MESSAGES FROM JACKO (AUG 2008) 166 - 186

MESSAGE FROM JACKO 186

It is 2.15am NY time Friday August 29 and the market is at 1.4735

My buy trade at 1.4690 is looking healthy. I have decided that with the extra volatility that I am seeing, I will be pushing my Stop losses to Break Even quicker than in the past.
I have therefore placed my Stop Loss at 1.4700 (to ensure a profit, even if the market retraces). Should the market move higher than 1.4800, I may change my SL to a TSL.

I am now letting the trade play itself out.

Edit 10.30am NY time Stopped out earlier at 1.4700 for a minimal 10 pips profit. Market low is 1.4692. I will be soooooo annoyed if 1.4692 is the low for the day...LOL


Emails

Email 1

Hi Jacko, What do you see as happening with the Fannie Mae and Freddie Mac situation?

It is now becoming very apparent that the Fed WILL have to step in and for all intents and purposes nationalise Freddie and Fannie. The estimated losses of these two firms are far, far, far beyond what they can raise in the market. However, when the Fed steps in, the current shareholders (which are mostly the institutions and Banks)which are holding all those will be wiped out. Their shares will be valueless. Now many financial institutions (especially banks) hold these shares as assets. When these assets are revalued right down, this reduces the banks Asset ratio, which means that they have to sell off other assets or stop lending. This will cause another liquidity crash for the financial sector.
Serious days ahead....
I feel sorry for Obama. Talk about a poisoned chalice ! What the politicians will do is to try and hang on until the new President is in place, then the Fannie and Freddie issue will be dropped on him to fix because he will have his whole first term to turn it all around. They rarely let a bomb like this drop on an outgoing President, even if it was his Administrations doing. (What is the point of dropping it on an outgoing President...anything he wants to do will be different to what the new Administration will want to do.) So poor ole Obama is really going to get a load dropped on his his head.

MESSAGE FROM JACKO 185

It is 2.10am NY time Thursday August 28 and the market is at 1.4778

Update below

After almost three weeks out of the market, I am now ready to venture back into the market. I consider that we are at the very early stages of the turnaround. I am looking for a minor retracement/dip back to 1.4700 to buy.

I am a buyer at 1.4700 (Those aggressive die-hard bargain hunters may want to look between 1.4650 and 1.4700).

Edit 11.00am NY time Market at 1.4709. The market is coming down faster than I would have liked but I am still a buyer at 1.4700 (or less...I might hold off and hopefully get in at a lower price, but I am definitely keen to go "long" at these levels...1.4650-1.4700)

Edit 11.55am NY time Market has dropped down to 1.4684...I have yet to trigger the order, but am watching ready to buy

Edit 12.05pm NY time I am bought at 1.4690

Emails (There are some excellent emails today, especially the last one)

Email 1

Hi Jacko,
In response to your blog entry "On a fundamental view, I cannot see a significant reason for this overwhelming strength of the USD."

Could there be a paradigm shift, from yield to capital appreciation? Yes, but that capital appreciation has now taken place. Most would now want to take their capital profits and this , in turn, would send the USD back down again Traders are not looking for the interest spread but rather capital appreciation which usually is in the country with lower interest rate. However this needs to be confirmed with US and European data. If US economy continues to detoriate they need to reconsider their positions. Yes

Email 2

I've noticed that the Euro has gotten crushed in the last two Asian sessions and pushed down pretty hard three sessions ago. Does that indicate more intervention? Possibly, though I think that the market players are now just pushing it I'm wondering because trading that kind of market moving size in the Asian session would be risky for a bank or a hedge fund when they went to cover their position or if it went against them in that kind of thin trading. They do not look at short term day to day holding. But do governments ever have to cover their positions? Yes, but they have much longer time frames and different goals(currency stabilisation at a certain point etc) than any currency trader I can only imagine the size of the positions the Fed had to take in order to get the market to drop 1500 pips, but will they ever cover those positions and cause buying pressure? Yes, but their time frames give them huge advantages in feeding them back into the market. Plus they are not trying to make trading profits (they don't need profits...they can just print more money!)..they are charged with the political goal of getting the currency to a certain level

Email 3

I just came across this article. Maybe another explanation for the recent sudden strong dollar surge:

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/26/ccchina126.xml

The writer blames intervention (direct and indirect) by China to strengthen the dollar and keep its exporters competitive. I agree ...HSBC spoke to me about it last week

Email 4 (This is an email from one of our newest members)

I've been trying to make sense of what's happened to the market recently, in relation to my future as a trader.
Here's the conclusion I reached: if one is a trend trader, making a profit is easy (once one gets the idea), provided the trend lasts! But ONLY while the trend lasts. Yes, and research shows that one of the "trendiest" markets is the currency markets. It also shows that the bigger the currency pair, the less volatile and more "trendy" they are...thats why I only trade the Eur/USD.
Most people for example invest in the property market for an average of 7 years. Most people invest in a stock for an average of three years. Most forex traders want to trade every day !!!!. If you want to be a serious trader, you need to widen your time frames and accept that it is sometimes better to be "out' of the market at certain times, rather than being "in" when the market is not trading in your preferred pattern (trending).

Like you, I also believe the trend is still in place, but this last move has been so far against the trend that it almost 'breaks' the trend, if I can call it that. The fact that it is artificially created doesn't help / save the trader who understands the trend. Worse yet, I don't see a reason why this cannot happen again or for that matter on a regular basis. I just don't feel like I have an answer / solution to this type of move in the market.

That is what stop Losses are for. To protect against such situations and give you a "heads up" to be much more careful. That is why I also have a policy of two or three losses in a row, then I stop trading !! (Take a good break from the market for at least a week and then have a look at it with a clear mind)

There have been SO many times since 8/8 that I was convinced that there were bargains to be had, that the Euro could not POSSIBLY go any lower. If I'd been trading and lost 100 pips each time... well, let's not even go there. My point is that the trend style only works when there is a clear trend in progress (and one knows what that trend is). When in doubt, stay out...but when in no doubt, then trade hard and use the rapid compounding to obtain excellent results
Never in a hundred years would I have believed we could have seen this drop in the Euro. If you take a look at the mothly chart, you can see similar sized falls March 1991 and again in Sept and Oct 1992 (considerably less than 100 years).
At what point could I have decided it was time to go short? In hindsight, the break of 1.5300 was the indicator for a short term counter trend short. It was the break of the bottom of the range that had been in place since early March.

