Trades Taken

Beans

Long 1 970K C, Short 2 990C

Profit Max:  $500

Risk:  $1,000

5/15 Expiration


 

FOR EDUCATIONAL PURPOSES ONLY.

Market insight: U.S. Dollar at 11-Year High Against Euro

Market insight: U.S. Dollar at 11-Year High Against Euro

And why now may not be the best time to bet on the greenback

By Elliott Wave International

Editor’s note: You’ll find a text version of this story below the video.

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On March 4, we spoke with Jim Martens, our Chief Currency Strategist. His Currency Pro Service is participating in our Pro Services Open House, a free week-long event that starts next Tuesday at elliottwave.com.

Elliott Wave International: Jim, it’s a good time to talk about currencies, because the euro has just touched an 11-year low against the dollar. Did you ever think you’d live to see this day?

Jim Martens: Did I ever think I’d live to see this moment… Well, back in mid-2011, when EURUSD was trading near $1.50, we started talking about the upcoming retest of $1.1876, the 2010 low. We were convinced that the rally from that level was a correction — so EURUSD would ultimately fall back to it. It took a while to get there because what followed was a wide-ranging sideways consolidation in EURUSD — a triangle, in Elliott wave terms, an overlapping pattern labeled ABCDE that you see on this chart:

That triangle ended in May 2014 with EURUSD almost hitting $1.40. From that point we had been expecting a move below $1.1876 — and we had lower targets, as well. Most of them have been hit, and the interesting thing is that now, all of a sudden, the idea of the dollar/euro parity is becoming popular. Someone at Goldman recently talked about parity by the end of 2017.

Elliott Wave International: Do you think we’ll see parity?

Jim Martens: Well, in 2008-2009, we spotted a three-wave rally in EURUSD from 2000 to 2009 — and we classified it as a correction. That, again, suggests that the euro will eventually revisit the lows we saw back in 2000:

But maybe not just yet. The current timing of the “parity” talk in the media is key. It’s interesting that we see it now, after a huge decline. This is very typical! At major turning points, sentiment is supposed to be extreme. There is a reason why extreme sentiment signals a turning point: First the trend gets popular, then it becomes too popular, then there is no one left to buy (or sell).

But the markets are doing what they are supposed to be doing: inflicting the most pain on the most number of people. The majority always gets caught on the wrong side at big reversals. Always. For me, the news of the public piling into a trend is another snapshot of the market sentiment. That’s useful information. Markets fool the most number of people at the most unexpected moments, but by tracking sentiment — and the news — you can prepare yourself.

The key is, just because the environment is right for a turn doesn’t mean there is evidence of the turn. Wave analysis has built-in indicators that give you that evidence, and you have to wait until you see it — before you act.

What separates Elliott wave fans from the rest of the public is that the public has no basis for determining when the trend may be over. In fact, the longer the trend continues, the more people join in — and the more committed they become. But right now is not the time to stay committed to your EURUSD shorts.

Elliott Wave International: Thank you for the insights, Jim.


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This article was syndicated by Elliott Wave International and was originally published under the headline Market insight: U.S. Dollar at 11-Year High Against Euro. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Forex Traders: The Only Question You Should Be Asking

Forex Traders: The Only Question You Should Be Asking
Elliott wave analysis foresaw the USDJPY’s recent rally. Find out what else we’re expecting for the world’s leading forex markets (plus stocks, gold, oil and bonds) — absolutely FREE

By Elliott Wave International

I can’t help it. Whenever I read the mainstream financial news, I feel like I’m eavesdropping on a job interview at Microsoft.

In case you don’t remember — Microsoft was made famous, in part, for asking prospective employees one single question: Why is a manhole cover round?

They wanted to assess how a person approaches a question that has many answers. And, many answers are what they got, from the most practical (i.e. “Because a manhole is round”) to the most philosophical (i.e. “The circle is the most aesthetically pleasing shape for the human eye.”)

