Research Division   

Strategy of the Day

Strategy of the Day

 Highlights
Friday, July 30, 2010 - New York Update - 12:29 PM EST Some very odd cross currents in the markets this morning with lower equities, and lower dollar, most likely attributable to month-ending flows. Usually these flows are one-time hedging kinds of business, and do not fit in the typical intermarket rhythm. We were stopped out of the last piece of AUDUSD to be flat into the close of the month. Back with you Monday. TG. If you feel like a little weekend reading, check out my latest article about the similarities of my former ski racing life to my current trading life. Developing your trading game plan

Thursday, July 29, 2010 - New York Update - 10:50 AM EST Traders, our AUDUSD limits were filled in the overnight session on continued dollar selling driven by improved risk appetites. EURUSD finally tested the 1.3100 level as the S&P 500 gapped up on the 9:30 AM EST open, but traders all but closed the gap in the S&P from 1106 as EURUSD pulled back by 30 pips. AUDUSD is acting quite weak relative to these markets, but I have serious concerns that the strength in the S&P and EURUSD will be too much for our AUDUSD stop losses to handle. Also, the chart below shows an alternate wave count that allows for a final test of 0.9100. On twitter just now I moved our stop losses for the entire trade down to 0.9050, and then on the push down towards 0.9010, I closed 3 of our 5 unit short position at 0.9013 for a 25 pip loss from our average entry. I will let the other two work for now with stops at 0.9050, and look for places to put the other 3 back to work.

As I have said a few times, picking such a significant top after a multi-month rally is not a sharp-shooter's exercise. It's more like lobbing a few grenades, move in to see if they hit, retreat back, and then throw another one. We need to be nimble up here as we feel our way through the topping process. This is why trend trading can be much easier than trend fading. After this month I will be redesigning my SOTD position tracker and results to allow for more units traded. Plus, I do not believe I will be able to continue to post my SOTD track record. This might be ok because many a few readers sent in Elliott Wave analysis of my profit and loss record showing a completed 5 wave rally with a triangle break in wave 4. We all know what comes after a completed triangle and 5-wave rally, a 3-wave correction of at least 50%. Anyway, having conversations with our compliance dept. I will keep you posted. TG.

Wednesday, July 28, 2010 - New York Update - 11:24 AM EST Traders, some benign CPI inflation data from the RBA has the markets chattering that the RBA is on hold until at least November. Also, we saw below consensus Durable Goods orders in the US that has the currency markets trading with a “risk-off” tone. The Aussie group is very weak across the majors, the Yen is very weak against the majors, but Euro and Sterling groups seem to be hold their bids. Oil inventory data showed a huge build sending the Canadian dollar sharply lower against the Yen and the dollar. I think weakness in commodity currencies such as Aussie and Canada spells trouble for the rallying equity and interest rate markets. We cut or EURUSD short yesterday for essentially a scratch as I felt our timing was just a bit early. I think today's Aussie weakness presents an opportunity to take another shot at a long dollar position.

Below is a 60 min AUDUSD chart showing a nice impulsive decline off the 0.9057 high. This impulsive decline is either wave i or wave a, but according to Elliott Wave, we don't need to know the count yet. The reason being is in either wave count a 3-wave rally in wave b or wave ii should unfold setting up another 5 wave decline in wave c or wave iii carrying us below the 0.8895 lows. This is the great thing about Elliott Wave; it provides a framework in which we believe the market should operate within. I will be looking to sell the b or ii wave back up towards 0.9000. Please see the SOTD position tracker below.

To corroborate our AUDUSD trade, the daily chart in high grade copper shows a nice potential reversal zone of $320-$331 in wave .II/.b.
Further, EURUSD shows an ending diagonal in formation, with a terminal push in wave v projected to end somewhere between 1.3050 and 1.3100. It is my plan that EURUSD rallies into a new high satisfying the requirements of the ending diagonal while AUDUSD rallies to a LOWER-HIGH filling our offers creating a nice sell divergence. Back later .TG.
Tuesday, July 27, 2010 - New York Update - 2:11 PM EST I am closing my EURUSD trade as my timing is a bit early. Will be watching for signs of risk reversal.TG. Tuesday, July 27, 2010 - New York Update - 12:47 PM EST Traders, we went short EURUSD on Twitter this morning as the dollar has been acting very strong, despite equities that continue to push higher. I have a feeling that this could be an example of dollar strength foretelling coming equity weakness, but what has me concerned is that intermarket relationships are very loose in summer, and often tend to wonder away from the usual relationship. To see the larger count, please proceed to this link: EURUSD 180 Min.

