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At this point, I am still holding onto a lot of cash and waiting for the right opportunity to put it to work. This week has been great so far but one thing has been conpicuously missing during the rally; Volume. The lack of volume on this week’s bounce tells us that the big players have yet to be convinced that we have seen a bottom.

Yesterday’s retail sales numbers were a pleasant, non-completely gloomy, surprise but they weren’t exactly rosy. The bounce that is occuring is setting up for a beautiful short opportunity should the DJIA actually make it to the FFF Short Zone of 13,200 - 13,400. That’s where I see the next play setting up in the short-term but again, I’m not looking for any huge plays at the moment, just shorter-term swing plays. Medium-Longer term, I’m actually looking for some long positions to add to my retirment account, but I am trying to scale (aka: average down) into those as the market continues to drop.

On the Forex side, the Yen has really been taking a beating accross the board this week. I just entered a Long position today on the USD/JPY as it is finally breaking out of a multi-week rectangle which should be good for at least a couple hundred pips. I’m using a relatively close stop under yesterday’s low for the moment for if this does go, I expect it to do so within the next couple days whereas if I am wrong, it will likely just drop right back down into its prior trading range and there is no need for me to take any larger of a loss than necessary.

Hardly a day goes by where we don’t hear about a bank somewhere taking huge write-downs due to their poor business decisions. It will be interesting to see how the market reacts to this morning’s news about Citigroup’s $18,100,000,000 wrtite-off. Here’s what I hope will happen: The markets will open up lower as they try to grapple with the meaning of it all. Then, as the jitters calm down and they realize that they’ve already largely discounted such news from Citigroup and thus making it not really that much of a shocker anyway, they’ll rebound and continue on with a short-term bullish correction.

As of right now though, my much anticipated Bullish correction has turned out to be a pretty boring sideways consolidation :-/ Yesterday USD popped up over 7% but that came on the heels of a 5% decline on Friday, So I’m slightly ahead on that trade. Unfortunately, yesterday’s positive day was accompanied by lower volume than what typically accompanies reversals. So if I don’t get stopped out today, and at least one of my targets is not hit, I’ll be taking a really good look at how I will need to adjust my positions heading into tomorrow.

But enough of that, let’s take a look at the FX Markets for a change.

I have been paying close attention to EUR/GBP for a while now and finally entered this Short EUR/GBP trade this morning. What has really been so eye-catching is the steep slope of that trendline, it’s practically a 45-degree angle! You might see this every once in a while on a shorter timeframe chart, or for a few days on a daily; but this has been ongoing for a month now…very impressive little run.

Usually when a pair rises gradually, you can expect it to decline gradually, with many warning signs…sort of like the rumbling earthquakes before a volcano. For EUR/GBP though, I am looking at a more abrupt turnaround than this and thus have entered on a little bit more aggressive line than I usually do. The RSI is way Overbought and has been for some time; this often means that the pair is very likely to continue to rise. It was the couple little things on the other indicators that caused me to enter.

The ADX is starting to roll over, the MACD is sporting a psuedo-divergence, and Price is in the sell zone of a mini-FFF. But what sealed the deal was when I zoomed in on the 60-minute chart and saw a very, very clear MA-crossover, the likes of which haven’t been seen in nearly a week. When the MAs last crossed, the pair saw a 200 pip pop on the heels of an already extended up-trend. I am looking for a minimum of 150 pips on this current trade and am keeping my stop tight above the most recent high.

As for the other pairs, I am really trying to stay away from the US Dollar at the moment as I can’t figure out what it’s doing. GBP/USD is in a pretty strong towntrend. USD/CHF, USD/JPY, & EUR/USD are all in a very ambiguous spot right now that could either see a divergence & reversal occur, or a breakout to new lows (or highs in the case of EUR/USD).

That’s pretty much it at the moment. It looks like the Pre-market & Overseas markets are currently starting the day a little under water. Let’s see what happens.

Well I was on a nice little run but they all have to end eventually. I was recently stopped out on my EUR/JPY fade for a loss of 106 pips per lot. I will still be keeping a close eye on the pair for a potential longer term swing setup if there is a trendline break or MACD cross as this uptrend is overdue for some sort of intermediate correction as it has put in 5 consecutive higher lows over the past couple months since the big selloff.

As for my other JPY fade, please refer to the chart below. As of right now it is under by about 120 pips per lot. In hindsight, I think I was over-anxioius to get on board this trade and missed a much better entry has I simply waited for price to cross above the first FFF Fade zone. All the conditions that originially caused me to enter this trade are still present (The MACD Divergence, Slowing ADX, Reversing RSI, & Overextended Price) so I am optimistic that price will at least fall back to my entry level where I will scratch at least half of the trade.

After that, we’ll just have to wait and see how things are looking. Either way this should serve as a good lesson for me in how NOT to become over-exposed in one direction of a particular currency (in this case, having 4 open shorts on the Yen accross 2 pairs).

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After reviewing the charts of the currency pairs this evening, I’m still convinced that the best chance for a profit is going to originate due to profit taking in the Yen cross-pairs. What caught my eye the most though was the AUD/JPY which was consolidating a few days ago and recently broke higher only to form an inverted hammer today right near the FFF Reversal Zone.

So while it is a little bit riskier move than I typically take, I’m going short here with a stop just above the FFF RZ and a target somewhere in the vicinity of the 95.00 consolidation area. The setup and targets are very similar to the EUR/JPY position which I still have open with the MACD divergence and Overbought RSI only this trade has an even better entry due to the recent daily breakout.

The risks here are that I am doubling down on my Yen short exposure but I am hoping that the more than 3+ Reward/Risk ratio will make the trade worthwhile. And as always, I’ll continue to monitor the position and look for signs that the tides may be turning against me so I can take action if necessary.

And for an update on my EUR/JPY trade; After initially moving in my favor 30 pips, today it move 60 pips in the other direction so that I was down 30 most of the day but it is now back around my entry point. I’ll let you know how both of these turn out.

I was happy to come home to see that I had gotten filled on my EUR/JPY trade this morning at 159.59 and that it was already 25 pips in the black. The more I look at this setup, the more I’m liking it. Looking back over the past year, NEVER has price been above the 10 EMA by 50-75 pips and a correction not taken place, just look what happened the last time!

Add to taht the MACD divergence with the RSI & ADX rolling over and I’m very optimistic. But that’s really all I can say at this point. I have my stop in place and am really just in wait and see mode. If it does roll over and touch the 10 EMA, then I’ll adjust my stop to just under the 160 range and have to decide whether or not I want to take half off of the table.

I’ll let ya know.