CFD Trading... The Aussie sharemarket gyrated in a moderately volatile trading band in contrast to the consistent and stable performances of bourse in the Asians region and the US Dow Jones Index Futures (+50). Whilst most Asian sharemarkets displayed a consistent, albeit cautious recovery throughout the session, the local market raced ahead at the opening only to tip over on arbitrage selling once more mid morning, before further advances in the Nikkei and Shanghai bourse drew buying by fund managers in the afternoon that took the ASX 200 back to above the neutral line. However, another bout of selling took the market back into the red with the SPI closing beneath its fair value. Technically further downside over the short term is most likely with the present downside momentum to at least the target point we highlighted last night.

• What worries us is that the US DJI Index pullback has in fact been quite contained in the broader context and if more severe losses unfold, it could lead to us to test the Sep-Oct 2011 lows before long.

Local financials continued to weigh up the implications of uncertainty in Europe, coupled with the talk over an expected escalation of the initial estimate size of JP Morgan’s trading loss, now seen closer to $3bn. Whilst the domestic majors do not have any direct exposures to the troubled region, the falls in share price of their international peers, does have a relative valuation impact locally on the sector as a whole. Interestingly ANZand NAB, which outperformed with near flat performances, but sizeable falls were noted in Westpac and Commonwealth Bank, suggesting quite a lot of reshuffling occurring presently amongst fund managers. The latter appeared to be caught up a “buy the rumour, sell fact” reaction after its Trading Update provided few insights into what appears to be a stunning result.

We find it worthy to touch upon gold tonight.

Unlike last year in which the yellow metal managed to benefit from the uncertainty stemming from instability in the Euro zone, the recent escalation of woes in Greece and Spain has not only done little to attract fresh defensive flows of money, but instead have triggered losses as investors/traders liquidate longs to pay for margins elsewhere or otherwise park money into the greenback. Technically the price did reach the key horizontal support region yesterday and showed mild bouncing signs in Asia today. However, we are wary over the present slowing physical demand especially from China and India.

• Hence in our opinion bottom fishing into the likes of Newcrest Mining and Kingsgate Consolidated might be a little early for our liking. (See our blog today on Capitulation)

FTSE Commentary: The FTSE is currently entrenched with a mild down sloping channel. Having taken out the previous up-sloping support line, the market confirmed a downward bias. The additional clearance beneath the 200-day MA line heightens focus to the downside. However, the SI is presently suggesting oversold and bouncing. It is all about the EZ for now and developments in the periphery. Its growth prospects will be stifled by uncertainty in the region. The overnight Bank of England Inflation Report was clearly softer than expected. This provides a mixed tone for equities as at least they will more likely receive further stimulus in the form of quant easing once more.

Forex Trading ... A tentative risk rebound was noted in the latter half of the Asian session in foreign currency markets after Asian bourses generally held firm. However like in prior sessions, upside appears likely to be limited as the European session unfolds.

• A trend over the past few trading sessions is for a rebound to get knocked on the head asthe European market session unfolds as more bad news is filtered into the market.

We chose to enter our FX Snapshots short idea via on the British pound on our Email/SMS Alert Trading Service in the afternoon. The much more dovish than expected Bank of England Inflation Report overnight suggest fresh quantitative easing might be on the cards once more.

GBPUSD Commentary and Forex Trading Signals:  The pair failed after testing the 1.6300 mark, just shy of the final Fibonacci retracement level. It then since drifted lower, but continued to perform well against the greenback compared to other major pairs, delivering gains on the crosses to the pound. Eelier this week the tone changed and overnight the pair scored its second severe back-to-back fall. It has ominously dipped back inside its previous trading range, suggesting lower levels are possible. We took upon a fresh short entry in our FX Snapshots/Email SMS Alert Service today. The Bank of England Inflation Report overnight proved far more dovish than expected and quant easing possibly being back on the cards will weigh on the pair.

As the author below discusses, from a practical perspective it is best to avoid the hype of trying to pick the bottom of a market or share fall. The only way to know is to wait until the low has been achieved as evidenced by a reliable well-proven bounce or other widely regarded reversal patterns. This alleviates the emotion involved in trying to pick the bottom.

During the free fall of the 2008 crisis, many share brokers and analysts kept saying the PE values suggest a stock is an enticing purchase.  There is no doubt the PE ratio could have been enticing: the issue is the forecast earnings can change dramatically. 

