And On And On And On...........

First I apologize to all for being away for so long. Enjoying a break during the Holiday season, not a bad idea for most traders to slow down about now. Now is a good time to catch your breath and reinvigorate for 2009. I still trade during the Holidays but I scale back a bit. Good pips to be made for sure, but good pips to lose very quickly also. Traders just be careful!

So the never ending gloom and doom continues everywhere. The US Feds just lowered the rates to nothing and it looks as if the other Central Banks will leave the rates unchanged or lower them. What does all this mean to the forex trader? It means look forward to lots of volatility in 2009. Grail traders be prepared to make some serious pips. For those of you wishing to become Grail traders the time is almost near. We have streamlined The FXGrail and the new site should be up by the new year. We apologize about the wait.

Where does the dollar go from here? As I have stated before, it does not matter much to the grail traders. Wherever it goes we will go too! With that said I found this article to be very insightful take a read here: Kiss The Dollar Rally Goodbye!

It Continues

Now that the entire world has been ailed out by the respective governments what's next? A continued global recession that's what. I suppose the "end of the world" has been adverted and the sky didn't fall.........yet!

So the gov's of the world are the new bankers? What happens when the bill comes due? The US Gov certainly doesn't have this kind of cash and I suspect neither does anybody else short of China. So basically China is the Bank Of The New World Order!

The trader says trade. If the bailout did nothing else, it has made for some nice runs in all major currencies. The carry trades have been good for some huge moves nicely telegraphed for those traders that were looking. EUR/USD, USD/CHF, GBP/USD and many other pairs were ripe for the picking. Heck, just by reading this blog the average trader should have made some nice pips.
Where are the markets heading? Who knows. Don't try to predict, trade the chart baby!

Bailout, Economy, And More......

I love this business. I hate to relish in the US economy meltdown but there has been serious money made over the last month or so. Trading only my three strike setup has been very lucrative (minus some crappy roll rates). I have been quite busy raking in the pips, too busy to post. That is the beauty of the forex market, pips to be made regardless of the actual state of the economy. Beautiful!

Now about that economy. The Feds have proposed a $700 billion dollar bail out. I may be of the minority here in this country but I have got to say NO! Let the idiots suffer. Do I believe that without this money the country will collapse. NO! Will it be tough, most certainly there are hard times ahead. This mess won't get fixed overnight, $700 billion or not. Nobody is there to bail me ou when I make stupid decisions, terrible trades, crappy investments. When is enough enough. Did these investment banks share any of their record gains over the previous year? Uh, no. Where was the Fed years ago when anybody with a head on their shoulders knew there was trouble ahead? Where were they when these investment banks were cooking the books, hiding this bad debt? I'll tell you where they were. They were on Capitol Hill telling congress that the economy was fundamentally sound over and over and over.

Let them all fail. It's time to start over. $700 billion or not this economic model will need to be changed. The bailout is and will be just a band-aid (an expensive one at that). You do know that the new CEO of Freddie Mac will make $900,000 this year. Less than the former idiot but come on. If things are so bad, the gov had to bail these guys out, don't you think this guy should be working for a bit less? I know $900,000 is tough to live on but give me a break. This is the perfect example of why the USA is in such a mess. SHOULD BE INTERESTING!

Greenback On The Move!

Wow, oil takes a nice dip and the greenback makes a pretty good run. We knew it was coming, just didn't expect it quite so soon. The FXGrail traders were rewarded quite nicely on this greenback rally just by trading the modules. More than one module triggered trades and if you kept to the program you should have made a small fortune from this currency rally. It's as I have always stated when it comes to The FXGrail, trade what the charts show you. In a nutshell it really is that easy. Find a system and stick with it and you will be rewarded.

We talk a lot at the Grail about risk free trading, this rally was the perfect example of what we are talking about. The recent EUR/USD and USD/JPY trades are the prime example of what the Grail is about. Keep trading people, lots of money to be made.

Could It Be?

