HLHB Weekly Update – May 21, 2010

PoD Chart

After a couple of weeks of inactivity, my HLHB system has finally started showing some life as a bullish crossover happened. I did not enter though because my signals did not line up! First, the candle following crossover candle didn’t rise 30 pips above the high (1.2599). And secondly, stochastics were already showing overbought conditions.

Still, my guts tell me that this might be a blessing in disguise since my HLHB system doesn’t take into account fundamentals or risk sentiment. Given my bearish outlook on the euro zone, I think this recent crossover to the top may give my system the chance to have a downward crossover next week!

Now.. moving on to my thoughts on the current market situation…

The last thing that I expected to happen this week was for the euro to strengthen against its counterparts. I mean, look how the euro seems did much much better compared to the comdolls!

It turns out that the euro is being propped up by two factors: the possibility of an European Central Bank (ECB) currency intervention and traders closing out their short euro positions. Earlier this week, recent data from Switzerland showed that the Swiss National Bank (SNB) intervened in the currency markets last month. Speculations that the ECB could do the same prompted traders to take it easy with shorting the euro.

But just the same, risk aversion continued to haunt the markets as debt contagion threatens to undermine global financial stability. According to a Fed official, this could give rise to much tighter credit conditions in the US, which could then hurt overall economic activity. Also, these concerns might force some central banks, such as the Bank of Canada, to delay their rate hikes further. I don’t think that bodes well for the Loonie…

In any case, I’ll be staying out of the market today see how all of these market themes play out. Thanks for checking out my blogs folks! You can follow me at MeetPips.com to see how well (or badly) I’m doing. Stay tuned for more updates!

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