I’ll now take you back to the world of mainstream finance where those in charge are regularly asked to answer this basic question: Why did market “X” move this way today? And, many answers are what they give.

Take, for a real-world example the March 9-10 upsurge to a 7-and-1/2 year high in the Dollar/Yen currency exchange pair. As for why the USDJPY rallied, the experts offered up these (and many more) explanations:

  • A February 6 robust U.S. jobs report
  • A February 9 hawkish speech by outgoing Dallas Federal Reserve President
  • A February 9 triple-digit rally in U.S. stocks
  • A February 8 government report showing Japan’s fourth-quarter GDP was lower-than-expected

The truth is, anyone can come up with endless reasons to explain market action — after the fact.

But what about anticipating the market’s next move — before it occurs? That is a question only EWI’s Currency Pro Service is equipped to answer. Case in point: At 9:44 a.m. on March 9, Currency Pro Service posted intraday analysis for USDJPY that identified a bullish contracting triangle on the pair’s 15-minute price chart.

For newbies, an Elliott wave contracting triangle is a sideways pattern comprised of 5 waves, A-B-C-D-E. They most commonly form in 4th wave or B wave position. And when one ends, the resolution is usually sharp and swift. Here is an idealized diagram:

The March 9 Currency Pro Service pinpointed the contracting triangle on the USDJPY chart and set the stage for a powerful near-term rise:

“The pattern can be counted complete, which suggest USDJPY will thrust higher toward the 121.84 high established in early December.”

The next chart shows you how the post-triangle thrust propelled prices right into the cited upside target at 121.84.

The mainstream experts always give you plenty of reasons why a certain market did what it did.

But EWI’s renowned Currency Pro Service analysts enable you to anticipate what a certain market likely will do in the coming hours, days, weeks and more.

And, there’s no better time to experience the incredible resource first hand. Why? Because for the second-time only, EWI has launched a Pro Service Open House event. Open, as in you get complete, no-cost access to Pro Service’s premier forecasts for not only Forex — which Investopedia calls “the most traded market in the world” — but also the world’s leading energy, metals, interest rates, and stocks.

This amazing one-week opportunity begins on Tuesday, March 10. Find out what’s in store for the markets you follow, free! Simply join the thousands of Club EWI members already taking part in the Pro Service Open House as we speak.


This article was syndicated by Elliott Wave International and was originally published under the headline Forex Traders: The Only Question You Should Be Asking. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

Striker Interviews System Developer, Don Wolf

John Gallwas, of Striker Securities, interviewed system developer, Don Wolf, creator of the Alpha Blend Trading System.

Mr. Wolf (Wolf Systems) is a professional trader who has computerized his personal trading systems and can also lease his proprietary trading systems to other traders. He has years of experience working with a Chicago-based Futures Commission Merchant (FCM) and learned about Striker towards the end of 2014. In this month we sat down with Mr. Wolf to examine the success of Alpha Blend live at Striker since October 2014 and currently up +46.15% a/o March 5, 2015 (all results are actual and include commission, fees, and monthly subscription).

Click here to read the complete interview, courtesy of Striker Securities.

Using the Clock to Catch a Break in the E-Mini S&P Futures

by Thomas L. Busby

The market is kind of like an ocean, sometimes it’s flat, but sometimes, if you are there at the exact right time, you can catch a break and ride it for big profit. A lot of traders rely on trying to “pick the top” and get short, or sell the market.  Of course, the same can be said for those who watch the market and buy the market if they believe we have made a low and are about to head higher.  Since my early days at the major wire houses, I know this for a fact, that stuff might work some of the time, but I have found that it does not work all of the time.  I trade the trend.  Because after all, it’s the truth, so write this down… The Trend is Your Friend. One of the strategies I employ in my personal trading and in teaching others is the use of a 0-minute chart to capture moves in the market.  The key is to use the best thirty-minute time frame to help frame the support and resistance of the market.

