Tuesday, December 05, 2006

Trending markets through the holidays

I have observed that markets trend from Thanksgiving through year end. I am not exactly sure why but possible less people being envolved in the markets due to vacations and traders closing out thier positions would seem to be a possible answer. If you believe in this "Theory" then look for continued weakness in the dollar across the board and U.S. rates to drift lower. I was initially correct on the dollar. But instead of trading the markets I let the markets trade me (a terrible mistake that even veteran traders make). I never however expected the strength coming out of Asia. With the U.S. economy in a weakening trend, it was my opinion that Asia would suffer (them being exporters ...see yesterdays post). So far this is not the case. For now I will continue to look for lower rates in Mexico and Brazil and currency strength across all os central and Latin America. Although I feel that the dollar will continue to weaken against Europe I will stay out of those markets as I have been wrong recently. Remember when trading it is not always the smartest person who makes money but rather the person with the deepest pockets (not the most money). Being able to cut your losses and live to fight another day is very very important.

Comments or Questions.......



Anonymous Caravaggio said...

There is quite a bit of written research on a seasonality effect in the FX mkt: in December, the USD tends to weaken against the EUR, moreso against the GBP. The question I have is whether this is information isn't already in the market and more importantly, whether the effect is real i.e. not just down to coincidence. I for one, would be more comfortable with a short GBP/USD trade than coming in from the long side.

8:51 AM  

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