Capitulation - How You Recognise and Trade It

(Reality Trader – Trader Planet) One of the well-recognised terms from the tape reading terminology is Capitulation - often mentioned and often misunderstood. Many apply it in an overly broad sense, labelling any new low as capitulation; some believe that buying into selloff makes them winners almost by default - after all, everyone heard about necessity to go against the crowd, right?

There are two important things to keep in mind about this concept.

First is, bottoms are not always being formed by the capitulation selloff (V-shape). Sometimes it's a slow grind shaping as a dish; sometimes even with capitulation it's still not that easy - weak initial bounce often leads to another drop and new low is being made sending a stock into panic.

Second, and most important to remember. You probably noticed that wherever you find the description of the concept of capitulation, it's still just a concept - meaning, there is no measurable component to it.

There is, to my best knowledge, no percentage of the drop that qualifies selloff as capitulation. Name any particular number, and you will inevitably find a whole lot of cases where it was exceeded. There is a good reason for that: if there was a certain measurement for capitulation that guaranteed ultimate low, everyone would be insanely rich waiting for it and buying it... and no one would be buying a second earlier. But then again, why would anyone SELL at that ultimate low which has been already proven to be an ultimate one?... And if the answer is "no one," then from whom the bottom hunters would buy at that same bottom they were hunting?

Thus, capitulation is either:

• cannot be computed and quantified as it's an emotional state, panic, total disarray leading to a free-fall - but not being quantifiable, it's in the eye of a beholder, which makes "getting a read" on it quite discretionary; or
• can be computed to a certain degree IF you somehow know the amount of shares that were held by different stakeholders, and see that roughly that amount is being traded in a very short period of time (again, discretionary component) during very steep selloff (once again, steep by what standard? on what chart?).

No doubt, sometimes experienced traders get it right by gut feeling which is a product of vast experience.

By no means it's a fool-proof process for any of them, and you will always see arguments about whether this particular stage of selling already constitutes capitulation or not yet, whether capitulation is going to be the case in this particular bear market or not. This concept is necessary to understand, but it doesn't mean that once you understand the concept you can spot the capitulatory type of bottom.

That's why I am always advocating for a different type of bottom-fishing - one that is based on:

• letting go of the idea of buying THE low,
• waiting for a stock to come out of free-fall, form a recognizable reversal formation,
• buying when such formation offers chart-based opportunity free of emotions.

Such an approach will never get you in on the exact low - leave that to amateurs to try and brag about those rare instances when they get it right. In exchange, such approach will give you a repeatable reliable method of trading the trend reversals.

Sourced from: http://www.traderplanet.com/newsletter_articles/view/7539/distribution:7

On a $311 position size outlay, the NZDUSD trade idea yielded a profit of $147 or 47% on funds deployed (based on 100 x leverage) for the Forex trader. 

On the 10th May, TRUMarkets provided an Email/SMS Alert Service trade idea which was to Buy the NZDUSD @ Best (0.7839) based upon the daily chart bouncing off the key horizontal support zone, near the 61.8% Fibonacci retracement level. Later on that same day, we sent out an Email/SMS Alert to take profits @ 0.7876. The trade idea delivered Subscribers a profit of 37 pips.

Synopsis of the trade idea:

• It has been one of our favourite pairs over the past few months from a trading perspective with the highest success rate from a profit/loss perspective.
• We are looking at a bounce opportunity based upon the technical target being reached from an extrapolation of the recent sideways trading range.
• Looking at the trading band (the two green lines) and taking the breakdown point and adding the same trading range, we all but reached the target overnight.
• We feel comforted also by the prospect of the 61.8% Fibonacci retracement support being underneath.
• The area of the overnight bounce also coincides with a region of previous horizontal support and resistance throughout Nov - Jan.
• The RSI on the daily chart has moved down to the oversold region, which suggests that price is due for a bounce.
• The stochastics is also in the oversold region and flat lining.
• The pair has dipped thanks to market risk aversion attributed to Europe and some softer economic data in the States of late.
• Looking toward its cousin, the Aussie and for now a lack of parity test, might inspire a moderate short covering rally across carry trade pairs.

Past performance is not a reliable indicator of future performance, and the CFD trader and Forex trader should be aware that future results may vary and may be negative from time to time depending upon market conditions and as such, we do not guarantee or imply future success.

Forex Trading ... After a stable and generally resilient morning session in Asia in which movements were largely contained, the greenback surged in the latter part of the session as softness in the region’s equity markets and another dip in gold drew further selling of the euro and commodity based currencies.

