aversion), perhaps it’s time to turn my attention back to the Euro.

While the recent move down hasn’t escaped my attention, it appears as though this may be the reversal that has been long overdue. The Euro is an interesting currency in that it is comprised of different countries that both cooperate and compete with one another. This is what gives it that balance, as strong countries tend to balance out the weaker ones. Think of it as automatic diversification.

But what happens when the balance begins to slip? Increased volatility and a move to the downside, which is what we are starting to see now. The reason is that there are more countries that are in economic trouble than there are those that are seemingly economically sound.

The fact that there seems to be a pickup in sovereign debt downgrades to Euro zone members is the catalyst at this point. S&P cut Spain’s rating and Fitch cut Greece’s rating all within the last two days. There is no proof that this will mark the last of the downgrades.

Combine this with already noted economic weakness in Ireland, Iceland, Portugal, and the Eastern Bloc and it makes one wonder who is actually doing well. As of this writing, it appears to be France, Germany, and the Scandinavian countries, although Germany just reported a decrease in industrial production, when an increase was expected.

So while many are correctly predicting that there won’t be a rate hike from 1% any time soon, I wouldn’t necessarily rule out a rate REDUCTION. While it’s no secret that the ECB lost out on the interest rate race to the bottom, it might just be time to loosen monetary policy as more members end up on ratings agency watch lists.

As ECB President Trichet whined about Euro strength as a result of dollar (and by proxy Chinese Yuan) weakness, he did nothing about it. While tasked with keeping inflation at bay, this doesn’t appear to be a problem anytime soon and could in fact prolong recovery if the unemployment and economic picture gets any worse.

Let’s take a quick look at a chart of EUR/USD:

As we can see, the Euro appreciated mightily against the Dollar until recently when its trend-line has broken. Expect to see further Euro weakness as the ECB scrambles to come up with measures to help stabilize individual economies. This also plays into the “risk aversion” trade, which would cause Dollar strength if the signs of Euro zone recovery seem distant.

Any way you slice, the Euro zone seems to be in trouble and the question now is whether they can enact measures fast enough to halt a potential domino effect.

You can’t be all things to all people, as Trichet is finding out the hard way.

To learn more about currency trading, please check out our forex trading course!

Pause or Melt-Down?

instructor@mywealth.com (MyWealth.com) — Tue, 08 Dec 2009 08:40:32 PST

Stocks & Commodity ETFs

The first half of last week started out strong with stock and precious metal ETFs moving higher. The week ended with less certainty of direction. The energy sector underperformed the market with crude oil and natural gas moving lower.

Below are some ETF charts showing where the broad market and commodities are trading with some analysis showing what could transpire going into the year-end holiday season.

DIA ETF – Daily Trading Chart

The DIA ETF that I am using to represent the Dow Industrial Average looks to be over bought and ready for a pullback. The broadening formation indicates volatility is rising and that the bulls are losing control. This pattern occurs in all time frames and in stocks, commodities and exchange traded funds. Remember this pattern when looking at charts as it could save you some money.

Using simple analysis we can see where the Dow is likely to test. With any luck this could happen quickly and be followed by a nice low volume rally going into to the holiday.

GLD Gold Exchange Traded Fund – Daily & Weekly Charts

Gold had a huge rally the first half of the week but gave it all back and then some on Friday. I have been warning about this sharp profit taking correction for a few days making sure everyone had tightened their stops or started to trim their positions. We locked in a nice 11.9% gain on Friday as our stop for GLD was triggered.

GLD fund is likely to trade in one of two scenarios this week:

Move side-ways after last week’s sell off
Or continue moving down as investors and short term traders review Friday’s action and place their sell orders for Monday.

Take a look at the small weekly chart which is located within the daily chart below. We had a very big volume week and a reversal candle indicating a shift in momentum. If we are lucky this could be a quick pause before another move up, but I am thinking gold will need several weeks to gain its footing. Only time will tell, and either way we will be ready.

SLV Fund – Daily & Weekly Charts

Silver had a sharp pullback with gold on Friday but because silver did not have investors tripping over each other trying to buy it like gold, the sell off was much more controlled. Silver breached the lower trend channel line but closed back above it to end the week.

Silver is trading at the lower level of its trend channel and at a support level. There is a good chance it will bounce Monday or Tuesday. But until we see what gold is doing at the open Monday morning I would not be jumping into anything at this point.

The weekly chart shows a reversal candle signaling strong selling pressure and this is the reason I would not be buying here. Let’s watch for a few days and see what happens.

USO Oil Fund – Weekly Charts

Crude oil has been weak the past 2 months as it drifts sideways from the October breakout. Not much to say here other than let’s wait for some action and a low risk setup.