I'm only down about 90 pips. That's fine and I can live with that. But if I had been trading live through the whole drop I don't know that I'd still have an account.

You have been innately prudent..you have instinctively preserved your capital for when the market is moving in your favor (whenever that may be, but I think that the market is overstretched to the max). You are showing the signs of a good trader...A bad trader would be trading faster and faster, and bigger and bigger trying to force the market to his will...You are showing far better instincts

I guess I'm just looking for some reassurance here that at some point I'll know enough not to wipe out under extreme conditions, because there will be more such conditions, maybe not this week or month or year, but eventually. Thats why Stop Losses are sooo important...to minimise the damage when the market is not trading as you expect


MESSAGE FROM JACKO 184

It is 2.10am NY time Wednesday August 27 and the market is at 1.4707

Update below

As stated yesterday, I am on the sidelines and wanting to get into the action. I am looking at the weekly trend line and thinking that this market may be aiming to bounce off it at just above 1.4500. Interestingly most trading houses are recommending that traders remain flat at the present time. (See

http://www.actionforex.com/technical-analysis/action-bias/action-bias-summary-200603225796/

and

http://www.dailyfx.com/story/dailyfx_reports/daily_technicals/Dollar_Edges_to_New_High_1219757335721.html

I am sitting on my hands at the moment (even though I am really keen to get back into the trades).
I am starting to appreciate what it must of felt like for that old man from Omaha to sit on his hands and wait months and months and months for the Dot-com bubble to burst. I have been watching a major reversal from Beijing and not been able to be involved and now that it is almost over, I have to wait again for strong signs of a bullish reversal. However, one thing that I do know is that the bullish reversal WILL happen.

Edit 9.55am NY time Market is at 1.4724 very sluggish. It is heading back around the 1.4700 mark again. It has been ranging between the 1.4650 to 1.4800 mark since Aug 15 (12 days ago).

The drums are beating louder that Fannie and Freddie are heading into a bankruptcy / a Fed bailout soon.

Emails

Email 1

Hi Jacko, This is a copy of a recent COT report that I have received.

According to the most recent (Commitment of Traders) COT numbers, US dollar bullish sentiment is at an extreme, which makes the buck vulnerable to a sharp decline in the weeks ahead. Notably, the difference between speculative and commercial positions for the British Pound is the greatest it has ever been. This is the kind of dynamic we would expect to see at a turning point. What are your comments. How will this impact the Euro?

While I find the COT Reports interesting as background information, I am also very aware of the famous words of John Maynard Keynes who once said "The market can remain irrational longer than you can remain solvent." Given that the COT Report has been at extreme levels for some weeks now, it is difficult to use them as a direct trading tool unless you are trading VERY long term and with huge Stop Losses (if any).
In regard to the Euro, I am very much of the opinion that the market is overdue for a reversal. But it is determining the reversal point that is causing me some angst at the moment.

MESSAGE FROM JACKO 183

It is 1.05am NY time Tuesday August 26 and the market is at 1.4704

Updates below (see especially the 8.30am update)

The market has dropped back to where it was yesterday at this time after rising to 1.4807 at the start of US trading yesterday. This market weakness is rather more persistent than I would like but I also consider that it is an excellent opportunity to start to look for getting set in a long term "long" position.

I am now simply looking for the best buy position for my "longs". If the market is weak in the Asian session, I will be watching the London session and US session with interest.

On a personal note, I am really glad to be back home. I am sooo looking forward to getting back into trading after my "Beijing Agreement" with Mrs Jacko (I agreed to no trading while we were at the Games).
On the other hand, the Beijing Games were extraordinary and fabulous. I hope everyone enjoyed the Games as much as we did. London will have a huge task to better Beijing, but we are looking forward to attending the London Olympics in 2012.

Edit 4.10am NY time The German ifo details just crashed the Euro down 100 pips to 1.4600. Is that blood that I see running in the streets??

Edit 8.30am NY time The market is at 1.4594 after bottoming as low as 1.4570. This market is becoming very frustrating to me. The only redeeming feature is that I have been "standing aside" from the market since the 8/8/08 (the opening of the Olympics) which coincided with the initial major drop of the Euro. The two intervening weeks have been awful for "long" traders, so the fact that I was standing aside was beneficial. As the wise old man from Omaha says "the first rule is...Don't lose money".

However, I am now at the point where I am standing on the sidelines wanting to get into the action and the game is playing the wrong way. There are two alternatives: firstly, jump in with the "in" crowd (the shorts) and sell the hell out of the market or secondly, plan the trade and stick to the plan.


As stated in a previous Message,I am not having a problem with the fall from 1.6000 to 1.5300 as this was just part of the trading range that had been in place since early March. However, in hindsight I was remiss in not considering the potential for the drop out of the bottom of the range...I should have considered that. (Obviously the intervention by the Fed to coincide with the opening ceremony of the Beijing Olympics was the big "Wild Card" that no-one knew was coming, but I still should have been more aware of the potential for the drop).
 
While I had Stop Losses in place to prevent any major losses from "long" positions, I was remiss in not having a strategy to take "short" positions IF it fell out of the bottom.

The fact that the market the Fed ambushed the market by timing the market push during the thin August period when most traders are away on vacations and also to coincide with the Beijing Olympics, has left me fuming.

On a fundamental view, I cannot see a significant reason for this overwhelming strength of the USD. (Indeed, the potential bailouts of Fannie, Freddie or even Lehmans are far more substantial than Bear Sterns...and the probabilities of the bail outs of some, or all, of those companies is VERY high). I read today that there was some "stealth support" for the USD coming out of China...but I am still trying to find verification of this.


Edit 9.20am NY time I am sticking with the prognosis that this correction is almost done and am prepared to wait for a "long" opportunity, rather than gambling on a "short".