Is this the end of the bear market? I doubt it. This seems to me to be more of a bear market bounce, better known as a suckers rally. I don't believe we have seen the bottom yet. Watch the dollar in the coming weeks, I think we will continue to see it trade in the same range it has for most of the summer. We will see another run at Eur 1.60 which would be a great opportunity to add some long term EUR/USD shorts and make some money this fall/winter. I believe black gold (oil) will also tease us a bit. Beware of the false bottom!

Forex, Oil, Banks, & The Dollar

What a web we (the US) weave. This is a most interesting time in the currency world. Has the oil bubble burst? Is the US economy hit rock bottom? Will the dollar regain its place in world economics? I do not pretend to know the answers to any of these questions, I really do not care. As a forex trader I just trade what I see. All traders should trade what they see. The fundamentals behind all of these questions are fascinating and do play a part in my overall strategy. Notice in a previous post I recommended to be careful of any long term dollar short. I still hold that view. I do believe we will see the greenback start to gain back some of it's prestige. The thing you must remember is it's in the best interest of almost everybody to have a strong dollar. Notice recent reports out of the Eurozone, they want a stronger dollar. China wants a stronger dollar as they have a fortune in dollars and a weak buck makes no sense for them, it lessens there holdings.

Has the oil bubble burst? I believe what you are seeing is a technical pull back. I do believe we are near the top of the range for oil but I don't believe we'll see any kind of burst. Remember where oil was last year at this time and give it some thought. Is this recent pullback the bubble bursting? No, oil would have to fall quite a bit more for any talk of bubble bursting to make any sense. What will be the downfall of oil is the renewed efforts to lessen the dependence on oil. This is what the Saudi's are worried about. I see it in everyday conversation with ordinary people.

There is still much pain to be felt in the US economy as more banks will fail because of the mortgage mess and unemployment will remain high. However, the worst may be over for the US economy. Now it's time for other world economies to feel the pain. We(USA)are already dealing with these issues, the rest of the world will have to deal with them too.

Fannie And Freddie

Will Fanny and Freddie fail? We all better hope not. Freddie and Fanny have about half the mortgages in the USA to a tune of almost 6 trillion dollars. If these should fail the US will plunge into a depression. No recession, straight into a depression. The government is already taking steps to ensure this doesn't happen. The Federal Reserve Bank of New York has been granted authority (by the Federal Reserve) to lend to the two companies should the need arise. The government will do whatever it takes, even if it requires a takeover.

The failure of IndyMac has everyone waiting for the next shoe to drop. What caused the failure? It was another classic run on the bank. With customers pulling out their funds, the bank simply ran out of money. Will more fail? I am under the assumption that there will be more bank failures. I don't believe that any big names will go down although there has been some speculation that WAMU is in some trouble.

How does this affect the greenback? It is hard to say. I think there will be a bit more pressure on the dollar in the short term, but we should see the dollar start to strengthen as we get into the third quarter barring any huge failures(Freddie, Frannie). Play it as you see it, I would however be wary of any long term dollar shorts at these levels.

Forex Traders Rejoice!

Forex traders should be shouting to the clouds. Up and down, down and up. The dollar and Mr. Crude Oil are playing teeter-totter. Both have been trading in a pretty definable range for quite some time. Astute forex traders have played the dollar both ways.

What am I talking about? Take a look at a daily chart and look at the range of the EUR/USD. Since late August it has been confined to a 500 pip range testing each extreme numerous times. GBP/USD, yup, USD/CHF-yes sir.

So how does a forex trader trade something like this? To much risk? Not much risk at all if you trade it the grail way. We traded all 3 currency pairs plus a few more and never used more than 75 pip s/l. Situations like this do not happen all the time. A good forex trader is prepared for them when they do. Are you prepared? Does your "system" make you prepared for these currency honey holes? If not you may want to rethink your strategy.

Oil, where's it going. I really have no idea although I have a hunch that it will retreat a bit. The Saudi's are understandably concerned with the high prices. Although they are making huge profits now they understand that continued skyrocketing oil prices will leave the rest of the world with no choice but to get moving on some alternative methods. This in turn will ultimately lead to less consumption. The end result of these extreme oil prices will be less of a demand for oil and that is something that OPEC surely doesn't want. Oil is essential to us, to them, to everyone, so I see a softening in the price of crude soon. How much remains to be seen.