UNG Natural Gas Fund – 60 Minute and Weekly Chart

This year I think natural gas has taken more money from traders than any other fund. Virtually everyone has been burned by this extremely over sold commodity. The 60 minute chart shows three resistance levels. But if you combine all of them there is significant resistance from $8.80 - $9.25. That is the test of the August lows.

We reached the August lows and that is what triggered the bounce and short covering rally 2 weeks ago. We have now seen prices slip below that level on rising volume which is bearish. With prices below this major resistance level I think we will see sellers step in on each bounce to push prices back down.

Stocks and Commodity ETF Trading Conclusion:

The broad stock market looks ready for a small correction. That being said the tape does not lie and we continue to see money flow into stocks which is why the Dow, S&P 500 and Russell 2000 are holding up well. These crossed signals are the reason money/position management is so important for traders. Scaling in and out of positions during oversold and overbought conditions is crucial for pulling money out of the market consistently.

I do this by tightening my stop to lock in a gain on 25-50% of my position, while holding a core position in the event prices continue to rise. This way I make a premium on part of my trade and have my stop moved to break-even or higher for the core position allowing it some wiggle room as prices consolidate before the next leg higher.

Gold and silver could go either way quickly this week. We have locked in some good money last week and now we hold our core position. From here I expect gold and silver to play out in one of three ways:

Prices continue higher and we ride our core positions for larger gains.
Price continues to correct and we get another low risk entry point to add to our core position, then prices rally.
Or, precious metals have a melt-down and we take a small 5% gain on our core position.

Crude Oil and Natural Gas are not tradable at this time. We need to see more price action before a high probability setup will develop. Let’s watch and wait these out some more.

If you would like to receive my Free Weekly ETF Trading Newsletter visit my website

To learn more about how to invest with both stocks and ETFs, be sure to check out our courses!

Dividend Investing Abroad!

instructor@mywealth.com (MyWealth.com) — Mon, 07 Dec 2009 09:07:29 PST

14 Foreign Blue Chip Stocks With 5%+ Dividends

The Fed model compares the forward earnings yield of the stock market with 10-year government bond yields. The model assumes that investors view stocks and bonds as competing assets and will purchase whichever asset has a higher yield, according to an article in Quarterly Review of Economics and Finance May 2009 issue.

Income investors will always be in a dilemma over whether to purchase fixed income securities such as bonds, or to buy stocks with competitive yields. Companies that pay generous dividends tend to perform well in an era of mild inflation.

More than half of the total global stock market capitalization is outside of US borders. The reason to have foreign dividend-paying stocks is for income and growth from economies globally, especially in an environment that features a weakening US dollar.

14 ADRs With 5%+ Dividends

Prospective foreign companies often come to the US for financing, and that means a greater number of investment opportunities for income investors in ADRs. I went over all foreign companies listed on US exchanges (NASDAQ and NYSE). The following are ADRs with dividends higher than 5%, market caps greater than $1 billion, and forward P/Es lower than 15:

Name (Symbol)	Forward P/E (1yr)	Yield	Market Cap
MAGYAR TELEKOM (MTA)	10	19%	4.17B
ENERSIS S A (ENI)	13	11%	637.41B
TELECOM CP N Z (NZT)	13	10%	2.05B
Partner Comm (PTNR)	3	8%	2.94B
DEUTSCHE TELE AG ADS (DT)	13	7%	68.09B
CPFL ENERGIA SA ADS (CPL)	13	7%	9.94B
FRANCE TELECOM ADS (FTE)	10	6%	70.66B
HELLENIC TELE ADS (OTE)	9	6%	7.74B
BP PLC (BP)	9	6%	180.71B
ECOPETROL SA (EC)	15	6%	52.17B
MOBILE TELSYS OJSC (MBT)	10	5%	18.84B
TOTAL S.A. (TOT)	9	5%	142.22B
PORTUGAL TELECM SGPS (PT)	14	5%	11.07B
TELEFONICA SA (TEF)	10	5%	132.75B

Not surprisingly, these companies are either in the telecom sector or energy related industries. They yield plenty, and many have some solid fundamentals to vouch for as well.

Telecom

The US telecom market is mature with very little growth out there. However, there are still more opportunities for foreign telecom companies, especially in emerging markets.

Magyar Telekom (MTA) provides telecommunication services in Hungary and internationally. Partner Communications (PTNR) operates a mobile telecommunications network in Israel. Hellenic Telecommunications (OTE) is a telecommunications services provider in Greece, Albania, Bulgaria, and Romania.

Mobile Telesystems (MBT), the Russian mobile telecom company, became a mobile/land-line provider this week with the purchase of COMSTAR-UTS. This gives it an entry into broadband - one of the country's underdeveloped markets. Russia has vast stores of oil and gold, the world’s 3rd largest currency reserves, and a relatively low net debt-to-GDP ratio.