Edit 10.30am NY time Market has conflicting signals from CB Consumer Confidence and New Home Sales. Price hanging around 1.4600-1.4650

Emails

Email 1

Seems to me that the Feds, ECB etc can enter the market short-term to manipulate it because they have the clout.
Does this therefore mean that because of their clout ther are 'always guranteed' to make money on their trades? To a limited degree yes
If so then what is stopping them from using the FX market to bail them out all the time? Because they would lose total credibility and would put the whole Forex market structure at risk. Also, the Fed doesn't need to make profits from Forex (or anything else). They can simply print more money

Email 2

I am very puzzled to see the Dow Jones surged 190 points on Friday after Bernanke came out to say that the financial crisis is not over yet. Maybe it was due to the drop in oil. However, just after Bernanke's speech, Dow Jones was up 130 points. That was before the oil dropped. It was as if Bernanke said that the crisis is over. I do not quite understand this. It was susprising. Bernanke has a habit of saying that the worst has happened...then something else happens...On the horizon, I can see Fannie mae and Freddie Mac being bailed out to the tune of $200Billion and also Lehman Brothers either collapsing or being bailed out by the Fed.(Why would anyone want to buy it when they can see the massive drop that the Fed engineered in the firesale price of Bear Stearns....they will wait for Lehmans to collapse, then buy it on the cheap..).

MESSAGE FROM JACKO 182

It is 12.05am NY time Monday August 25 and the market is at 1.4720

The market is looking weaker than I expected, but Asian trade is not usually a good indicator. I will be back for open of London session, then I will be hopping on a flight back home to Honkers (Hong Kong) later tonight.

I am looking forward to getting back into trading tomorrow.

Edit 4.00am NY time After a little spike down to 1.4696, the market has moved back up again to 1.4739. We have been seeing higher lows and higher highs since it bottomed at 1.4629 on Aug 19. It will be interesting to see if that pattern is maintained in the next 24-48 hours. If so, I will be looking to trade this market from the long side when I return.


MESSAGE FROM JACKO 181

It is 1.15am NY time Friday August 22 and the market is at 1.4878

The market has peaked at 1.4898 and some of you have made out like bandits on your buys. We are now heading into the weekend and have a Bernanke speech at 10.00am NY time today, during which he will say that the worst is over and everything will get better..... (But, remember, if his lips are moving, he is not quite telling the truth).

This may move the USD up (Euro down) for a short while, so if you want to get in, this may be the opportunity.
As outlined in yesterdays Message, we are looking for a 100 pip pullback for a good buy spot.

The Market has peaked at 1.4898 so a good buy spot may be 1.4800. (Those die-hard bargain hunters may want to look between 1.4750 and 1.4800).

Edit 12.05pm NY Time Market is at 1.4810 after having dipped down to 1.4783 just on an hour ago.


MESSAGE FROM JACKO 180

It is 2.10am NY time Thursday August 21 and the market is at 1.4792

Update below

I get the feeling that the correction is over. As stated yesterday, "I consider that anything between 1.4650 and 1.4700 would be a good buy". Those of you who got set in that price bracket are in a good trade now. I would eriously suggest that this is a good long term trade. The market will be rocky but I would think that the correction has hit its low at 1.4629.

If you are not in the market yet, there is no need to panic. This market will be bouncing up and down quite bit.
We may still see another move down to the low 1.4700's (1.4720??) for another point to jump in. (I would be surprised to see 1.4700 broken to any sizable degree). I am looking forward to returning home next Monday so I can get into the market myself. (Mrs Jacko loves me for not trading and paying full attention to her!!).

Edit 7.15am NY time Market at 1.4786. Market dropped to as low as 1.4742 ( a little stronger than I thought) and is now on the rise again. I think that this market is getting more certain of itself in the bullish direction.

10.10am NY time Market at 1.4863. This market has shaken off the correction and is on the move upwards.
However, this market is still fragile, so I would expect some pullbacks very soon.
I would be looking for any 100 pip retracements from a high as buy points. (For example, the market now at 1.4863...IF we assume that it is the high and it dropped back to 1.4763...I would suggest buying at 1.4763.)


MESSAGE FROM JACKO 179

It is 1.50am NY time Wednesday August 20 and the market is at 1.4770

Updates below

The market has given reasonable signs of the market having bottomed. While nothing is ever guaranteed, the dds of an bullish move are increasing. The issue now becomes one of establishing an entry price. The market has moved up from 1.4629 to a high of 1.4805 (at 7.50pm NY Time Aug 19) and has retraced slightly back down since that time. However, I want to buy a bargain. I think that the short term retracement has more downside.

I consider that anything between 1.4650 and 1.4700 would be a good buy. (I am still not allowed to trade because of my "Beijing agreement" with Mrs Jacko)

Some of the more aggressive traders have covered their shorts from 1.5900-1.6000 at 1.4650 and gone long from .4650. They have also now moved their SL to breakeven. We are uncovering some excellent traders in the group. Their attitude to risk is higher than mine but the are scoring some excellent points.

Edit 10.00am NY time Market dropped to 1.4690 just on four hours ago. Those of you who got in had only a small window of opportunity. There may be another opportunity soon.

Emails

Email 1

I've been reading a great book called Fooled by Randomness; not a book about trading per se, but he discusses


the concept of being wrong, and the need for flexibility in your position. I have that book at home. Its by Nasim Taleb

Is there a price at which you would say I'm wrong about this long-term trend? For a long-time before it broke, I aid to myself that a break of 1.5284 (the bottom of the big range) would show that I am not definitely right (leaving open the options of don't know, or it's changed). yes I said the same
I then noticed I changed my parameters to say a break of 1.5000 would prove me wrong. yes, I said the same
Now I'm eyeing 1.4300s as support as where it'd prove me wrong. Yes, I am saying the same...LOL

My issue is that I'm wedding myself to a viewpoint (of my own accord ). Would it not be better to make your initial assessments and then assume trend has changed until you have evidence to prove otherwise (eg support at 500, or 4300, then move back up and break through the resistance at 1.5284)? see below...I am looking at it in the opposite way (I am assuming that the trend has NOT changed but that it is a manipulated interventionary correction)

