Tuesday, August 7, 2012

Anatomy of a Trade w/ Intermarket Analysis

So I took a long trade in the euro today just 30 minutes into the Euro trading session.  The sp500 was sitting fairly flat during the Asian session, and normally you see some direction at the euro open as to where the US trading session might head.

As you can see from the above charts, we have the euro/usd hourly and the sp500 below.  The key to this trade was watching the breakdown of the euro after a huge upspike last Friday - were we going to see a continuation or not?  Given how the eur/usd had broken above the trading range set at 1.235 it seemed to be bouncing around that level - the two confirmations I saw were the fast up move in the sp500 shown by the 10 minute bars and the continued strength of buying that I saw in the EUROSTOXX LEAP options that I were holding.  I had an easy pivot, the low just below 1.234 and I got set with a target at 1.253.

As for the market action, I did mention that how we close on Friday will be the key to the short term trades. The Friday news report was seemingly neutral to negative, payrolls up, but unemployment also ticked higher - yet we saw a huge trending day in equities.  Just as I had suspected, the current selloff was in hindsight seasonal, and I was lucky to have added exposure the past two weeks.

I expect a weakening in the Yen and am currently holding SODA, QAN, NBR, CHK, GS, LEI, KBH, FMG, QAG, MERU, SBT, COK, BPTY, ATVI SHORT PUTS, CFU, CPST, CVN, ESTX50, GDX, HPQ, WPL.