111204 - The Week In Pictures

After being up 22% on the week last week with the new version of Watcher, it was only to be expected that this week would be less, possibly even finishing with account equity being lower, as we accumulate more losing positions.

 
On Wednesday central banks coordinated to reduce cost of liquidity swaps by 50 basis points. However, the Euribor-OIS 3-month spread, the rate at which Euro-zone banks lend unsecured funds to one another, closed at its yearly high. "For context, the last time the Euribor-OIS 3-month spread was this elevated and in an uptrend was in September 2008, right after Lehman Brothers went under".

US Non-farm payroll numbers turned out slightly positive, but the end of the week dollar rally (at expense of the Euro) was probably due to long positions being closed prior to the weekend. Hardly surprising given the 100 pip gap at the week's open (though this was a positive gap). With the Euro debt situation worsening (though see here) it seems like the market doesn't know which way to go.

Watcher closed a significant number of trades both at mid-week and at the close, finishing up an additional 12% (now 34% for the 2 weeks). Drawdown towards the 500% margin level was experienced, but this level was not breached. At one point, only 7 trades were opened, down from the week maximum of 17. Losing positions are less than 10% of equity at the close.

Looking at the heatmap, this is showing a shift in zones to a higher level (1.345 to 1.354) from the previous zone (1.328 to 1.34), with price now resting at the top of the original zone, as per my Wednesday prediction on StockTwits.

The long term view as shown by weekly chart (support lines in Green, Resistance lines in Red) is still negative.