In your trading, isn't there a very real danger of trading what you wish for rather than trading what you see (please understand this is a Devil's advocate question!). Yes. But I think that the wild card is the fact that the ed has so obviously intervened. If the market had been falling of its own accord, I would have adjusted my thinking about the trend. I am of the belief that the trend hasn't changed ...but if it moves back up to 1.5300 and then falls back then I would be more prepared to say the trend has changed

Email 2

An interesting article was sent

"Large US bank collapse ahead, says ex-IMF economist -8/19/2008 1:12:00 PM
The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.
" My money would be on Lehman Brothers failing. It has been reported that they may have to write down its $61 Billion worth of securities by as much as 20%. They also expect to announce a USD $6.77 loss per share versus their previous forecast of only USD $2.35 loss. Their shares have tanked 77%. (It just goes to show that even after the initial credit crisis, the fallout is still getting much worse.....The Fed bailed Bear Sterns. If they bail Lehmans, the moral hazard of "risk" trading is multiplied exponentially).

Another interesting article

"Fannie, Freddie Fall on Likely Need for a Bailout...(from Bloombergs 8/18/08)"
Fannie Mae and Freddie Mac tumbled in New York trading to their lowest levels in more than 17 years on concern the government will be forced to bail out the mortgage-finance companies, wiping out common stockholders.
Fannie slid 22 percent, while Freddie dropped 25 percent after Barron's reported that the Bush administration is anticipating the government-chartered companies will fail to raise the equity they need to offset credit losses, prompting the U.S. Treasury to act. The companies' stock market values are well below the minimum of $10 billion in capital that each would need to raise to ``have any credibility,'' Barron's said in its story. Ouch....this one is serious for the housing market

MESSAGE FROM JACKO 178

It is 4.50am NY time Tuesday August 19 and the market is at 1.4666

See updates below

As discusssed in the previously, we have had to endure a short and sharp correction induced by the intervention of the Fed on August 8.

The speed and timing of the initial fall was timed to coincide with the Olympic Games Opening (probably to favor the US/Wall St trading houses rather than the European and Asian trading houses).

After that, it was then a question of "Do I now jump in after a savage sell down like that?" (remember it was the argest daily correction in 8 years). Financial prudence would suggest otherwise. The market has been digesting that intervention and there have been prolonged unwinding by the hedge funds as the week progressed.

The market is currently bouncing around the 1.4650 mark. I would suggest that we are getting much closer to the bottom of this correction.

While I dont take a huge deal of notice regarding Commitment of Traders (COT) reports, this one by Terri Balkas at DailyFX (dated yesterday Aug 18 at 23.13pm) is interesting

US Dollar: Is the Rally Over?

Though the US dollar started out the week by plummeting lower against the majors, the currency ended Monday virtually unchanged. For the most part, the forex markets were relatively quiet amidst minimal event risk, but that doesn't mean that sharp moves aren't on the way. My fundamental bias for the US dollar this week remains bearish, which is something I talked about in our forex trading weekly outlook. Furthermore, now that I've seen the latest COT positioning numbers, I'm even more convinced we'll see a pullback in the greenback. Why? As Senior Strategist Jamie Saettele discusses in his analysis of the latest COT report, the 52 week index is up from
98 at 100, and the difference between speculators and commercials is its largest since late 2005. This suggests that while the greenback's rally may not be over yet, the US dollar is close to topping out.

I am also starting to feel much more comfortable at buying at these levels. On the basis that I don't believe that there has been a change in the long term trend (and that this has been an intervention-induced correction), this may be an excellent opportunity to get back into the Euro bull market at levels that would have been reasonably unexpected late as just a month ago.
When the market was at 1.5900+ , how many of us were saying.... "If only I could turn back time and buy again at 1.4650 (for example) " ?? Well, that opportunity is now there...

While I am not saying that we should all pile in and buy at 1.4650, I am starting to believe that the time for a buy is getting much closer. Some of the more aggressive of the group are certainly looking at around that figure to dump their "shorts" and reverse and go "long."

I will be looking for a buy trade in the very near future. It may even be around 1.4650, but I will have another look at this market at the US opening.

Edit 8.50am NY time Market at 1.4653...This is still bouncing around. Will have another look later (after dinner ..in the night here)

Edit 10.55am NY time Market at 1.4700 I am becoming more assured that we may have seen the bottom. I am waiting for a little more confirmation. Next 12 hours (3 x 4H bars) will give us a better indication.

Emails

Email 1

Its nice to hear what a positive experience you're having in China. I watched the opening ceremony on TV and it was Awh inspiring. I couldn't imagine what it was like live. Amazing...deafening ...a ton of fun...everyone is so
nice

Sneaky of the FED to launch their intervention during the opening ceremony. Yes...it also gave the US trading houses a big boost...The europeans were winding down and watching the olympics. And asia was asleep or watching the Olympics My question right now, is with the overall fundamentals for the $ still negative. How much attention due you pay to the recent inflation #'s. The US inflation is high because of the obscene amount of $$ being pumped into the system...the increased money supply was also the key reason for the increase in oil prices The $ news being generated is future rate increases being budgeted in, with the EUR holding steady. The news services are trying to make this the impetus for a trend change. The US Fed is looking at an interesting
exercise: pump $$ into the economy, then try to lift interest rates. The end result will be a serious case of stagflation like we saw in the late 70's... Is the big money on board with this thought process, or is this just the short term noise that comes with the daily explanation of market moves. The big money (see COT report in todays blog) is saying that the USD will revert to trend

Enjoy the rest of the Games, Thanks


MESSAGE FROM JACKO 177

It is 7.00am NY time Monday August 18 and the market is at 1.4700

I am back and fully refreshed from my weekend when I tried to not even think about Forex (very difficult when you love trading as much as I do) BUT I had some great distractions...that Michael Phelps is just such an exceptional athlete....and the Jamaican sprinters... and I could go on and on. And there are just so many other extraordinary athletes here that the exceptional ALMOST become the norm. Beijing is currently THE place where the best of the best are all situated. If ever a forex venue could ever match this type of "exceptional" environment, then it would be an unbelievable place.

