Global Macro Trading Journal

[Ghost of Cutten]

Quote from m22au:

I'm not Cutten, but if you have a fundamental view that there will be significant JPY depreciation, then you just sell it first thing when the markets open on Sunday evening.

Alternatively, if you're after some price movement confirmation, wait for the break of the 103.70-ish high from May.

Well - he needs to also consider 'how far could this trade go against me and I'm still probably right?', and then 'can I handle that heat and stay in, or ADD to my position?'. Otherwise the first 4-5 handle pullback and he'll be pressured to exit.

Also the problem with price action confirmation is that a slight technical move on a short-term timeframe only tells you something about the short-term. It could break 103.7 then go another 1-2% then go back 3-4%. What do you do then? Sell back out? Go short on the negative 'confirmation'? That price action confirms nothing on the timeframe of the trade, which is months, not days. Yes, you might be able to get a short-term edge e.g. buying a powerful breakout often runs for another few days in your favour. But that's a separate trade - it's a short-term breakout play.

I would agree with longer-term confirmation. But we have that already - the Yen is persistently acting weak and bearish over the multi-month timeframe, just as the fundamentals are bearish. So IMO the market is confirming it plenty.

I think what's happening here is muddled timeframes. You trade long-term views based on long-term action and setups. You trade short-term views based on short-term action and setups. A bear market isn't ever proven or disproven by one day or even one week's market behaviour. And 2-3 day move isn't affected much, if at all, by the longer-term context. Don't mix and match the timeframes.

 

[m22au]

Thanks for your thoughts Cutten.

Specterx: if you think USD/JPY is going to 150 and beyond, then it's sitting there waiting for you to sell it now at 103.05

 

[Specterx]

Quote from Ghost of Cutten:

Well - he needs to also consider 'how far could this trade go against me and I'm still probably right?', and then 'can I handle that heat and stay in, or ADD to my position?'. Otherwise the first 4-5 handle pullback and he'll be pressured to exit.

Also the problem with price action confirmation is that a slight technical move on a short-term timeframe only tells you something about the short-term. It could break 103.7 then go another 1-2% then go back 3-4%. What do you do then? Sell back out? Go short on the negative 'confirmation'? That price action confirms nothing on the timeframe of the trade, which is months, not days. Yes, you might be able to get a short-term edge e.g. buying a powerful breakout often runs for another few days in your favour. But that's a separate trade - it's a short-term breakout play.

I would agree with longer-term confirmation. But we have that already - the Yen is persistently acting weak and bearish over the multi-month timeframe, just as the fundamentals are bearish. So IMO the market is confirming it plenty.

I think what's happening here is muddled timeframes. You trade long-term views based on long-term action and setups. You trade short-term views based on short-term action and setups. A bear market isn't ever proven or disproven by one day or even one week's market behaviour. And 2-3 day move isn't affected much, if at all, by the longer-term context. Don't mix and match the timeframes.

Well I routinely find that short-term action at key areas, and taken in the proper context, does in fact 'predict' moves far larger than what would be expected from considering the short timeframe alone. In this specific case I'm basing the entry on a monthly chart, and the initial stop is at 95 (10% below entry). If I do get stopped out, obviously the fundamentals won't have changed a bit - but I'll have a high degree of confidence that the expected move in the Yen isn't imminent in the following 6-12 months at least, and will wait for the action to become bearish again.

 

[Ghost of Cutten]

Quote from Specterx:

Well I routinely find that short-term action at key areas, and taken in the proper context, does in fact 'predict' moves far larger than what would be expected from considering the short timeframe alone. In this specific case I'm basing the entry on a monthly chart, and the initial stop is at 95 (10% below entry). If I do get stopped out, obviously the fundamentals won't have changed a bit - but I'll have a high degree of confidence that the expected move in the Yen isn't imminent in the following 6-12 months at least, and will wait for the action to become bearish again.

I agree that say a 10% fall would seriously cast the move into doubt. What I'm disagreeing with is that any meaningful long-term information is imparted by a move from 103 to 105, for example.

 

[particibias]

The last time JPY/USD was at this level, it quickly bounced back to 94 in less than 1 month due to it being a crowded trade. Although I don't readily foresee a pull back of this magnitude, it is probably worth considering how crowded is the trade for a potential short covering (recent e.g. US treasuries actually went the other direction with strong econ data last week, quite a rare event given the strength report in favor of tapering).

However as far as the logic of trade, it actually looks better than ever. The doubt of Abenomics that is surfacing currently might actually prompt BoJ to act earlier and more aggressively next year (I think the market knows this). It would be interesting to see if the yen can weaken pass this level, if so BoJ better indicates it will act soon in Q1.

Again, the question I don't know in the near term is how stretch (or crowded) is this trade. Therefore, I am willing to wait for a more substantial pullback before getting back to this trade. However, the market might decide otherwise and/or BoJ tips their hands early (in this case, the market will go crazy again like April)

I suppose you can never really know, which is what makes it all so interesting...

 

[rsi80]

11-22-13 04:13 PM Quote from Ghost of Cutten:

I am just long stock indices and running a fairly tight stop. We just did a classic breakout, so the market should not fall back significantly if my interpretation is correct.

Does this still hold true?

 

[tradingjournals]

I do not put much weight in BoJ and Japan outlook in analyzing the Yen. I think the Yen's recent fall is probably due to two main factors: carry trade in stocks, and the fall of metals. If markets retreat and metals rise, the yen would show it teeth. The retreat in stocks is in its day 5 today, and we would see if there would be a santa bounce which the bears would take as a present to short. How long would the bull's holiday be if there is a retreat? Until mid March?

In terms of continents' currencies, under above scenario, I prefer long Yen and short the Euro trash. EUR/JPY is now at the 1.4150 area. If it breaks 1.4090, the late bears might join the earlier bears to take command, and the smart bulls might help them in their early surrender without a fight.

 

[Martinghoul]

What is the logic that explains the causal link between the "carry trade in stocks" and yen? What about the precious metals and yen?

 

[particibias]

Quote from tradingjournals:

I think the Yen's recent fall is probably due to two main factors: carry trade in stocks, and the fall of metals. If markets retreat and metals rise, the yen would show it teeth.

I have the same questions regarding the mechanism of yen vs stocks and metals. Is the carry trade in Japanese shares? If so, should yen decline as Japanese shares go up? Background: Nikkei just went up over 2% yesterday.

 

[ammo]

Quote from tradingjournals:

I do not put much weight in BoJ and Japan outlook in analyzing the Yen. I think the Yen's recent fall is probably due to two main factors: carry trade in stocks, and the fall of metals. If markets retreat and metals rise, the yen would show it teeth. The retreat in stocks is in its day 5 today, and we would see if there would be a santa bounce which the bears would take as a present to short. How long would the bull's holiday be if there is a retreat? Until mid March?

In terms of continents' currencies, under above scenario, I prefer long Yen and short the Euro trash. EUR/JPY is now at the 1.4150 area. If it breaks 1.4090, the late bears might join the earlier bears to take command, and the smart bulls might help them in their early surrender without a fight.

from a technichal outlook the eurjpy stalled at that tl ,but from market profile stance the exhaustion of this move isnt until 144 -146 area, a gap left from 08