A zoomed in 120 min chart look shows a possible ending diagonal. I am short EURUSD currently going under the assumption that the ending diagonal has completed, but I am aware of the possibility that it is still on-going and EURUSD has one more push into 1.3100 before reversing.

GBPUSD is also facing significant test of resistance in this wave IV zone of 1.5600-1.5550 that we have been watching for some time. A push above the wave I low of 1.5709 will invalidate the wave count, but a failure here has deep implications for USD strength.
AUDUSD is also facing a huge daily test of 0.9100 in a possible wave 2. A failure here also implies an extended period of risk aversion, dollar strength, lower interest rates, and lower equities. I am positioned for this long-term reversal in the markets, but know full well that to pick such a large and important top rarely happens on the first attempt. I am willing to trade this one so stay nimble.

There will be an important change in the SOTD position tracker in coming days. I will begin posting trades using more units. We have had too many winning trades at work with only 1 unit. Having only one unit at work significantly restricts your ability to properly manage an open position. So if you are trading along, realize that I will be using at least double my normal unit size and you must adjust your risk accordingly. This will present a problem with my on-going track record on SOTD if I suddenly double my lot size, but I will be working through that issue on my end. Fow now, it's important you adjust your lot sizes smaller to not suddenly increase your risk. TG.

ABOUT STRATEGY OF THE DAY

Todd Gordon Bio
Todd Gordon is the senior technical strategist for FOREX.com, author of the widely read Strategy of the Day research report, and trader for GAIN Capital Asset Management. He was previously a frequent guest on financial news channels such as Bloomberg, CNBC, and BNN, but has recently become a regular contributor to CNBC's Fast Money show. Affectionately known as “Flash” on Fast Money, he is regularly called on to share his technical observations and trading ideas in the currency markets. He has given seminars in regions around the world including the Far East, the Middle East, Eastern Europe, and the US. He also provides regular commentary and analysis to publications such as Technical Analysis of Stocks and Commodities and Futures. Prior to joining GAIN in 2004, Mr. Gordon was a director with Connors Capital, LLC, a hedge fund in Los Angeles. He began his professional trading career at Aspen Trading in San Diego, CA with David Floyd. Todd was a also a division I alpine ski racer in college.

Mr. Gordon's popularity stems not only from his accuracy as a trader, but also from his straightforward, highly transparent, and candid approach to his daily research report. In his report, Strategy of the Day, Mr. Gordon shares with clients of FOREX.com his technical, fundamental, and inter-market analysis, as well as his full trade plan including entry, exit, and stop loss parameters well before he initiates the trade in GAIN's managed accounts. The real appeal to SOTD is that along with analysis of the FX and related markets, readers get a behind the scenes look at the day-to-day life of a professional FX trader.

Todd has gained a significant and loyal following of traders by preaching and demonstrating the qualities required to be a successful trader- patience, discipline, analysis, and execution.

Todd lives by the mantra- Plan Your Trade, Trade Your Plan

TWITTER

As Strategy of the Day has grown and evolved, the need to more quickly communicate market commentary and position updates to a vast audience became very apparent. In the past year, I have come to heavily rely on Twitter to more efficiently communicate time-sensitive market commentaries to clients. I have setup two accounts. The first, ToddGordonForex is for general market commentaries, position-related updates, Strategy of the Day update notifications, and the occasional off-topic commentary. The second, ToddGordonTrade is designated for just position-related updates and Strategy of the Day update notifications.

The real benefit of Twitter is that aside from being updated to our moves when not logged into the FOREX.com platform, you can receive SMS text message alerts to your phone when you're away from your trading computer. Most clients follow both twitter accounts, but set the SMS alerts for only ToddgordonTrade.

To receive my updates you must first open an account at Twitter Sign Up Once you are signed up, proceed to my two accounts and click “follow“. Once you are following me, you can go into your Twitter settings and choose to receive my tweets via SMS messaging on your handheld for one account, or both if you choose. To set it up, go to your settings and select the devices tab. Enter your mobile number and check the box granting permission. Once you hit “save“ you are ready to get a daily dose of Todd Gordon right on your mobile device.

MEDIA APPERANCES

CNBC Fast Money Interview 6.4.10 CNBC Fast Money - NASDAQ.

CNBC Fast Money Interview 5.14.10 CNBC Fast Money - NASDAQ.

CNBC Fast Money Interview 5.11.10 CNBC Fast Money - NASDAQ.