So…let’s take a moment to talk about how “time of day” factors into trading. There are some traders who believe that some of the more popular technical indicators, such as Stochastics, Bollinger Bands, and Elliott Wave…will show them the way to consistent profits.  I have tried them all, year after yea, starting back in the early 90’s.  Not one technical indicator ever showed me a consistent way to make money in the markets. Some technicals may have served as a “confirmation” of the trend, but none were ever as accurate as the one constant we all have as humans, as traders, and that is “time of day”.

Many traders spend countless hours studying charts, all in the pursuit of mastering technical analysis. Believe me when I say this: The key to the trade can be found in the price and the time. In order to achieve consistency in trading, the market should be viewed as a global market, a 24-hour machine that cranks up at 5:00pm Central on Sunday nights and runs virtually non-stop until Friday at 3:15pm. Rather than rely on moving averages or candle patterns, I use the price action in the E-mini S&P futures index as one of my top indicators for trend identification.  I view the market as one moving entity by also factoring in other major indexes, such as the Dow E-Mini the NASDAQ E-mini, the German DAX Index, and the advance/decline line on the NYSE and NASDAQ exchanges. (Yes, I just gave you the keys to the castle in one line of text!)

Before we talk strategies, let’s talk about the power of leverage.  The S&P E-mini, at $50.00 per point and traded on margin, is a trader’s paradise when you consider the leverage and accessibility it offers.  Think of it like this: on Friday, September 4, 2009 the E-mini S&P opened up at 1001.50. To find the value of the E-mini simply multiply the price, 00.50, by the value per point, $50.00. In this example one contract on the S&P E-Mini index is worth $50,05.00 in stock value. As a trader you need to ask yourself where your money will be best spent.  The SEC requires $25,000 in a stock ac-count to day trade stocks, where the futures indexes percentage-wise provide much greater leverage, dollar for dollar. In a futures account you can post approximately $2,500 in margin per contract and control over $50,000 of stock value. It’s a matter of simple math.

There are four key times that you can capture a pivot off the S&P E-mini to help identify if the market is moving higher or lower. I use the following times to gather these numbers, then treat them like a dot-to-dot to see how the market has traded in the overnight session. The times are: 3:30pm, 3:30am, 8:30am and 12:30pm (all times are central).  The times all correspond to key changes in the market during the 24-hour session.  The times can be correlated to shift changes in the market based on where the sun is located.  I consider the 3:30pm opening price on the E-mini S&P in the afternoon to be the most pivotal price that is given in the 24-hour session.  This is clearly the line in the sand between the bulls and the bears for that trading day.  The next time that is important is when the sun has made the shift from Asia to Europe; in this segment the time and price I focus on is 3:30am in the US morning, this is number will carry me until the sunshine has moved to New York and the US stock market opens up at 8:30am.  The final price I will consider is the opening price on the S&P E-mini at 12:30pm.  This will mark the final time that the market may experience either an acceleration or a reversal of the trend that is in place at that specific time.

Figure A.1 below shows the S&P E-mini September contract on August 20 – 21, 2009.  The chart is made up of 30-minute candles. Candle 1 represents the Asian overnight session; Candle 2 represents the time when Europe is in control; Candle 3 is the U.S. market once the NYSE opens, and Candle 4 is the U.S. afternoon session. In this 24-hour cycle, the S&P E-mini had an opening price at 3:30pm of 1004.50. This 0-minute candle is tagged in Figure A as a “”.   This is the candle that sets the tone, from high to low, for the Asian session (Think:  Where’s the sun?)  Once the high or low of the noted blue 0-minute candle is broken, the market has a tendency to gain momentum and continue higher if the high is broken, and lower if the low is broke.  The point here is that the market is made up of people and people are creatures of habit.  These times have been incorporated in my approach to trading the global markets since 99, and continue to help me see not only the short-term trend, but have significantly improved my accuracy in noting major shift changes in the longer term trend.