In the short term, play the bounces. Forex traders should be rejoicing as there is much currency to be made. As I prepare to re-launch the new and improved The FXGrail website there will be many articles and options to learn more about forex, commodities, and all things economy! Stay tuned, its coming soon.

Paulson Vs Saudi Arabia

Watching CNN today I had the pleasure of hearing another of our wonderful Feds. Mr. Paulson apparently has decided he knows more about oil than the Saudi bunch. The middle east boys have said that the oil price is not being set by supply and demand and that current oil prices are not justified. Do you believe that the middle east wants the world to slow down oil consumption? Not hardly, less oil reliance equals less profits for them.

Mr. Arrogant, er, Paulson chimed in with his wisdom that the price is indeed being set by supply and demand. Hum, exactly how does a suite in Washington have a better understanding about the oil supply and demand than the ones actually have the oil? The correct answer is he doesn't, he is as full of hot air as the rest of our fine Fed leadership. Imagine what one of their meetings is like, arrogance unlimited.

The good news for us forex traders, there is none. If you are trading currency correctly it really doesn't matter who is telling the truth. Trade what the forex market gives you not what you want it to give. It is quite simple, let the charts do the talking, not a bunch of windbags in Washington.

Commodity Investors Drive Oil

Here is another good read for all that missed it. As we know, all things affect the currency market. Forex is a profession of knowledge, more knowledge=better trader.

Commodity Fund Investors Help Drive Oil Prices Higher

By Adam Shell, USA TODAY

NEW YORK — The list of culprits to blame for $4 gas and $125 oil keeps getting longer.

Oil-thirsty China and India get most of the blame. The declining U.S. dollar, tight supplies, geopolitics and hurricanes also are on the villains list.

Last week, the Commodity Futures Trading Commission (CFTC) alleged that market "manipulators" may be partly responsible for the spike in crude oil and that an investigation is underway.

The latest scapegoat: institutional investors that are pouring billions into index funds pegged to a broad basket of commodities, including crude oil, exacerbating the price gains.

Tuesday, financier George Soros told Congress that commodity index funds contributed to the oil "bubble" and caused "harmful economic consequences." His remarks echoed those of Michael Masters, a hedge fund manager, who testified on May 20 before a Senate panel. Masters said oil's rise directly correlates to the cash that pension funds and endowments are pouring into commodities futures markets. Assets allocated to all commodity index trading strategies by "index speculators," he said, have risen from $13 billion in 2003 to $260 billion through March.

"These trading strategies amount to 'virtual hoarding' via the commodities futures markets," Masters testified.

Soros urged regulators to improve market oversight and place limits on the size of commodity-specific positions. The CFTC last Thursday said it will require monthly reports from traders on their index trading to better "identify the impact of this type of trading."

Blaming the indexers for the rise in oil or branding them as speculators is unfair, says Michael McGlone, director of commodity indexing at Standard & Poor's. S&P GSCI is a popular commodity index. Investing in an index fund that provides broad exposure to commodities is no different than an investor buying an S&P 500-stock index fund to diversify a stock portfolio, he says.

Don Luskin, chief investment officer at Trend Macro, says index investors are just easy scapegoats. "The evidence against commodity index funds is circumstantial at best," he says.

After falling $3.45 to $124.31 a barrel on Tuesday, oil is still up 30% for 2008. The drop came after Federal Reserve Chairman Ben Bernanke said more interest rate cuts are unlikely. That helped boost the dollar, which depressed oil, because oil is denominated in dollars.

Five years ago, big investors were tiny players in commodities. But after the 2000 stock bust, they sought out the asset class to diversify. Greenwich Associates says that a third of investors in commodities have been active in these markets for less than three years

Oil Prices-Good Read

This is a good read from fortune regarding the oil price spike.



