Using Big Mac's to Trade Currencies: Big Mac Index

Think valuing currencies across the Globe is difficult? Consider the Big Mac Index:

 

Other links:

http://www.economist.com/markets/bigmac/

http://www.oanda.com/currency/big-mac-index

http://en.wikipedia.org/wiki/Big_Mac_Index

 

While currencies over time will lean toward purchasing power parity, keep in mind any move may take more time than anticipated. Using the index alone may lead someone to blindly enter a trade and be completely early, and therefore wrong. In summary, continue to do your homework, hopefully with a Big Mac near by.

 

Cheers.

Salvador Lara, Head of Education and Research

*There is a subtantial risk of loss trading futures.  Past performance is not necessarily indicative of future results."

 

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We await jobless claims and home sales - turn of the tides?

Hello All,
 
Stocks fizzled out today and Gold once again hit a new high as treasury yields slumped.  The most notable move of the day was in the Euro as it continued its 2nd day surge higher.  If the dollar is being slammed so hard, one would expect Gold to have cracked $1300 easily by now given the action in the Euro.  But flight to safety is being divided between various currencies, treasuries, and metals all with different weights.  In my opinion a true barometer of market health is the black gold, crude oil.  After receiving DOE data that we had a surprising build of 1 million barrles, the market was met with heavy resistance.  Folks, keep in mind that this build was in light of having the Enbridge pipeline shut down for a week.  And we still had an increase in supplies.  Economic growth is definitely slowing, and as I've been noting for the past couple of weeks, government intervention or notions to intervene will send these markets out of whack.  We have jobless claims tomorrow expecting 450k along with housing sales to be at 4.1M.  I would expect strong housing data which would strengthen our dollar, but weaker than expected jobless claims which would add pressure to stocks.  Nothing but more 'mixed' data, and we'll make the best of it.

1)  Sell Dec. Emini S&P at 1137.25, with a 1146 stop.  Exit near 1115.
 
2)  Hold Dec. Gold shorts from 1296.7, with a 1307.9 stop.  Exit 1265.
 
3)  Hold Nov Crude shorts from 75.72, with a 75.72 break even stop.  Exit near 72.
 
4)  Euro - stand aside.  Resistance is up above at the 1.35-1.36 region, but this is simply a blow-off before we come to our senses.  The market can remain irrational longer than we can retain our sanity or our pocketbook, so we'll hold out before initiating another short.

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Best,

Arman Vahdatinia
Futures & Options Strategist
1-877-338-EXPO [3976] ext. 25
www.ExpoFutures.com
 
*There is a subtantial risk of loss trading futures.  Past performance is not necessarily indicative of future results.

Fed announcement and the aftermath. Stocks, Dollar/Euro, Gold, Crude.

Hello All,
 
The Fed leaves rates unchanged and based on deflation concerns is ready to accomodate the economy as deemed necessary, but did not announce further quantitative easing.  Which basically means they're ready to print more dollars and continue purchasing debt, which dropped a ton of bricks on the dollar.  Inversely Gold and the Euro rallied to new highs, and the foreseeable stimulus helped push stocks up to break the previous' days highs and take out some stops.  Although stocks actually ended the day lower, we have to to note the action prior to the Fed announcement.  Housing starts climbed to a 4 month high with expectations on new construction at 550,000 houses, but it actually came in at 598,000.  This fact alone provided the data necessary to pressure gold bugs to take some off the table prior to the Fed announcement.  The one sector that we do need to see strength in for the basis of a recovery is housing, which ultimately would be bullish for stocks.  No matter which way you dice is, the result is dollar negative and positive for stocks and as contrarian as I am, that just seems to easy of a trade.  The Fed hasn't necessarily acted, just left the door open, which I thought was already the case and should have been baked into the cake.  We'll have to wait and see if there is follow through of the days trend, or if we'll get a reversal on Thursdays full moon.

1)  Sell Dec. Emini S&P at 1148, with a 1157 stop.  Exit near 1120.
 
2)  Sell Dec. Euro at 1.3324, with a 1.3357 stop.  Exit 1.3164.
 
3)  Sell Dec. Gold at 1296.70, with a 1307.90 stop.  Exit 1265.
 
4)  Sell Nov Crude at 75.72, with a 76.45 stop.  Exit near 72.
 
Best,

 
Arman Vahdatinia
Futures & Options Strategist
1-877-338-EXPO [3976] ext. 25
www.ExpoFutures.com
 
*There is a substantial risk of loss trading futures.  Past performance is not necessarily indicative of future results.