Having cleared my head, I have been looking at the charts with hopefully, a clear mind, ...and I am still not prepared to say that the trend has changed.
I could be wrong.... but I still get the impression that this short sharp correction is primarily an intervention by the Fed (which in turn has caused the unwinding of positions by the huge hedge funds etc) and I have seen Government interventions before. The market will eventually impose its will and defeat any intervention.
Having said that, those traders who went short are doing extremely well. A couple of traders who were "trading the range" (that is buying in the 1.53-1.54 range and selling in the 1.59-1.60 range) and are still in with sells are doing extremely well. A couple of traders are in with 1000+ point gains on multiple contracts.

The big question therefore is ...."Has the trend changed?".... I don't believe so.

And interestingly, even those traders with the huge profits from the shorts, don't believe that this is a trend change. Each of them is very thankful for their current windfall profits, but none of them believe that this is anything more than a short interuption to the bull market.

I have absolutely no interest in going "short" in this market at the present time.
It may have further to fall but I am not prepared to risk a "short" trade this far into a correction.


Edit 7.30am NY time I have a backlog of emails so I will try to answer them later after I put Mrs Jacko off to bed....she is exhausted and has absolutely NO voice left after cheering all the athletes and swimmers in the last few days....and she does miss the little briefs that the swimmers used to wear...LOL...she is certainly not a fan of the full bodysuits that they wear now.
PS Thanks for the advice about the date stamps on the Messages for Wed, Thurs and Friday last week. I don't know what happened but I was all at sea on my days...They have all been corrected now.

MESSAGE FROM JACKO 176

It is 1.15am NY time Friday August 15 and the market is at 1.4781

Well, this market is certainly proving challenging. As stated in Message 174, I will not be trading for the duration of my time in Beijing. However, this has proven to be a good thing in hindsight. The last seven days has certainly been challenging. It is difficult to believe that it has been less than seven days since the market fell out of the bottom of the 1.5300 to 1.6000 ranging channel that it had been in since March 6. And the fact that the major portion of that move took place on the day that the world was celebrating the opening of the
Olympic Games is even more galling.
I am not having a problem with the fall from 1.6000 to 1.5300 as this was just part of annoying the trading range that had been in place since early March.
However, in hindsight I was remiss in not considering the potential for the drop out of the bottom of the range...I should have considered that. (Obviously the intervention by the Fed was the big "Wild Card" that no-one knew was coming, but I still should have been more aware of the potential for the drop). While I had Stop Losses in place to prevent any major losses from "long" positions, I was remiss in not having a strategy to take "short" positions IF it fell out of the bottom.


I remember reading in one of the books by John Boik (Lessons From the Greatest Stock Traders of all Time or How Legendary Traders made Millions) how one of the traders had to endure the crushing two year long bear market from the end of 1972 to the end of 1974 where even his best friends started to avoid him. (The market..DJIA... dropped from over 1000 to 577 during that time). Coincidentally I started trading in stocks around late 1975.
However, I remember thinking to myself that that would take a lot of perseverance to go through that and still come out of it bigger and better (which he obviously did).

I am taking my own advice that I have given to other traders in the past. When you have racked up two or three losses in a row...stop trading...and get a clear head. So I will not be making any trades (or recommendations) until early next next week. I want the weekend to clear my mind.

Again, to those of you who sold the Euro on Friday. (and some are holding from even before that time). Major congratulations. You have done very well.

MESSAGE FROM JACKO 175

It is 2.15am NY time Thursday August 14 and the market is at 1.4888

There have been a couple of emails discussing possible Support and Resistance lines and Fib numbers. However, I believe at the present time the technicals are largely irrelevant. The BIG question is "where does the Fed want the USD to be?" The Fed has undertaken a massive intervention in the USD across the board over all currency pairs.

Given the major shift that took place on Friday US time (while the rest of the world was celebrating the opening of the Beijing Games at the exact same time), I would think that the Fed would be reasonably happy with the result. While there may be still another little "touch up" to keep the market under control when it drifts back up to the 1.5300 mark, I still see the market forces as being irresistible in the longer term.
As stated in Message 173, "with this intervention, central banks have bought some time. But alas, they have not fixed the problem. Central bank intervention does not make the dollar "as good as gold", the description that once accurately described the dollar....Central bank intervention"...is a temporary measure only.
I am still of the belief that anything under 1.4900....that is, say 1.4850, is a good buy. The downside risk is limited by the 1.4814 low as a reasonable support level (it was the climax of the panic reaction). And the upside is a much better probability than to trading the downside.

Edit 7.15am NY time Market at 1.4902 Has been very quiet in the European session....The market is consolidating.

MESSAGE FROM JACKO 174

It is 1.35am NY time Wednesday August 13 and the market is at 1.4928

I am receiving considerable "heat" from Mrs Jackson regarding my time answering emails versus her enjoyment of the Games...so I have undertaken not to trade myself during the remainder of the Games.

HOWEVER,.. if I was able to trade....then I believe that anything under 1.4900 is a good buy. I consider that the Fed has delivered the "smack on the bum" that it wanted to achieve and will now withdraw from the market.
The question is raised "why does the Fed intervene, if the market counters that intervention in the long run?"
The answer is that they are part of the political process and they have to be "seen" to be doing something.
Otherwise they are seen as being ineffective and of no value.

Some of the more aggressive traders did very well from selling this market on Friday (and some are holding from even before that time). You have done very well. Just be cautious and good luck

MESSAGE FROM JACKO 173


It is 2.40am NY time Tuesday August 12 and the market is at 1.4869

Update below

As stated yesterday, I think that the elephants (Fed and ECB) wanted to give this market a short sharp shock...but it will be temporary. There is now substantial evidence of massive Fed Reserve intervention. The following (from one of our members) is informative:

On July 15th the US Dollar Index closed at 71.87, the lowest close since reaching its record low in April. This index was in the process of breaking down, and in fact it had actually fallen out of its uptrend channel.