Arguments that $4-a-gallon gas (or even higher) is here to stay are dead wrong. Housing's boom-and-bust cycle tells you why.
By Shawn Tully, editor at large

NEW YORK (Fortune) -- High-flying tech stocks crashed. The roaring housing market crumbled. And oil, rest assured, will follow the same path down.

Not everyone agrees. In an echo of our most recent market frenzies, some experts pronounce that the "world has changed," and that the demand spikes, supply disruptions, and government bungling we face now will saddle us with a future of $4, $5 or even $10 a gallon gasoline.

But if you stick to basic economics, it's clear that the only question is when - not if - prices will succumb.

The oil bulls are correct in their explanations of why prices have jumped. It's indisputable that worldwide demand has surged, chiefly driven by strong growth in China, India and the Middle East. It's also true that most of the world's reserves are controlled by governments in places like Russia and Venezuela that mismanage production, thus curtailing supply growth.

But rather than forming a permanent new plateau for prices - as the bulls contend - those forces are causing a classically unstable market that's destined for a steep fall.

In a normal oil market, the cost of producing the last, most expensive barrel of oil needed to satisfy worldwide demand sets the price for every barrel the world over. Other auction commodity markets work much the same way.

So even if Saudi Arabia produces at $4 a barrel, if the final, multi-millionth barrel required to heat houses and run cars costs $50, and is produced, for argument's sake, at a flagging field in West Texas, the world price is $50. That's what economists call the equilibrium price: It's where the price that customers are willing to pay meets the production cost, including a cushion, naturally, for profit or "the cost of capital."

But today, the sudden surge in demand and the production bottlenecks have thrown the market radically out of balance.

Almost exactly the same thing happened in the housing market. And both housing and oil supply react to a surge in demand with a long lag. In housing, the lag is caused by restrictive zoning and development laws, especially in coastal markets like California and Florida.

So when the economy roared back in 2002 and 2003, builders couldn't turn out homes fast enough for buyers armed with those cheap mortgages. As a result, prices spiked. They no longer bore any relation to the actual cost of buying and improving land, or constructing and marketing a new house (at some reasonable profit margin). Instead, frenzied buyers were setting the price.

Because builders were reaping huge windfall profits, they rushed to buy and develop land. And sure enough, those new houses were ready just as buyers were retreating to the sidelines because they could no longer afford to buy a home. That vast overhang of unsold homes is what's driving down prices today.

The story is much the same with oil, with a twist. A big swath of the market isn't really paying that $125 a barrel number you hear about seemingly every hour. In China, India and the Middle East, governments are heavily subsidizing oil for their consumers and corporations, leading to rampant over-consumption - and driving up prices even more.

But sooner or later the world won't keep paying those prices: Eventually, the price must fall back to the cost of that last barrel to clear the market.

So what does that barrel cost today? According to Stephen Brown, an economist at the Dallas Federal Reserve, that final barrel costs just $50 to produce. And when the price is $125, the incentive to pour out more oil, like homebuilders' incentive to build more two years ago, is irresistible.

It takes a while to develop new supplies of oil, but the signs of a surge are already in place. Shale oil costing around $70 a barrel is now being produced in the Dakotas. Tar sands are attracting investment in Canada, also at around $70. New technology could soon minimize the pollution caused by producing oil from our super-plentiful supplies of coal.

"History suggests that when there's this much money to be made, new supplies do get developed," says Brown.

That's just the supply side of the equation. Demand should start to decline as well, albeit gradually.

"Historically, the oil market has under-anticipated the amount of conservation brought on by high prices," says Brown. Sales of big cars are collapsing; Americans are cutting down on driving. The airlines are scaling back flights.

We've learned another important lesson from the housing market: The longer prices stay stratospheric, the worse the eventual crash - simply because the higher the prices and bigger the profit margins, the bigger the incentive to over-produce.

It's even possible that, a few years hence, we could see a sustained period of plentiful oil supplies and low prices, meaning $50 or below.

A similar scenario occurred following the price explosion in the 1970s and early 1980s. The price spike caused the world to cut back sharply on oil consumption. By the mid-80s, oil prices had fallen from almost $40 to around $15. They remained extremely low for two decades.

