PPT Trader - Navigating the Markets: Recent Comments

Comment on Has the Dollar Bottomed?

PPT Trader — Wed, 10 Feb 2010 20:16:24 GMT

Hi Teri - Right now I think it is more about the unwinding of the carry trade than overall sentiment. Sentiment gives a picture of market characteristics that simply tell us if the time is right for a reversal because every one is crowded to one side of the boat. The dynamic we will see now is that as the carry trade is unwound, normal market forces will push the dollar higher. As foreign governments and central banks back away from buying our treasuries, that will provide the upward pressure on interest rates.

The press keeps referrring to the 'safe haven' status of the dollar as the reason for its rise as doubts grow over Greece's sovereign debt. What they are overlooking is that as carry trades were entered, the proceeds from shorting the dollar were invested in other assets like equities, gold, and foreign bonds. As traders scramble to sell their Eurozone bond exposure, they use the proceeds from those sales to cover their short dollar positions, thus pushing the dollar higher.

Comment on Has the Dollar Bottomed?

teri bergstrom — Wed, 10 Feb 2010 19:24:33 GMT

Wayne, do you still believe that sentimnet is negative toward the dollar given that interest rates will rise sooner than later? If interest rates rise in the next three months how will that affect the carry trade? Looking forward to your opinion--Teri

Comment on Has the Dollar Bottomed?

PPT Trader — Sun, 30 Aug 2009 21:14:28 GMT

Hi Peter,

Thank you for your kind words.

Wave 5 could indeed be a truncated wave, but we won't know for sure until the current price range is broken. My wave count is determined by taking the length of Wave 1 and projecting down from the top of wave 4 which I have as the July 8 high. If I do that and there is confluence with other price projection methods, it gives me a higher confidence level in using that particular wave projection. The whole key now is to watch the range. If 77.43 comes out, that means that my downside target is more likely to be reached. If 79.66 comes out on the upside, then it is safe to say that a bottom is in.

As for the carry trade, If the dollar is the borrowed currency, that means that the dollar is sold short, then the proceeds from the short sale are used to invest in other, higher yielding currencies, thus creating supply for the dollar and demand for the other currency. There are two things that should concern dollar bears, however:

- Sentiment is at a very extreme negative against the dollar right now.
- If there is even a hint that the Fed will raise interest rates, there will be one heck of a short covering rally as the carry trades are unwound.

So while I still believe that the dollar is going lower, those that short it here for speculation are playing with fire. The risk in this trade is very high.

Comment on Has the Dollar Bottomed?

Peter Lai — Sun, 30 Aug 2009 19:20:44 GMT

I have been reading your blog for quite a while. Thanks for your analysis and insight. I have two questions in mind after reading this article.
1.) Do you try to determine Wave 5 is not going to be truncated wave?
2.) Regarding the US dollar carry trade, when people borrow US dollar, this creates demand. Then they will US for another currency, this creates supply. Shouldn't these two actions neutralize the effects of each others?

Comment on NYSE Volume Oscillator Predicted Selloff

PPT Trader — Thu, 08 Jan 2009 14:48:04 GMT

Hi Dave,

You are correct. This rally has 'doubt me' written all over it. No leadership, no momentum confirmation, etc. However, bear market rallies can continue to grind higher for some time, frustrating early shorts. The full five wave pattern that unfolded on the weekly chart says that this mini rally/consolidation period may have farther to go before the overall trend (down) resumes. My main point was to be patient here.

Comment on NYSE Volume Oscillator Predicted Selloff

dave — Thu, 08 Jan 2009 14:34:11 GMT

"Energy has been outperforming of late due to the recent rally in crude oil..."

"The recent rally in commodities, particularly the metals and grains, is in part the result of expectations for the rebalancing in major commodity indexes that will increase the weight of certain commodities, such as copper and live cattle." David Gaffen 1/7 WSJ

That concerns me because "rebalancing" is not exactly like advocacy buying and therefore deceptive in terms of its significance.

Regards,
dave (but not Gaffen)

Comment on Dow Chart Not Encouraging

PPT Trader — Tue, 30 Dec 2008 12:23:16 GMT

Hi Dave - Sorry for the delay in replying. I took a few days off this past week. I have not done any studies on that. Right now I am just taking my cues from the market. While the price action has held up during this low volume holiday period, the internals are weakening. With the cycle change point due on or around January 2 (this Friday), things could get ugly once again, especially if the middle east situation escalates. Protect your capital and have a Happy New Year.

Comment on Dow Chart Not Encouraging

dave — Wed, 24 Dec 2008 18:31:44 GMT

Do you know of any implications of down Novembers followed by down Decembers (as we were in 07 & presently are in 08) ?

Thanks & Merry Christmas,
dave

Comment on Not Looking Good For the Bulls

dave — Wed, 24 Dec 2008 02:23:05 GMT

Thank you, for your prompt reply. Your info was even worse than my suspicions. I could make a case for a bottom in January IF we sold off & made new lows, but i was/am very uncomfortable with the seasonality of such a January low.

The fact that we were so "oversold" in Oct, Nov & Dec and achieved nothing more than a dead cat bounce is not very encouraging.

"If Santa Claus Should Fail to Call, Bears May Come to Broad & Wall."

Regards,
dave

Comment on Not Looking Good For the Bulls

PPT Trader — Wed, 24 Dec 2008 00:20:29 GMT

Hi Dave,

Going back to 1957 on the Dow using monthly data, I see no trend reversals (down to up) that resulted in a meaningful rally in the month of January. The market typically makes highs in January as the fall bottoms endure their first meaningful correction. I have January highs in 1953, 1960, 1973, 1994, and 2000, but no trend changing lows. I am sure lows have been made in January, but those were within the context of an advancing bull market, not putting the brakes on a bear market decline and reversing higher.

The best months to look for bottoms and trend changes are the usual suspects: March, September, and October.