However, rather than continue lower and fall off the edge of the cliff, the Dollar Index suddenly and mysteriously reversed course. It has now risen on 12 of the 17 trading days since reaching that low, and closed today at 74.55, a 5-month high. What caused this index to suddenly pull back from the brink and then reverse course to shoot higher over the past three weeks?
The Federal Reserve did not suddenly contract the amount of dollars in circulation. Its latest H.6 report shows that both M1 and M2 expanded in recent weeks, so there was no shortage of supply.
The Federal Reserve did not raise interest rates during this period. Consequently, inflation adjusted interest rates remain negative. In other words, the annual inflation rate is higher than the amount of interest one can earn on a 1-year dollar deposit, which is highly inflationary and a major disincentive to holding dollars

And Now The Answer !!!
On July 16, 2008 (the closest date of the weekly reports to the July 15th low in the Dollar Index), the Federal Reserve reported holding $2,349 billion of US government paper in custody for central banks. In its report released today, this amount had grown over the past three weeks to $2,401 billion, a 38.4% annual rate of growth.
To put this phenomenally high growth rate into perspective, for the twelve months ending this past July 16th, ssets in the Federal Reserve's custody account grew by 17.3%, which is less than one-half the growth rate experienced over the past three weeks.So central banks were accumulating dollars over the past three weeks at a rate far above what one would expect as a result of the US trade deficit.
The logical conclusion is that they were intervening in currency markets. They were buying dollars for the purpose of propping it up, to keep the dollar from falling off the edge of the cliff and doing so ignited a short covering rally, which is not too difficult to do given the leverage employed in the markets these days by hedge funds and others. So central banks pushed in one direction and funds and traders then stepped on board. In other words, central banks ignited the fuse of a bear market rally.With this intervention, central banks have
bought some time. But alas, they have not fixed the problem. Central bank intervention does not make the dollar "as good as gold", the description that once accurately described the dollar.In the final analysis, it is fundamental factors that determine the course of markets and the process of price discovery that results from them.
Central bank intervention -like fiat currency itself -is ephemeral

Edit 8.35am NY time Market is currently at 1.4910 and is showing a bit of strength after spike down to 1.4814 at 2am NY time. I believe that the market will turn up in the next 24 hours

Email

Email 1

a) What are your thoughts about the mid-term trends that you trade on? Getting close to bottom...!!

b) Time to revisit your counter trend strategy? Too late for that ...this is almost over...the big hit by the Fed was on Friday....this is now just the staggers (and yes I have been watching the boxing at the Games!!)


LAUNCH OF JACKSON FORTRESS ASSET MANAGEMENT

We have now successfully launched the new JACKSON FORTRESS ASSET MANAGEMENT LTD (Managed Forex Fund).

Please see here:

http://www.jacksonfortress.blogspot.com/

Edit August 11 Because of "intruders" we have locked the above website against non-members.
The access codes for the above website are:
User name: jacksonfortressaccess@Gmail.com
Password: jacksonfortress

Wayne

PS Beijing is absolutely the most exciting place on earth at the moment...It is great to be here

MESSAGE FROM JACKO 172

It is 3.10am NY time Monday August 11 and the market is at 1.4971

The rise of the USD (and fall in the Euro) on Friday was very impressive. What is more important is that no-one seems to know the reason. DailyFX states it succinctly as "Records were broken and important technical levels fell with the dollar's incredible rally last week. However, there was no specific top-tier indicator to trigger such a monumental move. So, is this just a remarkable false breakout or the inevitable fundamental shift behind a long-term trend change?"

Until I get a clearer picture, I am staying out. However, I am leaning more towards the "remarkable false breakout" scenario than "the inevitable fundamental shift behind a long-term trend change"

I think that the elephants (Fed and ECB) wanted to give this market a short sharp shock...but it will be temporary

I have just set my A-H buy order at 1.5250.... On Friday last, I just wanted to enjoy my Olympic Opening night with no thought of the market.

Emails

Email 1

I made this post on ForexFactory with the attached chart and this is kind of what I am seeing in the EURUSD from 2002 to current and what the current situation might be showing:
When I look back at the monthly chart to Jan 2002, I see a HUGE UP trend that is really made of 2 LARGE UP trends and 1 MODERATE DOWN trend that retraced to the 38.2 Fib of the first large UP trend. Yes

We are obviously in a medium retracement and about halfway to the 38.2 of the latest UP trend fib. Nobody can say whether the larger 6 year trend is over unless you have a crystal ball. If I had crystal balls I would sit down slowly....and gently..LOL


We can say that the current environment is not following the HUGE trend. I think that the elephants (Fed and ECB) wanted to give this market a short sharp shock...but it will be temporary

When the near-term shows no indication of following the HUGE trend, you really only have two choices. Sit on your hands until real resistance is met and the trend is resumed yes or play the countertrend. That was a decision that needed to be made on Friday morning...that opportunity is now gone I don't believe that you ever said that all trends last forever or that they go uninterrupted. I think it is time to take some smaller countertrend positions with fairly tight stops until we hit resistance.Too dangerous for me at the moment

So during this ranging to down-trending, until the market hits some significant resistance and resumes the uptrend, I think I should sit on my hands. That would be my recommendation Am I off base on this? The only other alternative to sitting on my hands is to play the countertrend, but I know you don't suggest that anymore.
Do you have any thoughts about trying the counter again? Too dangerous..too late ....especially now that the big move has already occurred

I hope you enjoy China and the Olympics. It is unbelievably exciting...Did you see me in the Opening crowd ??
...Outside of the VIP area, my wife and I were one of the rare corky's (caucasians/ white people) in the 91000 crowd...they kept asking me if I was lost....LOL

Email 2

Hope you enjoy the games! Don't forget to wave from the stands lol. The Games are amazing !!!! Huge amount of good feelings by everyone.

The following ... please help:

1. The Fund due to be launched soon (/8/8/08) ...... what it yours and/or Marks idea from the start of the group to eventually set up the fund? No, it just evolved as firstly an opportunity to help some traders who said they were having trouble "pulling the trigger" and trading themselves, secondly, we were helping some traders get into the "prop trading" so we thought that by giving them experience with a boutique Fund Manager it might help them, and thirdly we had some investors from Mark's side that wanted me to trade for them, but I want to give priority to the group members If so who are the target audience etc ..... I am sure this will all be revealed
in the next few days.