At the commencement of the European session, the euro was on track to score its 11th loss in 12 trading sessions, though we question how long it can hug the Bollinger band extreme without some kind of a technical bounce. With the market bias already heavily short the pair, an “out of the blue” technical bounce cannot be ruled out, but not perhaps before its medium-term horizontal support region is tested in the 1ow 1.2600

AUDUSD Commentary and Forex Trading Signals: The Aussie dollar slid through parity earlier this week, brought about by the Greek election uncertainty, Spanish concerns and China slowdown concerns. After the much better than expected April Unemployment data last week gave it a mild boost the tone has since changed as commodity prices have soured. Yesterday it recaptured parity briefly as the RBA Board Minutes provided little fresh information to the market that it had not already previously signalled. However, the calling of fresh Greek elections soured the tone and the price reversed markedly as commodity prices dipped.

CFD Trading... The local bourse was walloped by 100 points thanks to the Greek uncertainty, which will drag on for at least another 6 weeks leaving traders plenty to ponder about in the interim. It exceeded last Monday’s fall, thus making it the biggest fall for the year.

We suggested yesterday that today’s trading would be a pivotal one given the proximity of the key medium-term up-sloping support line.

• Today’s breakdown was savage, as aside from breaking through the uptrend support line with a big bearish red candle, the market also slid through the 200-day MA line, in addition to the 38.2% Fibonacci retracement level of the August – May movement.
•  With the RSI entering the oversold zone it has scope to bottom out over coming sessions after the next technical stop is reached around the 50% Fibonacci retracement level, near 4100.

We highlighted a number of blogs last month, which suggested that the adage” Sell and go away in May” might not apply this year. Right now with the market turbulence, the phenomenon has in fact been once again been spot on! Although overnight markets took the Greek re-election announcement largely in their stride, the local market and the Hong Kong bourse were for more risk averse by recording the steepest falls in the region amongst the major markets. Whilst the Greek debacle clearly has scope to de-rail stability for other countries in the euro bloc and thus deepen the region’s economic woes, it also hits us hard given our market’s top heaviness in resources and major banks, which are also influenced by their economic fortunes.

Major miners copped an absolute hiding, but it was not merely the size of the falls in the BHP Billiton, RIO Tinto and Fortescuethat was concerning, but also their hefty trading volume. It suggested today that there was some serious exodus occurring from overseas funds looking to park money to the sidelines. Outside of days when trading volume is artificially swelled by an options expiry, futures contract expiry, a profit announcement or an ex-dividend payment session, today’s trading amongst the Big 3 marked one of the largest for the year.The sector unfortunately cops the double whammy of contraction in demand stemming from the Euro region, as well as a weakening China, made even worse by the latest developments. BHP scorched traders who might have entered toward the close of yesterday’s session seeing a dragon fly doji candle, but today’s movement is a classic case of the prudence in looking for confirmation before entering.

The domestic major banks traded lower, but in light of the relatively resilient performances earlier in the week, overall they have not fared too badly to the fallout from the current Greece debacle. As we have highlighted previously the Big 4 are seen largely sheltered from the disturbances occurring over in Europe, and even though some of their funding is reliant on the performance of the bond markets in the region, they have strategically cut back funding reliance from that region following the turbulence over the past couple of years. ANZ Bank, which we highlighted a couple of weeks ago looked to be losing its appeal versus the other Big 3 put in the ugliest technical break of all benefiting pairs trade suggestions we noted at the time.

Nikkei Commentary: The Japanese bourse pared back from the horizontal resistance region, then consolidated in a wedge, before another down slide. It has since fallen 14 of the 15 past sessions on their futures contract, easily taking out the key MA lines. Persistent worries about the EZ, slowing Chinese growth and potential softening growth in the US are all weighing heavily. Not even the reliance in the USDJPY has done much to stem the tide over the past week.  The horizontal support now looks as the most likely technical target.

On a $400 position size outlay, the Ramsay Healthcare Limited (RHC) share CFD trade idea is currently yielding a profit of $240 or 60% on funds deployed (based on 20 x leverage) for the CFD trader. 

On the 3rd May, TRUMarkets provided a CFD Snapshot trade suggestion, which to Buy Ramsay Healthcare Limited (RHC) @ Best based upon technical factors (a break above the previous trading range resistance) and fundamental factors (its capacity to act as a defensive stock). The price opened at $20.30 on the day. We then re-featured the trade idea on the 9th May, leaving another opportunity to enter the trade suggestion and the price opened at $20.14. The trade idea currently remains open with a last trading price of $20.91. The trade idea is currently in profit by $0.61 per share CFD for Subscribers based upon an entry price of $20.30.

