September 2003

US Dollar

Watershed Events – Events that happen geopolitical or natural that can change the course of economic trends. Such an event may have occurred on September 22, 2003. The group of seven economic powers (G7) was meeting in Dubai to discuss coming events. After the meeting the US dollar dropped dramatically and the Japanese yen rose to the highest level in 2 years. All currencies rose against the dollar including the Hong Kong dollar which has been pegged “stabilized” at 7.7 Hong Kong dollar for many years. This price action in all currencies will be followed closely over the next few weeks because it is what moves the markets! To quote Linda Raschke, “Money makes the mare go round”.

The charts of the US dollar and the Japanese Yen depict the size of the price gaps and the patterns. Price action following gaps is interesting to watch especially in the case of a “breakaway gap”, which is a gap that occurs out of a consolidation area. These markets are not for everyone, in fact less than 2% of all traders should ever get involved in currency trading because the leverage offered is highly speculative – and they trade many times the value of the stock market each day and at any hour in the day. Knowing how money is moving from one currency to another (and in what asset class) may sometimes give clues to stock market direction.

Japanese Stock Market

Overnight news of the G7 meeting sent the Nikkei Dow down nearly 5% in one day, its strongest one day dip in over a year. The move was related to the Japanese yens appreciation in world markets. Economic theory suggests as currencies go up – the countries goods cost more so earnings go down, at least that’s the theory!

The Nikkei was at major Fibonacci resistance near the 11,000 level after rising more than 40% since the butterfly bottom at 7700. We continue to feel that our “Trade of the Year – 2003” is still in an emerging new bull market and this may be just normal corrections.

A Note on Market Information

Bloomberg Financial gave an interesting market statistic recently. It seems they tracked the stocks that had the largest number of buy and sell recommendations. Amazingly, the stocks with the most sell recommendations outperformed the buy recommendations by a whopping 50%! These statistics were valid in both bull and bear markets. Further evidence that the news does indeed follow the trend.

Astro Cycles

Shortly after I began publishing Astro Cycles I was invited to appear on the Ira Epstein television show. It was one of those periods where many astrological events were culminating at one point in time. The television show went very well and, as luck would have it, I was invited back for another session a few months later.

During preparation for the show I had a chance to talk freely with Ira about many aspects of the commodity and investment areas. He is exceptionally cordial, honest and very intelligent and operates one of the best full-service discount brokerage companies in the world. He openly admitted that he was skeptical of the astrological approach to speculation, but did agree that it was another form of cycles that might have some use. He then made the remark that his father-in-law told him to “always buy stocks on Rosh Hashanah and sell them before Yom Kippur.” I just acknowledged the idea and assumed it was another adage similar to the “voice from the tomb”.

One of my old friends and customers from my days at Drexal-Burnham-Lambert was Rabbi Jerry Fisher. I gave him a call to wish him a pleasant holiday for the Rosh Hashanah period. It was then that Jerry mentioned to me that this period is based on the lunar cycle of the Hebrew bible. Rosh Hashanah begins on a new moon (Sun conjunct 0 degrees Moon) and continues for eight days. That immediately got my attention! Jerry sent me the dates for Rosh Hashanah and Yom Kippur for the past 20 years and, using the Astro Analyst program, I plotted the days on the charts and noticed market turns near these lunar dates. They were short term changes unless accompanied by larger planetary pairs.