Tuesday, May 4, 2004
Issue Contents:
| 09:32 | Canadian Index Review Including an ETF strategy. |
| 10:20 | Focus on Gold Time to buy? Or lighten up? |
| 13:55 | Pre FOMC Announcement The Plan. |
| 14:30 | No Change FOMC Statement |
| 16:16 | TrendVue Active Trader Today's transcript. |
| 16:16 | TrendVue Trader Talk Today's transcript. |
Here are the broad market indexes on the TSX:
Of the broad Canadian indexes, perhaps the TSMC S&P/TSX Canadian MidCap index is the most interesting as Monday delivered an inside day right at a test of a prior swing low.
Secondly, Nortel is not in this index and thus its mood won't affect this index to the same degree. And thirdly, there is an ETF which tracks this index:
My strategy for this will be to buy on a break of the high of the inside day, above 57.40, sometime after the open. I may consider waiting until the FOMC meeting has release its statement at 2:15.
XMD-TC trades a little thinly - I am only interested in using this vehicle if it appears that a move up from this test of bottom is highly likely to transpire. I'll use the indexes intraday to come to that conclusion.
Gold futures are up today pushing price above a test of bottom established on the daily GC Gold Contract.
We also have seen three quick pushes down in the relevant indexes, the TTGD:TSX and $HUI AMEX Gold Bugs Index. Its likely that this move up is largely due to technical trading and simple price exhaustion, given the rapid move down since the start of April. Just look at how Gold has fared on this percent change chart comparing Gold and other sectors and broad indexes:
The question du jour is whether the Gold Contract will hold above this test of bottom or not, and whether a move up here should be used to initiate new positions, or to lighten existing positions if investors have ridden the Gold complex all this way down.
We know that the price of Gold is inversely related to the fortunes of the US Dollar. While the dollar has been moving up against other major currencies for several months now, today there has (so far, prior to the FOMC announcement) been a number of 1%+ moves in currencies against the dollar including the Euro, British Pount, Swiss Franc.
With the upcoming 2:15 announcement from the Federal Reserve we will have both currencies and Gold to watch to determine how long lived this move up is likely to be.
Prior to the FOMC announcement, we do nothing - no new positions are entered in this period.
It seems that markets are poised for a move up, simply waiting for the FOMC headline to come across the wire at 2:15pm. You will find the text of the announcement posted on the Federal Reserve website at that time.
Let us add a note of caution to this seemingly optimistic picture - in the past we have seen markets test either side of the current price range by 10, 20, 30 points or more in Nasdaq futures and a relevant amount of swing in SP500 futures. During these wild swings - which typically start in the minutes immediately prior to the FOMC release - many traders loose thousands as stops are run quickly in illiquid markets. Very often, the initial move is exactly wrong, and the market quickly reverses to the confoundment of many.
Despite this being a regular phenomenon, people insist on trying to game the FOMC release time and again. There is always time, and always another trade to be had - its not our job to capture the exact bottom tick or the exact turn of the market, and clearly intiating a new position during the insanity of the FOMC news release shifts risk up the scale considerably.
Instead, sit back and watch the spectable from a position of safety - and we'll look for opportunities to arise post-news release.
Active Trader and Strategies for Sucess subscribers - if you are able to visit the TrendVue Trader Talk forum at this time, there will be plenty of analysis and commentary taking place in real time once the news is out. / Mike
Here is the text of the FOMC statement, released after today's meeting of the Federal Open Market Committee:
Federal Reserve
Release Date: May 4, 2004
For immediate releaseThe Federal Open Market Committee decided today to keep its target for the federal funds rate at 1 percent.
The Committee continues to believe that an accommodative stance of monetary policy, coupled with robust underlying growth in productivity, is providing important ongoing support to economic activity. The evidence accumulated over the intermeeting period indicates that output is continuing to expand at a solid rate and hiring appears to have picked up. Although incoming inflation data have moved somewhat higher, long-term inflation expectations appear to have remained well contained.
The Committee perceives the upside and downside risks to the attainment of sustainable growth for the next few quarters are roughly equal. Similarly, the risks to the goal of price stability have moved into balance. At this juncture, with inflation low and resource use slack, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured.
Voting for the FOMC monetary policy actions were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.
Today's transcript.
Click on the title above to expand this document.
Today's transcript.
Click on the title above to expand this document.