02-24-2008: March Swiss Franc: Safe Havens Found There
We try to remind readers and ourselves that the standard foreign currency commodity contracts are denominated in U.S. Dollars. Therefore, what the U.S. Dollar is doing is key in all of them. Right now, the Dollar is the most shunned of all the major currencies by foreign investors. The economic situation in the U.S. looks weaker than in the rest of the world. While other foreign banks worry about inflation, our highly-politicized and mis-managed Federal Reserve caves in to Wall Street and lowers interest rates in order to "stimulate" the economy. This and a "stimulus" package passed by Congress are ridiculously ineffective in staving off recession, and may actually be contributing to it by weakening the U.S. Dollar even more. A weak Dollar encourage repatriation of foreign capital that was looking for a safe haven here, and now finds it elsewhere, such as in the Swiss Franc. Traders who formerly sold low-yielding currencies like the Franc and the Yen are now considering that "too risky."
It is often brought up in presidential debates how our nation is deeply indebted to the Japanese and Chinese who are buying U.S. Treasury obligations. What is not often brought up is the fact that as these investors are losing heavily on their investments, they may decide to pull the plug on them. Our mis-managed economic "leaders" who continue to appease large corpoprations who want to increase exports are doing everything backwards resulting in weakening the Dollar and encouraging the repatriation of capital scenario even further. When we can't borrow any more, it will be "payback" time, and we will be paid in worthless U.S. Dollars with the Treasury printing presses running overtime to print up even more of them. Or as Gresham said, "Bad money drives out the good."
March Swiss Franc:
March Swiss Franc:
Swiss economic reports are flashing a new inflation warning. This makes it almost certain the Swiss National Bank will not cut interest rates, giving support to the Swiss Franc. Meanwhile, the U.S. financial system problems continue to weaken the U.S. Dollar against other major currencies. Consumer prices rose 2.4 percent from a year earlier in Switzerland in January, the highest rate of inflation since December, 1993. Prices for oil, milk, and wheat there are soaring. Swiss consumer confidence declined to its lowest in more than a year. Speculation is that the Fed will drop the overnight rate another 50 basis points in March. This follows a decline in manufacturing in a report released by the Philadelphia Federal Reserve branch. The Euro, British Pound, and Swiss Franc are all up against the Dollar. The credit crunch is spilling over to the manufacturing sector, giving it a 6-year low on the Philadelphia Index. Concerns are increasing that the U.S. will ultimately face a recession. Last week a surprise increase in U.S. retail sales data pushed low-yield currencies like the Swiss Franc and the Japanese Yen down. U.S. Treasury Sec'y Paulson said turbulence in U.S. financial markets is both "serious" and "persisting." He expects continued volatility. This was the main focus of a recent G7 meeting rather than trying to pressure China to revalue the Yuan. Cross trading, selling currencies with lower interest yields, abated as it was considered "too risky" in this environment and that helped the Swiss Franc and the Yen. It did not help the higher-yielding British Pound, however. Exchange traded funds have revolutionized to some extent the way foreign currencies are traded and allowed investors to diversify over several different currencies. But the consensus is that almost any foreign currency is a better investment than the U.S. Dollar at this time. This comes from the conclusion to "stick with the trends." As fears of a U.S. recession mount, risk adverse investors fly to the Swiss Franc.
105.0I T 2/22
I IMM - Mar-08 Swiss Franc, 125000 fr, $/fr Cm.=0.03 Lim.= 1.2
I
I
I
102.5I_________________________________________________________________________
I
I
I
I
100.0I_________________________________________________________________________
I
I
I
I
97.5I_________________________________________________________________________
I X X
I XOX
I XOX
I XOX
95.0I__________XO__X__________________________________________________________
I X OX
I X OX
I X OX
I X OXO
92.5I__________X__OXOX___________________________X____________________________
I X OXOXO XO
I X OXOXO XO
I X OXOXO X XO
I X OXOXO X XO
90.0I______X___X__O_O_O________________________X_X____________________________
I XO X O X X
I X XO X O XOX
I XOXOX X O XOX
I XOXOXOX O X XOX
87.5I____XO_OXOX______O__X_________XO__________XOX____________________________
I X OXOX O XO XO XO
I X X O O O XO XO X X
IX XOX O XO XOX XO X
I OXOX O XO XOXOX XO X
85.0I_OXO_____________OX_XO________XOXOXOXO__X_X______________________________
I O OXOXOX X X XO OXOXOX XOX
I OXOXOXOXO XOX O OXOXOXOX
I O O OXOXOX XOX OXOXOXO
I O O OXOXOX OXOXOX
82.5I_________________________OXOXOX____OXO_OX________________________________
I OXOXOX O O
I O O OX
I O
I
80.0I_________________________________________________________________________
I
I
I
I
77.5I_________________________________________________________________________
I
I
I
I
75.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
11 111111 11 11
4455567788922123457789000122124577891225789122
1201110202302012101101012012000201001122011320
2140762164087451862913687420415677480571250085
The above point-and-figure chart is giving a conventional buy signal.
We are headed toward a cyclical low with no clear seasonal trend.
Our best-performing internal program is "Thrust." It is giving a buy signal.
Results of "Thrust" for Swiss Franc (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system is working on a long-term sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $1,250. Initial margin on a single contract is $1,350. Use of options is not advised.
Scale trade sellers are entering the market for the long term in this price range.
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. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are getting slightly more short.
The average volatility shown below suggests that the current trend up remains intact from a volatility low point.
We could find no options for this commodity.
Here's an intraday chart for the previous day ( 2/22 ).
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | + 1 |
| Nirvana Chart | - 1 |
| News | + 1 |
| Point & Figure | + 1 |
| Cyclicals | - 1 |
| Seasonals | 0 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | - 1 |
| Historic Range | - 1 |
| Range/Volatility | + 1 |
| Level Table | + 1 |
| Other Factors | + 1 |
| Total | + 2 |
Place 11 March Swiss Franc on a Buy Watch with stoploss @ -1.26 below the get-in point when the recent price is represented as "92.26" (for decimal placement.)________________________________________________________________________________________________________C.T.