2. We are no I think into our 9th month of your Blog / mentoring which I have found excellent (thank you once again). Are you going to continue with the Blog into the new year yes ..... if not I'd like to know ... just so that I can plan to scrap the nappies! I am still enjoying the blog immensely. I have no plans to stop the blog. It is mentally stimulating to have to justify my thoughts to other talented traders...LOL

3. Trading in itself I find 'boring' ..... (shock/horror). Mentally it is not a huge challenge .. once you are in a trade you just let it play itself out. I am thinking of going back into 'interim work' and managing my trades around the work ... which I think is feasible .... what do you think ....... I just need to keep my grey cells alive lol. Thats why the blog is so good for me. My trading is easy, but I am really enjoying the helping out the traders with just a little bit of my experience

4. Not sure if you can answer this one ... but out of interest: If I was the US Govt. and I wanted to drive down the Euro by 500 pips (as recently seen) then what sort of amounts/lots would I need to be dumping onto the market ..... I am assuming a few 1,000 lots/contracts at a time? I don't know...it would be huge

5. You mentioned in the blog ... 'high probability' trades ...... how do you define these ... in my view what-ever trade you enter into has a 50:50 chance ........ apart from say the ones you enter into 1 minute before an important news release or say entering into a trade late Fri NY session. The trend tends to bias the probability more in one direction, A pull back increases the probability, and well used technical tools (S+R, 50% retracement and trend lines) tends to increase the probabilities.. All that you need to do is underlay that with trict money management and you have a winning proposition. The alternative is wild punting on short term movements

6. Is the 'counter-trend' strategy totally defunct? No, just waiting for my "burnt fingers" to heal...LOL Or are you still using it to guide you as to when/how long to stay out of the market? Had the strategy worked on those two loss making trades I assume that you would still now be using it .yes but that is woulda coulda shouldas ... and presumably a part long/short trader as opposed to only being a trend trader? yes

MESSAGE FROM JACKO 171

It is 12.10am NY time Friday August 8 and the market is at 1.5218.

I was stopped out in my last trade at 1.5250. This has been my hardest period since I started in forex with three loss trades in a row. It has been less than one month (24 days to be exact) since the market peaked at 1.6037.

While I am still sustantially in profit for the year, I really dislike giving any profit back to the market. The optimist in me tells me that it is about to change (It is similar to trading...just when you think that the market is continuing against your position, the market turns and gives it all back PLUS extra profits). However, I won't be making any trades today.

On a personal note, I am in Beijing for the Olympic Opening Ceremony. Beijing is an amazing sight. The younger members of the group may not be aware but it was only a very short time ago that travel into China was almost impossible (and so too into the Eastern European bloc). Almost 50% of the world was impossible to get to visit.
It was such a stupid situation...but it makes me really appreciate what we have now. The Olympics start at 8.08pm tonight...(8.08 is an auspicious Feg Shui number for the Chinese)....I pray that it is a successful and peaceful Olympics.

MESSAGE FROM JACKO 170

It is 1.30am NY time Thursday August 7 and the market is at 1.5434.

I am definitely getting interested at buying at these levels. I am looking to buy between the 1.5350 and 1.5400 levels. The downside risks are now significantly reduced.

Edit at 7.15am NY time.. Market at 1.5465...I think I am going to get lucky today... I am a buyer at 1.5350 with a hard stop of 100 pips...

I am a buyer at 1.5350 with a hard stop of 100 pips...

Edit at 11.15am NY time Missed being picked up by the drop in price. It came to as low as 1.5354 (missed by 4 pips) but I think I will still get lucky today. It is currently at 1.5374

Edit 11.50 am NY time. I have just been filled. I am using a hard Stop Loss on this trade. My Stop loss will remain at 1.5250 until further notification or until it is struck. You may wish to use the standard 100 pip TSL method.

MESSAGE FROM JACKO 169

It is 1.40am NY time Wednesday August 6 and the market is at 1.5501.

The market is showing some feeble attempts of strength on the 4H chartbut not sufficient to warrant jumping in just yet....These are times for great patience. (see emails below). However, I do like this area of 1.5500 as a potential buy spot

On a personal note, we are leaving this afternoon for Beijing for the opening of the Olympics. (I have been assured by my friends that my blog will not be censored by the Authorities...LOL)

Emails

Email 1

As one of your first group of traders I would like to thank you for the time you spend helping us all come to terms with the realities of "Forex trading". Thanks

I feel that one of the most important lessons that any new trader can learn is the profit that can be gained by waiting for the right setup, in monitoring your trading style I am impressed by the patience you show in waiting for the right time to pounce. It is necessity...my trades are quite large so I am not trying to trade for maximum (that is, more risky) pips...I am trading for "safer" pips BUT to use the advantages of this business (leverage, liquidity and compounding) to maximise my profits

Yes, sometimes you get it wrong and when you do I am sure it weighs heavy on your shoulders knowing that a few of your trainees will have followed your lead. I used to worry more earlier but I am now comfortable that I have said my warning enough times that they now know that I am not a signal service...My trades are not a recommendation. They are simply to allow you to see when and what I am trading and why. I don't ask people to follow only my trades. My trades are simply my trades,... many of the group trade my trades PLUS their own

Email 2

Bloody hell, this is a lesson in patience! Yes BUT we are less than one month away from the all-time, rootintootin, trumpet blowing, highest ever, point for the Euro....so it may be a bit early to call lights-out on the uptrend

I put in an order at 1.5550 yesterday thinking it was nicely below the trendline. Nooo...! Then I decided we were still in an intermediate downtrend and the market had shown no signs of turning so no reason to buy into weakness. correct I pulled the order -I would (nearly) have been toast by now! Yes I then thought the spike on the 4H chart was the end (1.5465 where it bottomed is a minor support level) -but it's lows are now being tested.

This patience thing is not easy.....Making money is easy...if you are patient !!!

Email 3

Yes I learned this lesson very often and thought I have it now, but you know when greed is coming, brain has no chance. LOL...very well said …. my account is growing even if I make mistakes, yes that's the best thing in using our method, because in the past if I made 2 or 3 mistakes the account was not really growing!!!!!!!!!