FUTURE SEMINARS, TRADE SHOWS

*September 23-25, 2010 Las Vegas Traders Expo

Thursday, September 23 8:30 am � 12:30 pm Trading Strategies of a Professional FX Trader

In this session paid 4 hour intensive seminar, Todd will explain the underlying principles of his three-dimensional approach to professional trading: intermarket analysis, trade Identification, and account management. He will begin this intensive session with a candid look at how to identify which of the four major asset classes he believes most directly impacts your traded market. Then once these relationships are identified, Todd goes right to work using his specialty�Elliott Wave and Fibonacci analysis�to identify potential trade setups. Once the trade is executed, Todd will share the position management tactics he used in relation to the trade. Prepare for a candid look into the daily trading life of a professional foreign exchange trader. A basic knowledge of Elliott Wave Theory is recommended. Purchase Event: Trading Strategies of a Professional FX Trader

Sep. 25, 2:30 pm-3:15 pm Successful Strategies for Profiting from Forex Trading

In this panel discussion, you'll learn how successful currency traders watch charts, economic announcements, and global news to forecast short-term movements in the major currency pairs. You'll learn when to avoid trading entirely and when to scale in quickly to maximize gains. You'll also learn how consistent currency traders minimize their risk. Finally, panelists will discuss their overall views of the markets and which currencies are presenting trading opportunities now.

*October 11-14, 2010 Sydney, Australia - Conquering Today's Markets - 4 Days with Todd Gordon and Dave Floyd

In this seminar, you will have the opportunity to learn from two of the most trusted names in the game. Reuniting after five years apart, Todd Gordon and David Floyd have officially re-joined forces to bring traders some of the best analysis, research, and commentary on the global markets. Nearly ten years ago, Todd began his trading career under the guidance of Dave at Aspen Trading Group in San Diego, California. For several years, Dave served as Todd's mentor, advisor, and friend, all the while helping him learn the intricacies of the market and the strategies and qualities needed to become a successful trader. Given an opportunity to return to the East Coast, Todd left Aspen Trading to join FOREX.com, one of the largest FX dealers in the United States. Though apart, Todd and Dave continued to communicate daily, both refining and evolving their quite similar trading styles. Now, with nearly a decade after their first go around, they have decided to team up once more to deliver traders some of the most extensive forex research and training available anywhere. There has never been a better chance to learn the secrets of successful trading from proven and respected professional traders. Spend 4 days learning the intricacies of professional trading from some of the industry's best. *Friday, October 15-17, 2010 Brisbane, Australia. Australian Technical Analysts Association 2010 National Conference. The Art Of Market Warfare Todd Gordon - Contra-trend Trading With Elliott Wave and Fibonacci Levels Are the old adages “Trade with trend” or “The trend is your friend” ALWAYS true? Hardly! Markets only trend about 20 percent of the time, so what about the other 80 percent? In a candid look at how a professional trader navigates the markets using the razor tight levels defined by Elliott Wave and Fibonacci analysis, Todd will show you how the pros consistently contra-trend trade, while at the same time maintaining tight risk management. He will then share three strategies for identifying market tops and bottoms hours before they develop, and lay out how to move in and attack with expert trading tactics. *Friday, October 20-22, 2010 Barcelona, Spain. FXStreet.com International Traders Conference.

DVD RELEASE Chicago January 2009 Chicago Presentation. FOREX Trading Using Fibonacci and Elliott Wave. The new DVD for 2010 is scheduled to be released soon. Stay tuned!

WHAT'S NEW IN STRATEGY OF THE DAY

POSITION TRACKER In 2010 I introduced a new feature to SOTD called the SOTD POSITION TRACKER. At the bottom of most editions of SOTD,you will see all of my pending orders waiting to be executed, all open positions with associated stops and limits, and all closed trades for that particular month. In addition to closed trades you will all trade statistics for that month including number of winners and losers, average size of winners and losers, and total pip profit or loss for the month.

WAVE ANNOTATIONS Much like the original wave annotations introduced by Ralph Nelson Elliott in the early 20th century, I am going to introduce a standardized labeling procedure custom to SOTD. This will allow you the reader to quickly identify the location and degree of my Elliott wave counts on the charts. As you can see on the chart below, I have listed 9 possible degrees of wave counts and the corresponding chart time frame that is likely to use a particular annotation. Now obviously you will not see just one degree of wave annotations on any chart. My purpose within this framework is to align a certain degree wave annotation with the primary price trend on a given chart. For example, if you see a blue underlined roman numeral labeling, the price move I am studying is probably best viewed on either a 30 or 45 min timeframe. Once you see black Arabic numeral labels, the move is probably best seen on either a 60 or 90 min chart.

Questions or comments? tgordon@gaincapital.com

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.