It's impossible to predict how the adjustment this time will take shape, just as it was in housing. There the surge in supply came in places the experts swore there was "no supply," and wouldn't be any. Builders found a way to extend vast tracts of homes into California's Inland Empire and Central Valley, and even build "in-fill" projects near the densely-populated coasts.

An earlier bubble is also instructive. In the early 1980s silver prices jumped from $10 to $50 on the theory that the world was facing a permanent shortage of silver. Suddenly ads appeared asking homeowners to bring their tea sets and jewelry to Holiday Inns for a big price. Silver supplies poured from seemingly nowhere, out of America's cupboards, of all places.

And so it will be with oil. We don't know where the new abundance will come from, from shale, or tar sands or coal or an OPEC desperate to regain market share. We just know that it will appear. With prices like these, it always does.

Numbers suck!

It seems a weak greenback is not helping the manufacturing sector too much. The numbers came in today and they are not very good: Industrial production down 0.7% in April, manufacturing activity in the New York region has gone into the big fat negative territory. The Philly Fed Index improved to -15.6 but really where was it going to go after posting -24.9 previously. The housing market continues its free fall. What should the forex trader read in to all of this?

The dollar strength we have been seeing lately should abate. I would expect the dollar to give back most of its gains as we head into summer. The great thing about trading forex is our ability to be somewhat insulated from the economy. The currencies are going to fluctuate regardless of the state of any economy. Actually this helps the fx trader as it is easier to catch a nice wave and line your pockets. Enjoy the ride!

They Did!

Of course they did. We're talking about the Feds here. There may be a light at the end of the tunnel though as Mr. B did change his rhetoric slightly and hinted that the easing of interest rates may be ending. Not to sure if I believe that as the big bubble may break soon. What bubble are we talking about? Stay tuned for some very interesting info regarding the bubble that is about to burst and make whats happened recently look very mild!

What's all this have to do with forex for profits? As most all you know I no longer post trades on this blog as I believe it is better to teach would be traders a bit about forex. The only way to be successful in this business is to learn. In the long run this what makes a successful trader, this is the difference between success and failure in the currency markets. A good understanding of the fundamentals behind currency trading and the forex markets makes for a better trader. Plus I like to vent about the inadequate US Fed strategies, it keeps me from getting to pissed off!

Should They.....

Should they or shouldn't they....lower the interest rate. Of course I'm talking about the wonderful Feds. We all know what they are going to do. They will lower again. As they are consistently out of touch with the real world I am quite sure they will lower rates, the dollar will continue to weaken, oil will continue to rise, and the American people will suffer.

What should they do? Surprise everyone and raise the rates! Think of the shock this would cause. Oil would plummet, the dollar would strengthen, and it may just help check the rampant inflation and get America back on its feet.

Don't be fooled by the bogus inflation numbers. Inflation in the states is out of control. When the price of eggs is up over 30% that tells me inflation is rampant. Tomorrow I will fill everyone in on the falsehoods that are the inflation numbers, but hell, you don't need me to break it down, your wallets and bank accounts are telling you already!

Weak Dollar Good....

Is the weak dollar good? For international business it's great. Take a look at some of the companies that have posted better than expected numbers this month. What's the one thing that ties them all together? They do a lot of business outside the country. The weak dollar is a huge benefit for them. This is the same reason that European and British businesses are complaining about the strength of their respective currencies. Strong currencies make their goods more expensive, weak currency makes US goods and business cheaper. As with everything in this world, its a catch twenty-two, what is good for some is bad for others.

The weak dollar is certainly tough for the American people as a weak greenback is a primary reason for the high price of oil which has made gasoline a bit more expensive than the Americans are used to paying. It's a tangled web we all weave now isn't it!

G7

Changes in the G7 language regarding the volatility in the currency market, stability of financial markets, and the global economy were not enough to sustain a USD rally. The US dollar strengthened against the other majors but it was short lived.

What is the reason for this? Though the G7 changed the language, the markets believe there's not much behind the words. The G7 called for more investment bank self-regulation and higher capital requirements for banks. Of course the banks balked. We are now pretty much back where we started with the majors.