Incorporating “time of day” into trading the futures indexes is paramount to success in trading.  While there are technical indicators that can help improve your trading, the ultimate indicator for trend direction is the S&P E-mini Futures Index, and of course, the clock.

usingtheclock

Figure A – The S&P E-mini Futures September contract on August 20-21, 2009 (30-minute candles)/  Note:  Once the high or low of the blue candle is broken, a trend follows.


If you enjoy these types of articles, we invite you to subscribe to Futures Truth Magazine!

 

How Good Is That System, Anyway?

jrhsketch

Our founder, John Robert Hill, was interviewed by Stocks & Commodities Magazine back in 2002.  We thought it would be fitting to share the interview with you.

Click here to read the complete interview in pdf format.

Using the Commodity Channel Index (CCI) to Stay With the Trend – Part III

by Joe Ross

(Previously published in Futures Truth Magazine.)

Four Steps to Calculate CCI

1.  Calculate the last period’s Typical Price (TP) = (H+L+C)/3 where H = high, L = low, and C = close.

2.  Calculate the 30-period Simple Moving Average of the Typical Price (SMATP).

3.  Calculate the Mean Deviation. First, calculate the absolute value of the difference between the last period’s SMATP and the typical price for each of the past 30 periods. Add all of these absolute values together and divide by 30 to find the Mean Deviation.

4.  The final step is to apply the Typical Price (TP), the Simple Moving Average of the Typical Price (SMATP), the Mean Deviation, and a Constant (.015) to the following formula:

CCI = (Typical Price – SMATP) / (.015 X Mean Deviation)

CCI shows the relationship (expressed as the mean deviation) of today’s Typical Price to a moving average of Typical Prices.  By measuring today’s Typical Price against a moving average of typical prices, we are in effect taking a measurement of volatility.

Now let’s see how to use this concept to stay with a trend.

5

Keep in mind that CCI varies from one software program to another, but then, of course, so does data vary some-what from one supplier to another.  However, as long as CCI is consistent with the charts created by the soft-ware we are using, it is acceptable to take the signals generated.

Following are some illustrations to help clarify the concept.

6

The chart above is 5-minute chart spanning a time period of 3 days.

At “A” CCI is below the -100 line.  Notice that the CCI curve rises above -100, then above 0, and finally, above the +100 horizontal lines.  When we see such action by CCI, we should suspect a trend in the making.  If we have other indications of a trend such as a technical study, or a 1-2-3 formation followed by a Ross hook, we should consider using CCI for our trailing stop.

Once CCI rises above the +100 (in the case above), we would resolve to hold our position until CCI once again touches the 0 line, or could be projected to touch 0 through the use of typical price calculations.  A projection would indicate to us exactly at which price the value of CCI would touch 0, and we would plan to exit at that price.  In this particular instance, CCI never again touched 0.

7

The chart above is a 5-minute chart spanning a time period of 3 days.

At “A” we see CCI crossing below the +100 line.  Subsequently, it crosses through “0” and then -100 at “B.”  This, combined with any other flters we may have, should alert us that a trend is in progress.  Shortly after “B,” CCI touches “0,” but after that the trend begins in earnest.  CCI never again touches “0” until “C.”

Pertinent Points

•  CCI in and of itself is not a great indicator of the start of a trend.  However, it offers an excellent   alert that a trend may be forming once we see CCI crossing three horizontal lines.

•  CCI should be filtered with at least one other method for confirmation of the trend.  Any momentum indicator will do, because CCI is a volatility indicator.

•  If we choose to not compute typical prices for purposes of CCI projection, simply exit the trade on  the first bar after CCI touches “0.”  Statistically, the results will be about the same as with the projection.  For day traders, this may mean waiting an extra few minutes, depending upon the time frame in which the trading is done.  However, for position traders this can mean an extra day or an extra week.  Therefore, position traders, because they have the time to compute the projection, are probably better off doing so.


