Sunday, February 26, 2012

Major Currency Pairs

The euro has been on a nice rally since January when it hit a year low of 1.2657 it is currently trading at  (EURUSD=X) 1.3448.  Fear of the European crisis has subsided somewhat.  The dollar has been trading lower against the euro, franc and the pound. 

The dollar has rallied against the Japanese yen from the beginning of the month when the yen traded at 76.1789 currently (USDJPY=X) trades at 81.00.

The dollar has been breaking down against the Swiss franc since January when it had a year high of 0.9754 now the (USDCHF=X) trades at a low 0.8957.  Although the euro has enjoyed an upward movement against the dollar the franc has continued to rise on the euro trading at (CHFEUR=X) 0.8299.  The market may be signaling the crisis is still a threat.

The sterling has recovered from its January low 1.5314 there are signs the economy is picking up in the UK and that they will not see a double dip, the (GBPUSD=X) is currently at 1.5872.

The Canadian dollar has been on a downward movement this whole week trading at (USDCAD=X) 0.9995 while crude oil WTI has been on a violent upward ride to trade at 109.62.

From what we learned last summer news from Europe can change the market in a heartbeat and the longer the European crisis goes unresolved the more people start to panic, there may be some correction on these pairs as we move ahead.

Japanese Finance Minister Jun Azumi stated the following at the G20 meeting in Mexico: "The economy is somewhat picking up in the world as a whole, including Japan, and we want to put an end to the Europe crisis in the early spring and to accelerate the global economic growth."

Sunday, February 19, 2012

The Global Economy

During the last 12 months the Dow (DJI) reached a low of 10,655.30 points in October of 2011and hit a high of 12,949.87 last Friday.  Will the Dow hit 13,000 next week?  Does this rally have a little more juice left? 

How healthy is the global economy?

According to the World Bank our GDP makes up 23.52% of the world economy.  Our unemployment rate has gone down to 8.3% and our consumer confidence is at 61.10.  Our inflation rate is at 2.90% and our interest rates at 0.25% which has been punishment for anyone that is staying conservative and not investing.

The Eurozone's GDP makes up 20.09% of the world economy.  The Euro Area's unemployment rate is at 10.40% consumer confidence is at -20.7.  Their inflation rate is at 2.00% and their interest rates are at 1.00%.  The Euro Stoxx 50 reached a 12 month low of 1995.01 points in September 2011 and a high of 3013.09 points in February of 2011 the index is currently at 2520.31 points.

China's GDP currently makes up 9.48% of the world economy.  Their unemployment rate is at 4.10% and consumer confidence at 97.00.  China's inflation rate is 4.50% and their interest rates are at 6.56%.  The Shanghai Composite Index which is a major stock index reached a 12 month low in January of 2148.45 points, it currently trades at 2357.18.  The world seems to be counting on China to continue its healthy growth yet some believe it will slow down a bit.  General Electric (GE) which has operations in China believes the slow down will be manageable and will not have a strong effect. 

The FTSE 100 the major stock index for the U.K. is currently trading at 5095.07 and their unemployment rate is at 8.40% with consumer confidence of -29.00.  Their inflation rate is at 3.60% and interest rates of 0.50%.  The U.K. is going through tough times right now, about 40% of them believe the Eurozone will break up on the other hand in the U.S. about 20% believe the Euro will cease to exist.

The Nordic countries have not been spared Sweden has an inflation rate of 1.90% and has abandoned interest rate increases for the rest of the year as the European debt crisis has spread like cancer moving now towards the north.  The slow growth predicted for the year has led the Swedish to start saving more and to start consuming less.  The failure of European leaders to put an end to the debt problem has affected even the strongest economies in Sweden.  Problems in the Eurozone has lowered demand for Swedish exports.  Sweden which is home to some of the biggest companies in Europe will see those companies begin to trim down their workforce to adjust to the weaker economy.

Can the U.S. and China hold the house down?  Europe appears to be in a recession, will our growth and that of smaller countries like Brazil be enough to avoid a global economic slowdown?

It is expected that European finance ministers will approve a 130 billion euro bailout for Greece to avoid a default.

Monday, February 13, 2012

General Electric and Microsoft Join Forces

Monday morning Microsoft Corporation (MSFT) and General Electric (GE) announced that they will join forces to take on the world of healthcare with a joint venture by the name of Caradigm.  The new company will launch later on this year.  Both companies are working on breakthrough technologies as mentioned earlier on one of my blog posts "Changing Medicine" together they will bring changes to the hospital experience for years to come. 

