Cognitive Dissonance – EUR/USD EU-phoria

Fear Rules !

Counter Intuitive Trading.

Spain 10Y yields gap above 6% !!!


Noooooooooooooooooooooo !!  BUY !

Spanish auction success !


Nooooooooooo !! SELL !

That was what I did.

I am trying out my new counter intuitive trading style now.

Tossing between QE and LTRO and now IMF, SNB, World Bank and EFSF. The fx markets are confused, frazzled and caught between central banks, high frequency trading and gamma hedges. Which basically leaves the poor retail guy just a little lost.

Not to worry. Different strokes for different folks.

We have European bank repatriation + IMF funding for EU vs SNB intervening in EURCHF then selling EURUSD.

IMF wins. Over USD 400 bio of EUR to buy in the weeks ahead.

FX traders do not care about the rest. They are just hunting for the next stop loss.

Does it really matter that people are jumping ship fast and credit concerns persist ? or that countries may be pushed off the edge to declare moratoriums ? and that the good news of the IMF war chest has not reached a single European shore ? and why do they call it a war chest of loans which will never be returned ? the Spanish, Italian and French auctions so far have been too good to be true, when will people start to question the results ?

Trading forex in cognitive dissonance and with counter intuition is perhaps one of the toughest thing facing a thinking mind. Yet, I will master it for its twisted logic.

Next week beckons. What should I do ?

I think its time to sell EURUSD. Things are looking good. The street is now long because real money is short and really, last week was pretty much like 90% short vs 10% long. Quite reminiscent of 2010 and last year, when nobody I knew in their right minds were long and yet it ran till nearly 1.50 and the time when everyone was buying at 1.25 (including me) before it crashed to 1.19.

This time round, I do not think trading positions will make up the bulk of trades. The fear factor is high.

Thus I will be looking to short on Monday, add on for every big figure and challenge it till 1.35 choke level.

The Amelia Earhart mystery may be unravelled soon,too, with a new search team this summer venturing to somewhere off the tip of New Zealand. Link.  

She was my fearless role model since I read about her as a child. From that, I will draw my strength for another week of cognitive dissonance trading.