Some of the more notable observations from the list:

• The US was the only country to get an UNCH forecast for 2012 (1.8%, which was revised downward by only 0.3% in September).
• Europe was the hardest hit for both 2012 and 2013, with Western Europe seen in negative territory for 2012.
• Germany receives a rough projection, revised down 1%for 2012, UNCH for 2013.
• World output average seen -0.7%  lower for 2012 (3.3%).
• Developing Asia keeps creeping lower, seeing more volatile shifts since June.

Source (and a great blog): http://blog.thomsonreuters.com/index.php/imf-forecasts-graphic-of-the-day/

Below you will find a concise summary of everything from market depth to the manner in which dealers interact. A while back, one of our good friends introduced me to the work of Carol Osler, a professor at the Brandeis International Business School. I have read a wide range of academic papers over the years discussing order flow, microstructure, etc., but I have never found one this concise in terms of discussing the foreign exchange market as a whole.

I respect the straightforward and nonsensical manner in which this paper was written, which essentially draws an outline of the market from a bird’s eye view. Last week I was ready to post a quick link to this article, when I thought it would make better sense if I just created a brief presentation that outlines key sections and points. The presentation is essentially a verbatim translation of what is posted in the research paper, just simply broken down into a more visual manner with key points exposed. I have never blatantly asked this before but if you find this in any way useful, please share it. It is one of those things that simply deserves more attention.

You can alternatively download a copy of this in .pdf format (with active links to sources and much better quality) by clicking here.

“Buy the rumor, sell the news”, is one of the oldest expressions in trading. Here, we just call it “expectation versus reality”. Is it a patience issue when it comes to people actually trading it, or just a lack of confidence? I think a little bit of both.

During this entire downtrend your local broker analyst and all their friends are blaming this, that and the other thing on a slew of preexisting events that really went absolutely no where. You could blame this downtrend on a slew of other factors (which the media is forced to do on a daily basis) but sentiment is sentiment, and it is not where it comes from that matters, but how strong it is.

In yet the latest edition of NBT’s “Expectation Versus Reality”, the markets completely bug off the reality of European downgrades, and trading into the expectation of them actually happening.  There is no “shrugging off the news” going on here – we already knew it in early December. Buy (sell) the “rumor”, sell (buy) the “news”.

The comic was Jim Jeffries, who’s niche is to play the offensive card as hard as possible.  Some of you might / might not have heard about him but he got me going unlike anyone I’ve seen in a long time.

For any trader that struggles, I always have one piece of advice: take your risk down to practically nothing, and keep it down until you can trade consistently, months and months at a time.  But no matter how many times I say this, maybe 1 in 500 people will actually do it.

Instead of pressing more keys here and reiterating an infinite loop of things that have already been stated on this site, I’m just going to copy / paste an embed code and let Jim explain the rest.

This video and pretty much everything this guy does is about as offensive and raunchy as you can possibly imagine, so feel free to move forward at your own discretion. “Don’t die today”.

On March 12, 2009 we first witnessed the bank intervening on its own currency with full force, fueling EUR/CHF nearly 500 pips before throwing in the towel.  Flip forward to September 6, 2011, and not much has changed.  The mystery trade executed by Hildebrand’s wife sent him to the unemployment line and now we have a new leader that may or may not decide to continue pushing money against the Swiss Franc.

The market continues to play chicken with the line in the sand, and EUR/CHF is now resting 85 pips above the proclaimed 1.2000 level.  This is something that has obviously been on my radar for a while but I have shied away from in terms of activity.

There are a few things we have learned since then, I’ll try to be as blunt as possible in terms of trading:

1. EUR/USD, under pressure from EUR/CHF buying, rises in tandem with the pair during the actual intervention. Immediately afterwards, it sells off aggressively and fills up the gap.

2. Sell stops on EUR/CHF have been piled up heavily under touted areas of intervention.  When the bank is called bluff, someone sells big, triggering these sell stops and sinking the pair aggressively.