GE is working on smart medical rooms to monitor patients and staff to improve performance as well as save lives.  MSFT is working on avatars in a medical setting to interact with patients as a healthcare worker might do.  It is known that as the avatar interacts with hundreds of patients it will improve its ability to diagnose what may be wrong with patients just as good if not better than a healthcare employee.  Both are futuristic projects but can become a reality in our lifetime and change the inpatient/outpatient experience. 

The aging population make up a large amount of the expenditures in healthcare.  An enormous amount of baby boomers make up our population and this makes healthcare the place to be.  Why not invest in healthcare through innovation and breakthrough? Both stocks are up after the announcement.

Friday, February 10, 2012

Taking Profits

It is said that 95% of all day traders lose all their money and about 90% of all option contracts expire worthless. It is also known that a large number of future contract traders lose money consistently. From my experience most currency traders also have problems, but they don't seem to have a problem making profits they seem to have trouble holding on to their profits and go on to turn them into losses.

The stock market works its magic by eliminating over time the individuals who don't trade successfully.
Discipline and good funds are essential to stay in the game this will allow you to be a part of the small percentage of day traders that make money

When day trading stocks a rule must be made about taking profits, the same way we set our stop losses to prevent a small loss from turning into a massive one. I have turned an $800 profit made in a few hours into $0 before the end of the trading day trying to bag every last penny on the trade.  I would suggest to set a reasonable profit point in which to exit depending on the trade set up and the amount of risk involved.  Taking any amount of profit is always better than taking no profit at all but taking bigger losses than the size of profits we take will wipe us out in no time.

If I buy 1000 shares at $10.00 and the trade goes my way I would look at the tape and divide the trade into sections I would sell back. I wouldn't sell all the shares at once I would test the waters and begin dumping them as the price continues to increase. For example if the stock were now selling at $10.30 I would sell 200 shares at $10.35 and wait for it to hit $10.40 to sell the next 300 shares but if orders start to pick up at $10.40 and the tape shows sales of 1000 - 3000 share icebergs I would buy back the shares I just sold and wait for the price to increase a bit more for me to start unloading my shares again. As you can see making profits is a complicated dance few get right but it is possible. It takes guts to hold on to that position but also wisdom to come out of that wave at the right time and not sink.

In this day trade with Visa Inc. (V) we would enter the trade at 12:29 pm at a price of $113.26 and exit at about 12:36 pm at a price of $113.40 realizing that we are not looking to enter the trade perfectly at the very start of a reversal nor do we exit at the complete top of the wave. The trade could be entered once again at 12:46 pm at a price of $113.50 and exit the trade safely at a price of $113.70 at 12:49 pm.  The candlestick chart says it all and after spotting some reducing bodies there are trade set ups that give a trader a 50/50 chance of being correct.

Wednesday, February 1, 2012

Where Should I Put My Money This Year?

With interest rates set to stay low until 2014, safe havens like CDs and Treasuries do not offer much returns.  It is almost the same as leaving your money under the mattress.  With inflation estimated to stay at 2.00% some may argue that a 1% interest paying CD is not too bad.  For baby boomers and risk averse individuals CDs and bonds may be a choice they can comfortably sleep with at night.  But for the younger crowd and those who want to earn some gains stocks do seem fairly attractive.

With interest rates low, now is a good time to buy high yielding dividend paying stocks, this is true even for the older retiring crowd.  Older people know this they usually invest in utilities and blue chips.  In this environment with the European crisis and the S&P downgrading at will dividend paying stocks seem like a good alternative offering capital gains for the coming years and higher dividends as we fight the weather.  Stock volume has been lower since investors remain concerned with the economy and job market so they have taken money out of stocks and mutual funds.  If this slow economy gets a bit rough and stocks go lower well then taking some risk that didn't get rewarded right away would be the least of our concerns.  I would keep an eye out and adjust my position if I were not able to sleep at night.  That is why it is good to only invest amounts that make us feel comfortable.

Gold has shot up since the fed announced that rates will stay low for the next few years, this also sent the dollar lower and the euro higher.  People have been stocking up on gold, silver and other precious metals.  Although gold coins are popular as a way to hedge against the weak dollar, ETFs and gold future contracts are another form of speculating and trading the news. 

For those with a little more cash and good credit buying a home may be a good way to invest for the long term.  A large amount of Americans have most of their net worth linked to the value of their home.  With mortgage rates at 3.88% for the 30 year fixed and 3.19% for the 15 year fixed buying a home now seems to be a good strategy especially for young adults.  Sure the housing market is still bottoming out and not going to shoot up anytime soon but for those with time to wait this is an alternative to stocks and bonds.  With that said if you don't have good credit and a 20% down payment don't even think about it stick to other forms of investing.  Owning a home is a big responsibility and should be planned for appropriately. 

Finally for those concerned with risk and only feeling safe with a 9-5 job playing the lottery is always an option.