Email 4

I have had a couple of enquiries about my comments on the secrecy by the Govt over the M3 numbers. One of the group sent me this.....you may find it interesting/alarming

http://www.inflationdata.com/inflation/Inflation_Articles/M3_Money_supply.asp


MESSAGE FROM JACKO 168

It is 4.50am NY time Tuesday August 5 and the market is at 1.5490.

This market is going deeper than I expected. I will be waiting for signs of this market bottoming.

For those of you have gone short, I congratulate you. It is too risky a trade for me. (Those two violent spikes upwards to 1.5699 and 1.5630 in the last day or so would have taken my breath away...)

Edit 7.45am NY time Market at 1.5465. I am still looking for signs that this market may be bottoming soon..It is difficult to say in advance what I am looking for but they include either a hard and fast spike down (showing a capitulation by buyers...which, in turn, brings buyers back into the market because the perceive a deep discounted bargain), or it may be a smooth rounded bottom which slowly starts to build strength. It really is one of those things that we don't know in advance what it is, but we will know it when we see it. These patterns don't happen every time, but they happen enough times to be "statistically significant".

However, a very good indicator is when everyone says "This market is getting away from me ...everyone else is making profits...I will jump in even though it is late".......That is when the market is very close to turning


MESSAGE FROM JACKO 167

It is 3.00am NY time Monday August 4 and the market is at 1.5577.

Market is still not giving a clear enough signal as to the direction as yet. I will be watching the London session for a better indication.

Edit 10.25am NY time Market has finally moved and is at 1.5621. I think that the market is starting to indicate strength. Looking for a place to get in. Market may move back to mid 1.5500's for a potential buy. Not a definite buy yet. (this market is soo erratic at the moment...I was talking to a stocks trader and he has stopped trading the Dow and taken a vacation becuase the Dow has been up 200 and down 200 then back up again and then back down to where it started in the last two weeks)


Edit 12.08pm NY time Market at 1.5568 Well the move back to mid 1500s happened quicker than I expected... just over 90 minutes !! There has been a collapse in oil. Still not a definite buy yet

The Olympic Games are starting to really have an impact here in Hong Kong...all the hotels are full and some long lost "friends" from my previous business career have been calling to find out if the Wayne Jackson Hotel (Hong Kong) is available...LOL...It is not !!!!

Also, we will be launching the Managed Fund on Friday August 8 , 2008. As I live in Hong Kong we have had a Feng Shui expert in as part of our process and he advises us that the 8-8-08 is a most auspicious and lucky date (which is why the Olympics is starting on the same date). I am not superstitious....but why take a chance...LOL.
Mark has done an excellent job and we have tried to minimise the "waffle"in the document so that what you see is what you get. I will advise more on Friday.


MESSAGE FROM JACKO 166

It is 1.30am NY time Friday August 1 and the market is at 1.5550.

The market is now sitting right on the Daily trend line from August 2007. I am watching to see if it is going to break through to 1.5300's or bounce of it again, like it did in Jan, Feb, June(...almost) and now July.
I will be watching the NFP data today (even though it is not very reliable) to see which way the market is biased.

Also a quick summary of what the economic reality is:

House prices falling, Equities falling, (therefore the value of our main assets are falling)
Unemployment rising,
Inflation rising (I read today that the private estimate of the growth of M3...the supply of actual money...in the last year was 18%...the US printing presses are running flat out!!...what a debasement of our money!!).
Consumer debt in US continues to soar even as interest rates drop (what happens when they go back up?)

Edit 6.45am NY time Market is coiled up tight ready for an explosive move from the NFP data. (To try to guess the direction is a 50/50 bet...not good odds).
It is better to wait until after the move...it will then retrace partially. But the direction will have been established. It is then a much safer strategy to wait until the direction has been established, then load up on contracts.


Emails

Email 1 I received a copy of this broker report today from a group member(see below)
Ben Bernanke and the Fed have today (July 29) extended the emergency lending program through to January.
So convinced that the financial turmoil is finished or coming to an end the Dow is continuing the rally from yesterday. Yet this on the very day that the Federal Reserve announces that it is extending and increasing its emergency programs through to January. Amazing that not one person is commenting on what must be a very clear signal that the Federal Reserve and others know that the crisis is far from complete and help is still desperately needed. Indeed the Federal Reserve is increasing its assistance........ We still believe there is a lot more to come out of the wood work yet on the subprime and deepening credit crisis both in the US and the UK. If this were not the case, why would the Fed have taken this action and also asked for extended and increased lines from the ECB too....... Euro is standing on the key 1.5555 level and still holding. This could be the last big push before the US Dollar cracks. Time will tell." Interesting

Email 2

This dollar buying looks like a bear trap to me. There is no real fundamental reason to buy the dollar. I agree It looks like "less bad news" is "good news", but what they forget is: it's still bad news for the US economy!

exactly...but the good thing is that it gives us an opportunity to buy back in at a low price

Email 3

I would like to get your input on how much you rely on economic news, world events, etc when you trade? How much influence does economic and world events have on your next trade setup or perhaps do you just try to grasp the overall market sentiment and trade your plan.Yes...it is an intangible thing. I don't know if it can be called background knowledge, experience, intuition, overall market sentiment or just all of those things combined. It often just gives me an awareness of what may be happening. However the main thing that I have to keep under consideration is that it is very difficult to change an economic phenomena such as a trend, especially when we considering the two major economies of the world (EUR and USD) Also, what are some of the important factors which you feel move the forex market in the long-term? Interest rates and the general economic well-being of the economies

Email 4
Last weekend the "government" went into talks and came up with a plan to "assist" the 740,000 (yes, thousand ) current home foreclosures. My thought was that the dollar may have a bullish tendency just for the week. Yes the US govt was very generous with our taxpayers dollars PLUS a liberal use of the printing presses to give Fannie and Freddie a $300Billion lifeline I have read that perception moves the market. Any thoughts on this?
Because the same credit debt is still live and well in America (and increasing) .......... Oooh yes!!!
What are your thoughts on the impending Presidential race in November and the effects on the market? Obama to win, unless McCain dies from old age and they find a younger alternative ....LOL