Stay tuned for the follow up posts on this excellent article!

Using the Commodity Channel Index (CCI) to Stay With the Trend – Part II

by Joe Ross

(Previously published in Futures Truth Magazine.)

Tomorrow’s Typical Price in a Downtrend

To compute tomorrow’s Typical Price in a downtrend, we need to find the average rate of descent.  It’s important to use four bars for this computation.

What we want to know is, on average, how much prices are moving in the direction of the downtrend.  To find out, we measure from high to low.  Here are the steps to follow:

We measure from today’s high to the previous day’s low, to see how far prices move over a two-day period.  We do this for three overlapping two-day periods.

3

We then add those measurements together and divide by three.
2.25 + 2.00 + 1.50 = 5.75 / 3 = 1.92 (rounded) on average.

Subtracting 1.92 from the last known high (61.50), we obtain 59.58 for tomorrow’s projected low.

Next we need to determine tomorrow’s projected high.

We measure the average volatility for the last three bars.  Average volatility equals the sum of the differences between high and low, divided by three.

4

We have:

61.50 – 59.25 = 2.25
62.75 – 60.00 = 2.75
63.50 – 60.75 = 2.75

The three differences are, 2.25, 2.75, and 2.75.
Summing these and dividing by 3 = 7.75 / 3 = 2.58

Adding 2.58 to the projected low, we obtain 62.16 for tomorrow’s projected high. 59.58 + 2.58 = 62.16.

The final step is to add the projected low and the projected high, then divide by two to come up with a Typical Price.  In this case, (62.16 + 59.58) / 2 = 60.87 = tomorrow’s Typical Price.

I’m sure there are many other ways to come up with typical price. It’s a matter of choice.  With today’s software in many instances being programmable by the user, we can fgure all the different ways and then make our choice.

One last thing: the formula for calculating the CCI follows, for those “do-it-yourselfers” who want to know.


Stay tuned for the follow up posts on this excellent article!

Using the Commodity Channel Index (CCI) to Stay With the Trend – Part I

by Joe Ross

(Previously published in Futures Truth Magazine.)

Let’s see how we can use the CCI study in a way that few have seen before.  We’ll take it a step at a time.  (The CCI study is available in most charting software packages.)

The CCI measures the mean deviation of a bar’s Typical Price relative to a moving average of N bars’ Typical Price.  Typical Price may be computed as the high plus the low plus the close, divided by three.  This gives a close-weighted Typical Price.

The CCI study is a volatility indicator generally displayed with three horizontal lines: +100, 0, and -100.  However, CCI is theoretically, if not practically, infinitely expandable.

There is one great advantage to the scale.  It is increasingly difficult for CCI to make ever greater extremes in its readings.  It takes increasingly more volatility to push the CCI plot increasingly further out on its scale.

Experience and testing have shown that a 30-bar CCI works best for trend following.

Any software which allows us to insert a fictitious price bar can be used to emulate the manner in which we use the CCI at Trading Educators.  However, this CCI technique can be done quite satisfactorily without the use of the fictitious bar.

To insert a fictitious reading for CCI, we need to be able to create a hypothetical price bar for what will be the next price bar.  This is easily done on a daily chart with most software.  On anything less than a 15-minute chart, we will have to really scramble to get the job done.  The truth is that the calculation of a fictitious price bar works best on an hourly, daily, or weekly chart.  Once we have placed the hypothetical bar on the chart, simply run the CCI study with the hypothetical bar in place, and see what the reading will be.

The hypothetical bar need have only one price for all fields.  The open, high, low, and close can all be the Typical Price, but if our software will allow, we can also insert a high and a low if we want to do the extra work.

How do we know what the next bar’s Typical Price might be?

I’ll show two ways to do it.  Then I’ll show how to use CCI as a trend-following tool that will keep us in a well established trend.