Telecom Corp. of New Zealand Ltd. (NZT), Deutsche Telekom (DT), FRANCE TELECOM (FTE) and Telefonica SA (TEF) are all in developed markets. Portugal Telecom (PT) is investing heavily in a fiber network and TV service in Portugal and in 3G & 3.5G technology in Brazil.

Utilities/Energy

Enersis S.A. (ENI) engages in electric power generation in Argentina, Brazil, Chile, Colombia, and Peru. CPFL Energia S.A (CPL) serves residential, industrial, and commercial customers in Brazil. Ecopetrol S.A. (EC) is a crude oil and gas giant in Columbia.

Main International ETFs With 5%+ Dividends

Name (Symbol)	Yield
WISDOMTREE EX-FINL (DOO)	12%
WISDOMTREE PACFC EQ (DNH)	10%
WISDOMTREE DEFA (DTH)	9%
WISDOMTREE PAC TTL (DND)	9%
WISDOMTREE EUR TDIV (DEB)	8%
WISDOMTREE INTL LC (DOL)	8%
WISDOMTREE DEFA (DWM)	7%
WISDOM TR EM MKT (DEM)	7%
VANGRD EUROPEAN ETF (VGK)	6%

Conclusion

An investor who missed the 10 best performance days out of 110,000 trading days would have had a portfolio that was 69% less valuable than a passive portfolio. Avoiding the 10 worst days would have resulted in a portfolio that was 337% more valuable than a passive investment, according to an article titled “Black Swans in Emerging Markets” in Journal of Investing Summer 2009 issue.

When a crisis strikes, the people who sell first get the best price, if they can move ahead of a wave of forced sales. If you are not a trader or can’t time the market, the best way is to find solid-yielding companies and stay invested.

Fundamental metrics such as P/E and dividend yields are too narrowly focused to stand alone as a single measure of a stock. Inconsistent dividends in the past mean that the dividend yields can't be counted on. By combining different methods of valuation, you can get a better view of a company.

Disclosure: I have long position on CPL. Data is from Yahoo Finance as of December 4, 2009.

To learn more about dividend investing, be sure to check out our stock trading course!

Jobs Summit Delight!

instructor@mywealth.com (MyWealth.com) — Fri, 04 Dec 2009 09:29:38 PST

Is the Non-Farm Payroll Report Believable?

The Bureau of Labor Statistics. BLS for short. Perhaps it should just be BS?

On the heels of President Obama’s “Jobs Summit”, the shockingly surprising NFP number reported showed not only a much smaller number of jobs lost (11K vs. an expected 125K) but also a revised figure from October to a drop (111K vs. 190K previously reported). I suppose this is one time that the media can use the word “unexpected” and actually be correct.

And while I’m not going to start conspiracy theories based on the extraordinary timing of this surprise number, it is rather comical to see all of the big smiles and back-patting going on today.

Here’s a sobering thought: we’re not out of the woods yet.

While this figure is good news for the economy, it may mean bad news for the markets, particularly stocks and commodities. While high-priced commodities don’t really benefit the end-user, having a declining stock market (if that occurs) could be damaging to the economic recovery. The reason for this is that it may give Bernanke and the Fed a reason (besides all of the others they’ve been ignoring) to raise interest rates sooner than later.

A quick peek at the charts confirms our suspicion. Here’s a chart of AUD/USD which is emblematic of the risk-taking trade:

The market’s initial reaction was to bid up this pair as the risk-taking trade seemed to be the play of the day. When things are going well here, investors seek out additional yield if they believe things are getting better or stabilizing.

But then, the pair sold off as investors realized that this could mean rate hikes here in the US. I detailed this in a previous article and mentioned that one of the things holding back Bernanke was the employment numbers. If these numbers continue to improve going forward then he could be forced to act more quickly then he may have liked.

He was taken to task at his re-confirmation hearing so perhaps the coincidental timing of this NFP figure will allow him to save face AND reverse the path to dollar destruction he was following.

And while the markets may sell off in the short-term, I think this bodes well in the longer-term. Let’s get the markets back to trading on the fundamentals, and not on anti-dollar sentiment. Savers have been punished long enough, and those who acted poorly have had ample time to rectify their misdeeds.

Now let’s just hope these numbers are real, and not just waiting for yet another revision down the road. Now that doesn’t make for a good photo op!

To learn more about how the currency market works, be sure to check out our courses!

'Tis the Season!

instructor@mywealth.com (MyWealth.com) — Thu, 03 Dec 2009 08:30:50 PST

‘Tis the Season to Trade the Seasonal Charts, Dow, Gold, Silver, Oil, and Gas

The market has had a fantastic week so far for stocks and precious metals. The financial and energy sector are underperforming which is a concern, but we continue to hold our positions and will wait until a reversal to lock in our gains.

Things seem to be lining up for stocks and precious metals to take a breather, which is in line with the Dow Jones Seasonal chart below.

Let’s take a look…

Dow Jones ETF

You can see from looking at the chart the repeated pattern of price rallies, leading to exhaustion and a test of support, followed by another repeat of the pattern. It looks as if the broad market is setup for a test of support which could happen within 2-4 days. Then as we near the holidays prices will start to drift higher. This pattern occurs more often than not as seen on the Dow Jones Seasonal chart below.

Dow Jones Seasonal Trends

This chart clearly shows weakness in the first half of December and continued strength moving forward. This has not really happened in the past two years which means we are overdue for continued strength. J

That being said, the previous two years were bear markets and we are now in a bull market. So the tendency is for buying to continue into year end.

GLD ETF Fund

Gold continues to push higher surprising many of us. It seems as though money is rushing into metals and buyers are not particularly concerned about price. While this is great for short term-traders and those of us in the trade, we must remember that the faster things go up, the quicker they correct.

Don’t get me wrong, I don’t think gold is going to crash, I just think we could get a 10% correction before moving much higher. Gold is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market before pushing much higher.

SLV Exchange Traded Fund

Silver has been underperforming yellow gold but is still a solid investment. It is also trading near the upper end of the trend channel and could have a 2-4 day consolidation with the broad market.

USO & UNG Funds

Oil continues to flag from its breakout back in October. This is a bullish pattern. Last Friday we saw oil open much lower then rally back into the trend channel. This is called an outside day and many times this happens to stocks and commodities as it shakes out the weak traders before starting another rally higher. We will keep a close eye for any low risk entry point.

Natural Gas had a nice rally last week which I mentioned looks a lot like a short covering rally. The price action this week suggests it was and has now made a new low. Today on CNBC it was reported that a new source of natural gas has been discovered. This resource is 20 times larger than the biggest source in the US. Enough gas to last the US over 100 years. This added to the selling on both natural gas and oil today.

Trading Conclusion:

Precious metals continue to perform well and it’s important to note that PM stocks are now moving higher with gold. They have been lagging for some time but are on fire again. Great to see!

The Dow Jones index and several others look ready for a breather. The timing of these overbought charts bodes well for the seasonal December pause before the holiday rally. Time will tell.

Energy and financials are both underperforming the market and without their participation we will not see the indexes move much higher.

Continue to hold precious metals positions but be ready to lock in profits if we see the market reverse sharply. I am watching energy for a play but no setups at this time.

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Please Stop Rising!

instructor@mywealth.com (MyWealth.com) — Wed, 02 Dec 2009 08:00:11 PST

Japanese Yen: Intervention Fears Stall Strengthening—For Now!

On the heels of the Bank of Japan’s emergency meeting at the beginning of the week in which policy-makers decided to extend quantitative easing to its credit markets, Japanese officials led by Prime Minister Hatoyama are suggesting various degrees of intervention to keep the yen from strengthening. Or are they?

Taking their cues straight from the Bernanke book of monetary double-talk, Japanese ministers are offering conflicting views about what course of action needs to be taken to slow down the yen, including trying to enlist international help. What they can all agree on is that a strong yen is bad for their exports and hence bad for their economy.

Regardless of the rhetoric and what may or may not happen, yen bulls are heading for the exits. This also coincides with the resumption of the risk-taking trade, as the market has for the time-being dodged any contagion from last week’s news out of Dubai.

So while it appeared that the market was not impressed by the emergency measures, it is taking notice of the three-ring circus that is the Japanese version of jaw-boning. All this in the name of “reducing volatility”.

Let’s take a quick look at a chart of USD/JPY:

Earlier this week the yen reached 15-year highs at 84.80 vs. the US dollar due to the Dubai news on that huge doji candle. Combined with a stochastic crossover near the 20 level could mean a possible trend-reversal, at least in the near-term. If this pair can stay below 89, then I expect strength to continue. Should it breach 89, then the next stop could be the 90.75 level.

If the yen moves back down to the 85 level, then expect more forceful words from the ministers, and don’t necessarily rule out intervention. What sounded like a good idea back in September could have major implications for the Japanese economy, especially if things don’t improve.

Also to keep an eye on for this pair is what is going on here in the US. The forex market practically blew-off Plosser’s comments that we may need to raise rates here sooner than later to ward off inflation, regardless of recovery status. While there is still much debate about where we are in the inflation/deflation realm, one thing can be certain: maintaining a zero-interest rate policy for a prolonged period of time will not be good for the US economy.

If rates in the US, or even talks thereof, rise, then look for the yen to resume its “natural position” as the currency of choice for the carry trade.

In the meantime, Japanese officials will do all they can to threaten intervention to buy time and slow yen strengthening.

Right back at ya, Bernanke!

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