Dollar Sobers Up Despite Fed PunchBowl

Asad, don't you think fundamentals also has a herd effect? I think so many in the business and investment classes transmit their information from the business papers and channels, that the same explanations occur--feeding a herd cycle. A classic one is "gold is going up because of fears of inflation". I really doubt that there will be inflation, but if you get enough people to jump on board, who cares what the official rationale is? What about the old dutch tulip boom? Or our last housing boom (housing has never gone down! was the rallying cry). I agree that having a fundamental understanding will probably give somebody the heads up or the edge, but I also think that many of the official fundamentals narratives misses whatever key components it needs to miss in order for there to be a collapse.

My fundamentals story is that there is a shrinking amount of space for private investment, at least the type of investment that can create massive employment. If this triggers enough social backlash, then all bets are off. You have periods of business dominance in history. But you have periods of major statism (the last great depression being a case in point) where the state has distinct advantages at answering where the private sector has difficulty answering.

ashraf, I was in the Hamzei room earlier this month, you want to talk about hedging. If Fari didn't see the ES moving his way, he would start hedging with the NQ. Then when he thought he saw a turn, remove the hedge. That being said, you need one Big Bankroll. It was too much for me to stomach. Happy New Year!

i dont see the point in hedging my bets if i am sure the market will move in my favour. what is the point in hedging otherwise? I wont make anything! A hedge would be a decent negatively correlated asset! For example, it was obvious that dollar index and gold are currently good hedges but why would i go for both if im sure that dollar would go up or down? i would make on one and lose on the other which would be rather silly i guess. hedgin is more likely to be useful on short term trading which i do not do. I guess you could hedge by buying options but that costs and is good as insurance but only if i have doubts.

Slightly off-topic for this thread perhaps, but since the market is relatively quiet at this time, and we seem to be in a discursive mode:

With all this talk of parity, what do people think about the possibility of EUR/GBP parity some time in 2010?

It almost happened in 2009 (and I was surprised it didn't become established).

Also, unrelated, I have been wondering where to ask this question, and in a discursive mode again, and because it is relatively quiet, what do people feel is the balance between fundamental and technical in their own trading?

I ask because I tend to think of Ashraf's approach as being mainly fundamental, but from time to time he makes some strong technical points, and he is usually pretty accurate.

However, in my own mind and my own trading I can't quite reconcile these two approaches. Just to say where I am coming from: I've been trading (spread-betting) for about 2 years, in a fairly small way. Like most people I began to learn TA, and went through the whole multiple indicator experience, eventually ending up with a minimal-indicator, price-action approach, pretty well ignoring fundamentals. I then realised that I was missing something by ignoring fundamentals, and began to try to learn more about how the market worked and how all the currencies, commodities and the stock market fitted together. Clearly Ashraf's approach has helped enormously with trying to understand all that. (I have the book and workbook). However, once I got into fundamentals, I tended to find myself deprecating technicals altogether, which I see is NOT the way Ashraf works.

And now I'm unsure how much weight to give each approach.

Just to elaborate further, I've read some market analysts who seem to have a lot of knowledge of the market who have (at best) deep reservations about TA, even about such cornerstones as support and resistance.

So why, for example, if we believe that it's really fundamentals that drive the market, why on earth should we believe that some historical level from the past should have any bearing, whether as support or resistance, in the future? This is my dilemma.

The only answer I can come up with is the old "self-fulfilling prophecy" one, but I don't think it's all that satisfactory.

I would be interested to read anyone else's thoughts on this.