Below is write up that accompanied the trade suggestion:

Today we have featured the daily chart of Ramsay Healthcare Limited (RHC).

• Our recent long suggestion from 6th March, entered @ $18.52 reached the profit taking target last week of $20.00.
• It has since consolidated and tested the resistance band for a number of sessions.
• However, finally over the past two sessions there are signs that it might be breaking higher once more.
• At the time of our last entry we noted that the sector appeared to be standout.
• The trend at the time in Europe and America was the movement of money into defensive based issues, including health care related stocks.
• We also noted earlier in the week that strength in healthcare related issues continues to be the “flavour of the month”.
• Technically, we noted that the price action has largely been caught in a rectangle-like band with support around $18.00 and resistance near $20.00.
• Now that this sideways pattern has been broken to the upside, it can now be construed as a consolidation/continuation pattern for further upside.
• There is no negative divergence seen in the OBV indicator since it remains near its peak.
• We are happy to re-enter the stocks CFD in light of the market’s appetite for healthcare stocks and the broader trend of the market, following the breakout this week.
• The private hospital operator with exposure in Australia, Asia and parts of UK and France remains a stable, if not spectacular performer from an earnings perspective.
• At the same time, if the equity markets hit a rough patch their defensive earnings profile enhances its attractiveness relative to other sectors.
• Buy @ Best (Last $20.21), with a stop loss @ $19.42 and for a target of $21.30.
• Use an $8,000 notional position size, which equates to around 394 share CFDs.

Past performance is not a reliable indicator of future performance, and the CFD trader and Forex trader should be aware that future results may vary and may be negative from time to time depending upon market conditions and as such, we do not guarantee or imply future success.

CFD Trading... The Aussie bourse closed largely in line with the overnight expectations with the XJO falling 0.7% on moderate trading volume. Initial softness in the DJI futures cast a negative overtone to the opening, whilst there was a relatively muted response to the RBA Board Minutes. In spite of relative resilience in the domestic financials, the softer resources sector weighed, leaving the market in a tight trading band.

• Technically, the physical XJO once again tested the medium term up sloping support line, which was reinforced by the presence of the 100-day MA line and held.
• Like last week, a bounce tomorrow could provide scope for a mild recovery.
• On the contrary a clear break of the up sloping support line will draw in technical sellers, thus opening up a crucial trading day tomorrow on the Aussie sharemarket.

There was no escaping the bearish tones stemming from the commodity price slide overnight with base metals, oil and gold collectively lower, leaving the technical picture for some vulnerable to further losses. A couple of weeks ago we noted that market sentiment is fickle and the psychology is the key to how they interpret fundamental events. At that stage we noted that the Dow was rallying on the back of weak US economic data on hopes that the Fed might introduce a QE3 whilst logically a weak number was a poor outcome per se.

Over the weekend, the PBoC cut the RRR by 50 basis points and it a bullish market mindset risk assets would have rallied. But with the Greece overhang, it was interpreted as emphasising the concerns that the central bank and China faces, go figure! Irrespective it was enough to hammer BHP to a near 3-year intraday low, but we suggest there was some deliberate stop seeking there today.

• Technically, BHP's dragon fly doji on heavy trading volume suggests a near-term nadir could be on the cards.

We also highlighted this morning that the defensive stocks would continue to outperform in the present uncertain market trading environment with the sectors such as the consumer staples, utilities and pharmaceutical/healthcare stocks outperforming Notably of the consumer staple stocks, Woolies added 0.9%, Wesfarmers was flat, but outperformed, whilst amongst the telcos, Telstra firmed 1.9% after a flat opening and healthcare big caps, Cochlear added 0.9%, though this morning’s CFD Snapshots long, CSL Limited slipped 1.1%. However, as we noted this morning a Buy at best the opening would in fact be netting you a 1% gain before leverage since the stock gapped lower at the opening.

Today we highlighted an interesting trading blog, which tells a story in itself. As noted in our introductory commentary whilst Greece developments are clearly causing a headache to traders at present given its two way potential knee-jerk risk, what is clear in the analysis is the relative lack of cover by options traders on the euro, which to us suggests that the market concerns (or the media beat up) might be overdone.

Whilst Europe’s stock market volatility Index, equivalent to the US VIX fear factor gauge has been on the rise, the relative lack of escalation in the euro’s own fear factor gauge tells us that there is clearly scope for short covering in the pair and markets generally.