3. Much more ambiguous, and for the dealers to mess with, EUR/CHF itself fades from the peak. This occurrence has been hit or miss and contingent on the situation in time.

Almost 2 years ago I posted a graphical recap of all SNB interventions to the date of the post. You can find it here: http://www.nobrainertrades.com/2010/01/hildebrand-reaffirming-franc-anti.html

With Hildebrand or not, the 1.2000 proclamation level was stated on behalf of the SNB.  It would seem nonsensical for them to wait until the level gets approached or bluff yet again, but not much more nonsensical than stack up these reserves in the first place. USD/CHF demand was teetering today, so we might be drifting for a little while longer.

Unlike the Wall Street Reform and Consumer Protection Act (Frank-Dodd) or the Affordable Health Care Act, we are not talking about an industry that is demonized in popular society: it is embraced. Many people that supported heavy reform of the financial and health care industry vehemently oppose the far reaching consequences of these bills.

California is the epicenter of high tech industry and the home of many of the world’s largest internet giants. It is also the home of Hollywood, whose business product is the common target of internet piracy. Protecting a business product is one thing, but to essentially criminalize our day to day internet usage (many would be shocked how many “felonies” most people have committed over the years under this bill) is an entirely other story.

*Names and numbers below updated on 1/19/2012 to reflect the significant number of defectors of support following yesterday’s call to action.

I wanted to know who started this freight train of frustration, and the findings did not surprise me.  The gist of HR 3261:

• Lamar S. Smith (Republican, TX) introduced the bill
• The bill had at most 30 co-sponsors.  16 are Democrats and 15 were Republican. With Ben Quayle the support split was exactly 50/50
• Support for the bill (after 5 withdrawals) now stands at 15 Democrats and 12 Republicans, inclusive of Smith
• Of the now 29 co-sponsors, 8 are from California
• All of the 8 Californian Representatives live in areas in or directly around Los Angeles, none are from San Francisco or districts anywhere near it.

The full listing of co-sponsors for HR 3261 (Stop Online Piracy Act):

And the Senators supporting the Protect IP Act (PIPA):

• Senator Patrick Leahy (D-VT) introduced the Act
• The Act had 42 supporters (including Leahy).  25 were Democrats and 17 were Republican
• Support for the Act (after 10 withdrawals) now stands at 23 Democrats and 9 Republicans, inclusive of Leahy
• Both California Senators (Boxer and Feinstein) are Democrats and support the Act. Both are from the San Francisco area.

Sources:

http://thomas.loc.gov/cgi-bin/bdquery/z?d112:HR03261:@@@P

http://www.votesmart.org

http://en.wikipedia.org/wiki/List_of_legislators_who_support_or_oppose_SOPA/PIPA

And more:

PS – I absolutely realize that this is far beyond the norm of what gets posted on this site, but this site, like thousands of others, would be affected by this legislation. Lame.

But before we get excited, as shocking as today’s event might seem, really is not, as S&P has noted in the past that several of these European nations could cost the EFSF its top tier rating.

Friday’s S&P temper tantrum resulted in the downgrading of 8 major European countries. Considering their verbiage during the last time they spoke about the issue, Friday’s result was actually better than expected for France, as rhetoric implied a potential two notch downgrade for the now furious government.

In addition to all of this, Moritz Kraemer, head of EMEA sovereign ratings for S&P made the television circuit today and in one sentence stated the gloom of all gloom: “Greece will default shortly“. Happy 2012, everyone. XOXO, S&P.

EUR/USD opened lower yesterday but quickly filled the gap as the expectation for this occurrence was essentially already priced in. It’s 2012, and the currency market is still very unhappy with the Euro as a whole. Relative to the past, however, things from the perspective of price could be considerably worse, but not by much. Recession lows are now less than 800 pips away in EUR/USD.

Today we present yet another update on ratings. As a reminder: anything under BBB- is considered junk, of which only one nation in this entire list has such status. So when you look it that way, life isn’t so miserable.

