Friday September 28, 2007 - 12:03:29 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
Just another number or something more
Â· Rising prices and surging demand for the crops that supply half of the world's calories are producing the biggest changes in global food markets in 30 years, altering the economic landscape for everyone from consumers and farmers to corporate giants and the world's poor. (WSJ)
8:30a.m. August Personal Income. Expected: +0.3%. Previous: +0.5%.
8:30a.m. August Personal Spending. Expected: +0.4%. Previous: 0.4%.
9:45a.m. Sep Chicago PMI. Expected: 53.0. Previous: 53.8.
10:00a.m. End-Sep Reuters/U Of Mich Sentiment Index. Previous: 83.8.
10:00a.m. August Construction Spending. Expected: -0.2%. Previous: -0.4%.
â€śIt is the growth in speculative capital flows moving in a trend-following fashion that makes the trend so persistent; it is the persistence of the trend that makes a trend following bias so rewarding; and it is the rewards reaped by speculation that attract increasing amounts of capital.â€ť
FX Trading â€“ Just another number or something more
Well, we watched history being made in the form of an all-time low in the US$ index.
So far the dollar dumping has been brisk but orderly. It begs the question: Is the 7819-level in the US$ index just another number, or will it open the floodgates of dollar selling i.e. real cascading lower? (Those gates havenâ€™t been exactly sealed over the last few months we must admit.)
No doubt the dollar is oversold. But itâ€™s moving in line with the newsâ€”bad news about the US economy. Itâ€™s seems the sweet spot of the trend when even the consensus gets it right for a while.
Usually we see some type of bounce after so many one-way bets are established. Itâ€™s normal for a market to shake off riders, or shakeout weak hands. But an all-time low has a way of changing the dynamics of the game.
New lows embolden those that are in the trade, leading them to add more. And it can force capitulation on the part of those who arenâ€™t already in the trade, those whoâ€™ve been waiting for Mr. Market to play some shakeout. Capitulation, coupled with swelling confidence on the part of those that have been â€śright,â€ť makes up the selling pressure creating the cascading (spiking) downward move in price.
It can become a runaway self-reinforcing trend, leading to a significant overshoot downward in the buck to a level that far exceeds any real fundamental weaknesses in the US.
If the cornerstone of modern portfolio theory was accurate, it would tell us that rational investors wouldnâ€™t fall for thisâ€”it wouldnâ€™t happen. But the fact is market participants are not rational. They may approach seeming rationality during so-called â€śnormalâ€ť times. But they become increasingly irrational during critical price moments. They revert to their own mean, which is measured in fear and greed. Fear of loss, greed for gain, and one other motivatorâ€”fear of missing out on another big move; they want to participate with the crowd.
So, the setup is ripe for a big move lower in the buck thanks to a key numberâ€”7819. Hmmmâ€¦19! Is it bad karma for the dollar? Weâ€™re not sure. But at the very least, it probably represents a selling rationale as good as some weâ€™ve heard about lately.
Have a great weekend!
Black Swan Capital
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."