FTSE Commentary: The FTSE stalled at the mid-July 2011 horizontal resistance and after some quiet consolidation, dipped lower back to the 200-day MA line, which kicked in as an area of support. It did well to recover to the 100-day MA line, before another slump, which has taken it beneath the 200-day MA line. It has reacted badly to the uncertainty in Greece and France triggered by last week's elections. It is tentatively holding near a key Fibonacci retracement line. The RSI shows some scope for a bounce, but a lack of bad news from the rest of the EZ will be needed for a bounce.

<

Forex Trading ... Today we highlighted an interesting trading blog, which tells a story in itself. As noted in our introductory commentary whilst Greece developments are clearly causing a headache to traders at present given its two way potential knee-jerk risk, what is clear in the analysis is the relative lack of cover by options traders on the euro, which to us suggests that the market concerns (or the media beat up) might be overdone.

Whilst Europe’s stock market volatility Index, equivalent to the US VIX fear factor gauge has been on the rise, the relative lack of escalation in the euro’s own fear factor gauge tells us that there is clearly scope for short covering in the pair and markets generally.

There was a fairly mixed trading in the Asian time zone with the Aussie taking centre stage with the release of the Board Minutes from the RBA’s last board meeting. After an initial dip, the Aussie rallied as traders read into a fairly neutral tone by the RBA. Whilst they clearly cited European risks and Chinese slowdown expectations and lower inflationary outcomes, they fell short of suggesting further rate cuts would be a done deal. In late Asian trading/early European trading, the pair recaptured the parity mark thanks to much firmer than expected GDP data released in Germany, which has scope to spark further a risk recovery as the session unfolds tonight.

USDJPY Commentary and Forex Trading Signals:  The pair is currently entrenched within the trend channel highlighted. However, in spite of its vulnerabilities, the price is finding support at the key 200-day EMA line, which held last week and for down side tests this week. A bounce back up to the 20-day or 50-day MA lines cannot be ruled out not too far from the channel resistance line. In spite of mild risk aversion in FX markets the pair has failed to fall to fresh lows, suggesting scope for a short covering rally. Japanese Ministers are once again making some jawboning noise.

Handicapping the Chances of Greece Dropping the Euro

(Bill Luby – Vix and More) Understanding all the moving parts in the European sovereign debt crisis can be a Herculean task, even for the most determined analyst. Heck, even hazarding a guess at what tomorrow’s crisis du jour will be is more than enough for most investors to grapple with.

In the case of Greece, with an ever-changing political party landscape and fickle voters who intend to distort that landscape even more, trying to assign probabilities to various scenarios and then divine the implications for Greece’s relationship with the euro is sufficiently daunting as to cause many an investor just to park their money in cash until the future begins to look a little less murky.

For some aspects of the euro zone fiasco, there are financial instruments and measures that can serve as a barometer of how bad things are now and are likely to become in the future.

• Credit default swaps are an excellent example,
• as is the VSTOXX equity volatility index,
• the euro volatility index (EVZ),
• sovereign debt yields, etc.

As far as the euro is concerned, the EVZ is relatively subdued at the moment. Over the course of its life (which began in November 2007), EVZ has typically traded at just a shade over half of the VIX, which is where it closed today. Still, while the VIX posted its highest close since January, EVZ was substantially higher during January, February and the beginning of March.

It is at times like this when I find myself paying more attention to the various Intrade prediction markets contracts. In the case of the euro, Intrade has three separate contracts based on the possibility that a euro zone member announces it will stop using the euro as its national currency. The three contracts have expiration dates of the end of 2012, 2013 and 2014 and currently indicate (see top graphic below) that the probability of any euro zone country announcing it will drop the euro is 37.5% by the end of 2012, 61% for the end of 2013 and 68% for the end of 2014.

In addition to the probabilities derived from the price of these prediction market contracts, the trend also bears watching.The bottom graphic shows trades in the 2012 contract. Much to my surprise, sentiment that Greece (or any other country) will exit the euro this year apparently peaked(for now, at least) yesterday afternoon, and pulled back somewhat today, in choppy trading. For those who wish to watch this contract on a tick by tick basis, try the Advanced Charts option and click the Time and Sales radio button. Note that it is also possible to set alerts for this contract.

This seems like a good place to reiterate that I believe Intrade contracts, while helpful, are far from perfect. Still, if your talents do not include four dimensional euro zone dominoes in Greek, these prediction contracts can be a great shorthand for determining how certain events are likely to play out.

Sourced from: http://vixandmore.blogspot.com.au/2012/05/handicapping-chances-of-greece-dropping.html?