Application Is Still The Best Form Of Education

I, like many others, are under the belief that you can read as many books or articles as you like, but nothing is going to get you moving forward faster than just raw observation.  The problem is that we tend to forget what causes us to prevail or conversely, get burned, by the market. Why this is the case with trading and not as much as other activities can be explained in 500+ page documents, but just be aware that we DO forget many things along this line, and on a very consistent basis.

Getting It Done Is Easy; Just Do It, That’s All

1. Create a new folder on your computer that is as “in your face” and easily accessible as possible. For most people, this is going to be right on your desktop, or if you don’t want to slow down your machine, create a desktop shortcut to a buried location, or one in your taskbar, or both. Easy access is key, otherwise you are just less likely to use it.

2. When you take a trade or observe something that could have paid off or caused some harm, grab a screenshot of the chart.

3. Mark up the chart with notes. Go nuts. The more information, the better, so you won’t have to second guess the movement when you use it as a reference guide in the future.

Take stock of the following:

• Fundamental backdrop – is the risk on or off? What just hit the wires? Economic data? Rumor mill? Be specific.
• Technical backdrop – local and long term support and resistance levels, price patterns, fibonacci sequences etc.
• If you executed (or were going to and did not) exactly where and why?
• How far did price travel before major support or resistance got in the way?

Etc….the book is open. You are the author, after all.

4. Categorize your charts into subfolders

You can distinguish movements by news events, volatile, non-volatile reactions, specific price patterns, etc. Just make sure that you are not overlapping too many categories which might be relevant to one another.

5. Browse

Use your downtime to browse through your charts and stay sharp when it comes to “normalized” market movements. Most of time, you are likely to open your folder for viewing right before an event or other potential movement.

Software

In both Windows and Mac operating systems, you have the ability to take screenshots and paste them into other editing programs. I used to do this with Widows before I found SnagIt.

SnagIt has been the best piece of software I have used when it comes to taking “screen notes”. It’s a $50 purchase but in my opinion, well worth the money. It is very easy to use and saves me the hassle of having to battle the Windows interface and cropping images, etc., in other programs. Everything can be done in SnagIt, and there is no cropping to speak of when it comes to grabbing the shot.  Again, ease of practice is key…..if it is hard to do, you are simply less likely to do it. Make it easy.

From the standpoint of FX reserves as a % of GDP, no one seems to be facing more severe a situation in terms of currency reserves than the SNB, who at the time of their last major intervention (following the proclaimed floor of 1.2000) stood at just over 70%. This number has slowly and slightly stabilized in subsequent months but still remains very uncomfortably high (reserves held / reported for November were 231.6bb Francs). While the market seemed to get the drift of such a proclamation, the Yen has been less lucky with ambiguity over what could be deemed a reasonable level and continues to strengthen despite government efforts. EUR/JPY is now under 100 and USD/JPY continues to float in its lowest range.

Source: http://online.wsj.com/article/SB10001424052970203899504577130803655761464.html

—————-

On December 5, Standard and Poors placed 15 of the 17 Eurozone nations on creditwatch: negative, or under review for a rating action (downgrade). Today we hear from Fitch, who places already outlook: negative nations under review for a potential downgrade.  ”Results” from the Dec 8-9 summit have left the agencies dissatisfied, to say the least.

Comments from the ECB and monetary / political leaders of Eurozone nations have intensified in the past few days regarding these potential downgrades, and the market is leading to believe that the action is coming much sooner than the “within 90 day” guideline.

Sovereigns are typically notified up to 12 hours in advance of a rating action.

S&P’s language the day of the release signified a potential 1 notch downgrade for the following countries:

Austria, Belgium, Finland, Germany, Netherlands, and Luxembourg

….and up to two notches for the “other governments” omitted from the one notch list including France, Estonia, Ireland, Italy, Malta, Portugal, Slovakia, Slovenia and Spain.

Fitch placed the following nations under review for a potential downgrade today: 

Belgium, Spain, Slovenia, Italy, Ireland and Cyprus

….and affirmed France’s AAA rating but revised their outlook to negative.

Below is a current summary of ratings and outlooks (not “under review”) across the 3 major agencies: