01-18-2018: March British Pound: Clearing Brexit Uncertainty

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Introduction
Intermarket
Parabolic

Nirvana
News
Point & Figure
Cyclic/Seasonal

Internal Progrm
Third System
Margin

Historic Range
Commitment
Volatility

Random Chart
Options
Calendar Spread

Level Table
Other Factors
Recommendation

1     01

2     3

4     5

6     7


Introduction

The British Pound exchange rate some time back collapsed when a vote to exit the Europen Common Union passed. There were issues such as current establishment of London Financial Exchanges which might have to be moved and possible erection of tariffs and other trade barriers that could negatively affect British economy. Recently it appears many of these issues will be settled without the dire consequences earlier predicted and that has started a push in the Pound back up to former heights retracing the Brexit fall.


Intermarket Analysis

We fed the British Pound, Canadian Dollar, and Australian Dollar into a neural network to get the following result:




Parabolic Chart

March British Pound:

Parabolic Chart


Nirvana Chart

March British Pound:

Initial Chart


News Analysis

The Pound has been able to overcome domestic political problems to reach a new 3-1/2 month high. Recent UK economic data has seen mixed results,but having the latest CPI at a 3.1% year-over-year rate looms large compared to U.S. consumer inflation readings.

It is believed the Pound Sterling would surge further if a second referendum on EU membership were announced, and hedging against such an unexpected outcome is therefore considered wise by some. Signs point to a softening in the state of playi around Brexit. A small band of influential lawmakers in the European Parliament are reported to be considering watering down legislative proposals related to clearning houses which could mean negative impact to the City of London caused by Brexit is diminished. Attempts to force London's clearing houses to move into the Eurozone would hurt both the E.U. and the U.K. This would cause a major disruption to Europe's financial architecture.

The Sterling posted its biggest jump in four months on a media report that the Netherlands and Spain were open to a deal for Britain to remain as close as possible to the trading bloc crushed short positions. Officials from the Spanish and Dutch finance ministries denied the report and siad there was no new agreement between the countries on how Britain should leave the EU. Some investment banks are saying the Pound is undervalued by 10%. Any Brexit transitional deals should lift the Pound higher.

The rally in the Pound may be drawing to a close as speculators take profits after a more than 5%rally since early November unless economic data improves markedly.

According to "Trading Economics", the Pound is expected to retreat to 1.35 to the Dollar by the end of the 2018 First Quarter. This would be based upon a least squares line drawn through prices starting in January, 2017.

The three main forces affecting the British Pound futures are the British economy and Brexit consideations, British politics and uncertainties related thereto, and an inverse relationship to the U.S. Dollar, in that order.

Expectations for inflation in the UK have slowed for year-on-year readings, which could trigger Great British Pound turbulence. German inlation rate data is imminently coming out which could affect restrained Pound vs. Euro trading.

Summing up indications from variousnews sources, it appears the consensus is that the Pound will rocket this year as Brexit uncertainty clears.


Point & Figure Chart

139.0I                                                                  T  1/12
     I IMM - Mar-18 British Pound, 62.5Kpd, $/pd   Cm.=0.05  Lim.= 3.8
     I
     I
     I
137.5I_________________________________________________________________________
     I                                                                X
     I                                          X                     X
     I                                        X XO                    X
     I                                        XOXOX                   X
136.0I________________________________________XOXOXO________________X_X________
     I                                        XO OXO                XOX
     I                                        X  O O          X X   XOX
     I                                        X    O          XOXO  XO
     I                                        X    O          XOXOX X
134.5I________________________________________X____O__________XOXOXOX__________
     I                                        X    O          XOXOXOX
     I                                        X    O        X XO OXO
     I                                        X    OX       XOX  O
     I                                    X   X    OXO  X   XOX
133.0I____________________________________XO__X____OXOX_XO__XO_________________
     I                                    XO  X    OXOXOXO  X
     I                                    XO  X    OXOXOXOX X
     I                                    XO  X    OXOXOXOXOX
     I                                  X XO  X    OXOXOXOXOX
131.5I__________________________________XOXO__X____OXO_O_OXOX__________________
     I                        X         XOXO  X    OX    O O
     I                      X XO      X XOXO  X    O
     I                    X XOXOX     XOXO O  X
     I                    XOXOXOX     XOX  OX X
130.0I__________________X_XOXO_OX_____XOX__OXOX________________________________
     I                  XOXO   OX     XOX  OXOX
     I                  XOX    OX     XO   OXO
     I                  XO     O O    X    OX
     I                  X        O  X X    O
128.5I__________________X________OX_XOX________________________________________
     I      X           X        OXOXOX
     I    X XO          X        OXOXOX
     I    XOXO          X        O O OX
     I    XOXO          X            O
127.0I____XOXOX_____X___X______________________________________________________
     I    XOXOXO  X XOX X
     I    XOXOXOX XOXOXOX
     I    XOXOXOXOXOXOXOX
     I    XO OXOXOXOXOXOX
125.5I____X__OXO_O_OXOXOX______________________________________________________
     I  X X  O     OXO O
     I  XOX        OX
     I  XOX        OX
     IX XO         OX
124.0IXOX__________OX__________________________________________________________
     IXOX          OX
     IXOX          OX
     IXOX          OX
     IXOX          OX
122.5IX_X__________O___________________________________________________________
     IX X
     IX X
     IXO
     I
121.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
                                                    11111111111111111
       1111112222222333444455555666666677778889999990000011111122222211
       1112230011122123011200112001112201220230122220122301112200011211
      02783712706737580429745186192240373053811800129736020348857835912
The above chart is giving a conventional buy signal.


Cyclical and Seasonal Factors

We are headed toward a cyclical low and a seasonal down period.

Cyclicals Cyclicals Seasonals
Seasonals


Internal Program

Our best-performing internal program is "Pattern." It is giving a weak buy signal.

Internal Printout 1 Internal Printout 2

Results of "Pattern" for British Pound (blue lines = successful trades, red, unsuccessful): (Always in the market.)

Results

A second internal program is "Thrust" which is giving a sell signal.


Third System Confirmation

Our third system is working on a longer term sell signal. (Note, disregard the year on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)

Third System


Margin

The point value is $625. Initial margin on a single contract is $2,178. Use of options is advised.


Historic Range

Scale trade buyers are entering the market for the long term in this price range.

Historical Chart


Commitment of Traders

Commitment 1

In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Blue is small speculators. Red is large speculators. Green is commercials. Large speculators with the best track record are getting increasingly-long.

Commitment 2

Interpretation of a Different Site Below (Their trader categories vary from ours):

Commitment 3


Volatility / Probable Range

FB 1 FB 2

The average volatility shown below suggests that an uptrend remains intact from the last volatility low point.

Range/Volatilitiy Chart


Possible Future Prices

Random Chart


Option Recommendation

Our option trade recommendation is to Buy (1) British Pound June 1.36 Put and Sell (1) British Pound June 1.39 Put @ 0.012352 to sell side or grreater.


o 1 o 2 o 5


Calendar Spread

What the Mar. - Sep. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down in the long run. This disagrees with our ultimate conclusion. The best time to enter or leave the above spread is when it is at -0.70 or narrower buying the far as prices are rising and then selling the near, and exiting or entering when it is at -1.50 or wider selling the far as prices are falling and then buying the near. At this time, we appear to be headed toward the buy the far, sell the near point.





Level Table:

Level Table

The path of least resistance is down by our pimary measure below, but up on the Steidlmayer Market Profile chart below..
140.0|                                                                  T  1/12
 IMM - Mar-18 British Pound, 62.5Kpd, $/pd   Cm.=0.05  Lim.= 3.8
     |
     |
     |
137.5|_________________________________________________________________________
     |[   <<<
     |S[
     |RSSSS[
     |RSSSSSSZZZZZ[
135.0|RSSSSSSXXXXZZZZZZ[_______________________________________________________
     |RSSSXXXXXXYYZ[
     |RSSSTXXXXXXYYYYYYYZZ
     |RRTTWWXXXYYYYYYYY
     |OORRRTTTTTUUVVVWWX
132.5|OOOORRRRRTTTTUUUUVVVWWWWX________________________________________________
     |OOOOPRRRRTTTTTUUUUUUUUVVVWWWW
     |NNNOOOOPRTTTTUUUUUVVVVVVVWWWW
     |JJJJNNNOOOPPPRRTTUUVVVVVWW
     |HHJJJJJJKKMMMNNOOPPPPPRTVV
130.0|HHHHHHHHJJJJJKKKKLMMMMMNNNNPPPPPQRR______________________________________
     |GHHHHJJJKKKKKKKMNNNNNPPQQQQQQQRR
     |GGGGGGHKKKMMNNPPPQQQQQ
     |GGKKLLLLLMQQQQ
     |BGLLLLLLLMMM
127.5|ABBGLLLLLMM______________________________________________________________
     |AAABBBEGLL
     |AABBBBBCCEFFGGG
     |AAABBBBBBBCCCCCCCEEEFFFFGGG
     |AABBBBCCCCCCCCDEEFFFFFFFFFG
125.0|AAABCCCCDEEFFFFG_________________________________________________________
     |AAAABDEEEEFF
     |AAAADDEE
     |ADDDEE
     |ADDDEE
122.5|ADDDDEE__________________________________________________________________
     |AE
     |A
     |A
     |
120.0|_________________________________________________________________________
     |
     |
     |
     |
117.5|-A-B-C-D-E-F-G-H-J-K-L-M-N-O-P-Q-R-S-T-U-V-W-X-Y-Z----|----|-- TPO= 0.029
                                           1 1 1 1 1 1 1              
       1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 0 0 0 1 1 2 2 1           1
       1 3 1 2 1 2 1 2 1 2 0 2 0 2 0 1 0 1 0 1 3 1 2 1 2 1           1
       7 0 3 8 4 8 1 6 0 4 8 2 7 1 4 8 1 8 2 6 0 3 8 2 7 1           2


Other Factors

Multiple Chart Indicators Summary
Multiple Chart Indicators Summary


Here's an intraday chart for a previous day ( 7/11 ).

Intraday Chart


                 Risk Versus Opportunity Report
                ________________________________

                 BPH8    March British Pound

                      High Price:  141.38
                   Current Price:  137.64
                       Low Price:  135.78

                            Risk:  0.027
                     Opportunity:  0.054

                    (O/R) Ratio =  2.011


Overall Recommendation

Decision Weighting Factors
FactorsWeighted Points
Inter-Market Analysis + 1
Parabolic Chart + 1
Nirvana Chart + 1
News + 1
Point & Figure + 1
Cyclicals - 1
Seasonals - 1
Internal System 1 + 1
Internal System 2 - 1
Third System - 1
Historic Range + 1
Commitment of Traders + 1
Range/Volatility + 1
Level Table - 1
Other Factors + 1
Total + 5
Place 6 March British Pound on a Buy Watch with stoploss @ -3.55 below the get-in point when recent price is represented as "131.00".
____________________________________________________________________________________________________________________________________________C.T.