Showing signs of nEUROsis? Here is what the Euro is telling usAug 10, 2012
Chad Karnes, CMT
Following the media for trading setups would make anyone crazy. Avoid the neurotic tendencies of the news and use real data and technicals to make trading decisions.
Someone with neurosis typically shows excessive anxiety and/or exhibits indecision with no real objective or identifiable reasons. Symptoms associated with Neurosis include insecurity, depression or irrationality.
The media seems to be the perfect example of neurosis continuously showing anxiety, indecision, and lack of evidence in their reporting. Check out these headlines from the same trusted source over the past few days:
- Optimism Drives Euro Higher – 8/6
- ECB President May Need to Apply Unusual, Even Emergency, Measures – 8/9
- Draghi Lays out Toolkit to Save Eurozone – 8/9
- The Euro Still has a Mountain to Climb – 8/9
First, it is optimism driving the Euro higher, and now it is time for emergency measures. Then on the same day we have a report that Draghi has laid out a toolkit to save the Eurozone, but yet there is also a mountain to climb. Talk about neurosis, indecision, and irrationality!
There is no way to make rational investment decisions using these news reports. Even if you tried you would be whipsawed daily buying and selling as the media repeatedly changed its mind about the future of the Euro.
One of the problems with the news is it often relies on opinions and rhetoric that is rife with conflicts of interest and statements made more for positioning and jawboning than for fact. We prefer to ignore the neurosis, and use factual and objective evidence to make trading decisions on the Euro (NYSEArca: FXE) and other investable assets such as the S&P 500 (NYSEArca: IVV), long term bonds (NYSEArca: TLT), and commodities (NYSEArca: SLV).
On 7/1 with the FXE at 125.88, in the ETF Profit Strategy Update we alerted subscribers that a wonderful short setup in the Euro was here: “First target for shorts is the red support line currently around $123.75. Traders can look at buying the EUO (NYSEArca: EUO) or the newly created EUFX (NYSEArca: EUFX) ETFs to short. Once again the risk is small, but reward potential is large. The mid and long term trends in the Euro remain bearish.” The $123.75 target was exceeded later that week.
In the chart below, published more recently on 8/5, the Euro (shown through FXE, its tradable ETF) is in a clearly defined downtrend and there is no reason at this point to think that downtrend has ended. On 8/5 with the FXE at 123.05 we posted an update for our subscribers that a good short opportunity on the Euro was present. Today the FXE is down to 122.24 and remains firmly in that downtrend. We also have identified price levels for our subscribers to place their stops as well as prices that would identify a more bullish trend change in the Euro.
The ETF Profit Strategy Newsletter filters through the overabundant, unhelpful, and neurotic media by using comprehensive technical analysis and data based decision-making techniques to keep us on the right side of the markets. A few times each week we update our subscribers on actionable high probability trading setups that also identify risks and profit targets like those of the Euro and its tradable ETFs.