Not a problem, easy money with currencies filling gap from the weekend. Keep it simple stupid. K.I.S.S. that is the key to forex, and one of my favorite bands. Happy trading!

More.......

The government can implement all the rules and regulations it deems necessary but the bottom line is the people must change their ways. We Americans are way over extended. We have used credit upon credit to buy our new flat screens, to secure mortgages that are way over our budget, to drive the newest luxury suv's. Americans have forgotten the most important lesson-Live within your means!

We can blame the lenders all we want but the bottom line is we the people have created this mess.

So It Is!

So it is. Bernanke, in typical Fed speak, has mentioned "recession". What does this mean? Not much really. The US economy has been slow for quite sometime. Unemployment has topped 5% and growth has been stagnant for quite sometime. Is the world going to end? No. Most economists figure that the feds will continue to lower rates, some thinking they may keep lowering into 2009. Most all agree that the economy will start to pick up in the 2nd half-3rd quarter of 08'.

What does all this mean for the poor dollar? Lots of volatility, excellent trading opportunities, and an interesting time to watch the buzzards on Wall Street. As I have said numerous times, the buzzards feed of this and induce panic, making a self-fulfilling prophecy. The Bear Stearn mess was the perfect example of this.

Washington, in all their wisdom, thinks that thay can fix this mess. I am not so sure a few more regulations and restrictions will make much difference as I think the problem is much more involved. I think we must look at the american public and the habits we all have.

More to come.....

Mortgage Mess

It is very disturbing to me that the government wants to use my hard earned money to bail out irresponsible homeowners. Don't get me wrong I don't want to see anyone lose their home but come on. What happened to people being responsible for their own decisions?

Would I like to live in a bigger home? Sure would, everybody would. The problem I have is many purchased homes that even my dog could have figured out they couldn't afford. Sorry idiots you should have known that when you make $30,000 a year you couldn't realistically afford a $300,000 home. It's not rocket science folks, we shouldn't bear the brunt of stupidity.

The gov bailing out Bear Stearns was a different story. Yes they are idiots also but to prevent a collapse of the financial system in this country, it had to be done. I'm not happy about it but being involved in what we're involved in, we should understand the ramifications if the idiots at Bear Stearn were allowed to collapse.

Gov-Stop bailing out idiots, put some responsibility back on the banks and the individuals who created this mess. It's time the Feds stop holding the hands of the morons.

Fiscal responsibility, something apparently the Feds and a lot of this country have no clue about!

The Correction?

Recession or not? It really doesn't matter. Whatever you call it, it is in fact a nice correction to the economy. No economy can expect to have continuous growth quarter after quarter after quarter. It is a correction that in my mind is much needed.

People have been living way over their means for quite some time. Who doesn't know somebody that is or was in a house that you knew they shouldn't be able to afford?

It is inevitable that the market corrects. Whether it be housing, stocks, forex, the market must always correct itself. In essence, the market is resetting itself. Will there be pains? Most certainly . Is it the end of the world? Not hardly. Buckle down, it will be a bumpy ride.

We are close to the launch of a new cheaper version of The FXGrail. Will it be as powerful as the original? No, the original is the complete program that I trade. It will however be a very powerful method/module that will make a lot of people a lot of pips. It's a scaled down version of the very popular FXGrail. More on this later.

Time To Roll

It has been an interesting start to the new year. The buck continues to get hammered as the US economy sputters around. March should be very interesting as many pairs sit at or near all time hi/lo's. Will the dollar make a comeback? Should be a fun ride.

Nice Set-Ups

We are looking at some great potential trades tonight. Eur/Usd, Eur/Cad, Eur/Aud, Usd/Cad, all look like they may give up some pips. What is our mantra-Patience, the trades always come.

Grail members don't forget to check "The Round Table", charts are there now.

2008

The FXGrail really took off in 2007. It was a very good year for all grail traders. Some of the results were absolutely incredible. We would like to thank everyone for the success in 2007. Lets make 2008 even better (some of you are already off to an excellent start)!