Figuring the next bar’s Typical Price in congestion has been done essentially this way since the inception of exchange trading.  Each day many insiders and market makers come to the exchange with these figures in hand.  They tend to sell at or near the typical high and buy at or near the typical low.  If either the high or the low is violated by more than a few ticks, we see them bail out and run for their lives.  This shows up on a chart as an extra long intraday bar.

Figuring the next bar’s Typical Price in Congestion

(Open + High + Low + 2(Close)) / 5 = X
2X minus The High = Next Bar’s Projected Low
2X minus The Low = Next Bar’s Projected High

  O       H       L         C
     Example:  (24 + 25 + 23 + 2(23.5)) / 5 = 23.8  

     2(23.8) – 25 = 22.6 = Next Bar’s Projected Low
     2(23.8) – 23 = 24.6 = Next Bar’s Projected High

Next Bar’s Typical Price = (Next Bar’s Projected Low + Next Bar’s Projected High) / 2

     (22.6 + 24.6) / 2 = 23.6

Figuring the Next Bar’s Typical Price in a Trend

Typical Price in an Uptrend

To compute the next bar’s Typical Price in an uptrend, we need to find the average rate of ascent.  It’s important to use four bars for this computation.

What we want to know is, on average, how much prices are moving in the direction of the uptrend.  To find out, we measure from low to high.

Here are the steps to follow:

We measure from one bar’s low to the next bar’s high, to see how far prices move over a two-bar period.  We do this for three overlapping two-bar periods.

Here is an example:

1

We then add the “amount moved” measurements together, and divide by three.

2 + 3.75 + 3.25 = 9.  9÷3 = 3 on average.

Adding 3 to the last known low (29.25), we obtain the number 32.25, which is the next bar’s projected high.

Next we need to determine tomorrow’s projected low.

We measure the average volatility for the last three bars.  Average volatility equals the sum of the differences between high and low, divided by three.

2

We have:

31.00 – 29.25 = 1.75
30.25 – 27.75 = 2.50
28.00 – 26.50 = 1.50

The three differences are 1.75, 2.50, and 1.50.
Summing these and dividing by 3 = 5.75÷3 = 1.92 (rounded).

Subtracting 1.92 from the projected high (32.25), we obtain 30.33 for the next bar’s projected low.

The final step is to add the projected high to the projected low, then divide by two to come up with a Typical Price.

In this case, (32.25 + 30.33) / 2 = 31.29.

It’s important to realize that this is not an exact science, but it’s surprising how often we can come within a tick or two of being right.


Stay tuned for the follow up posts on this excellent article!

 

Intro to Minor Reversal Patterns: Part VIII

Over the last several days, we have published Minor Reversal Patterns, as published in John Hill’s book, Technical and Mathematical Analysis of Trends in the Commodity and Stock Markets.  Feel free to browse the blog for previous pattern posts, and as always, if you have any questions please don’t hesitate to ask.

The reversal patterns listed are based on only several days of action.  They can be very useful when used in combination with the overall chart pattern and when used with other technical tools.  I will emphasize that these factors or formations used by themselves can result in trouble and lead to whip saw action.  Also, market action may not be exactly as shown.  There may be several more days of movement.  My intention is to introduce new concepts.

Pattern 15: TIME DURATION

patt15

When a market makes a new high for 5 days, it indicates the momentum has shifted to the upside.  Inside days can be ignored in counting the five days.  Commodity may be purchased on a reaction.

 

 

Pattern 16: WIDE SPREAD REVERSAL

patt16When you have a wide spread which closes above a previous rally top, this strongly indicates a change in trend.

 

 

 

Pattern 17: END TO CORRECTION

patt17This reversal formation is one that signifies the end of a correction against the prevailing trend.  This is usually indicated by:

  • A reversal day, or
  • A narrow range day followed by a range increase and a close in the direction of prevailing trend.

Copyright 2015, John Hill & Futures Truth Company