finding a pattern and placing it in the intermarket circle of life …

Update: looks like the level has held so pay attention to FXI in the coming days.

1/8th subdivisions of SRC appears to have worked

1/8th subdivisions of SRC appears to have worked

DEFINITION (BART’s) for the circle of life – fixed income, FX, equities (global and conus) and commodities and their symbiotic relationship.

in this case, we have a BUY pattern coming in a little lower on the AUSSIE vs the USD.  The following three charts show how you can diligently walk thru finding a pattern by projection, extension and retracement.  Here’s the flow in chart form:

retracements

retracements

extensions

extensions

projections

projections

as you can see above, after a rather strong move up –  after quite the beating  – we have a normal/controlled and pretty unremarkable pull back in the AUSSIE vs the USD. I say all that because this can sometimes be a rare occurrence. My specialty is the SPOT FX market … I like to call it the wild wild west.  That being said, the patterns do work in this 3-4 Trillion Dollar/Day market.

An opportunity is simply presenting itself to manage risk. NOTHING more and/or nothing less.  The pattern works or it doesn’t.  Our job is to find these type of patterns and determine, beforehand, how much we are willing to risk.  Because, in this world of investing/trading the ONLY thing we can control is how much risk capital to deploy.  After we have entered the market, we are playing w/ dynamite being thrown by caged gorilla’s and, guess what, we are in the cage…

now, seeing this very nice level, we can now put this into the context of the intermarket world … perhaps you are aware and/or perhaps not but the AUSSIE’s do a lot (OK, probably a majority) of their trade w/ CHINA.  Now, take a look at the correlation of FXI (ETF for CHINA LARGE CAP) and AUSSIE vs USD.  Pretty nice and, it’s safe to say, by looking at the chart below that nice swings occur when both of them find inflection points.

so, what can we surmise …

IF AUSSIE level holds and the AUSSIE goes UP vs the USD then the Chinese market should follow higher …

IF AUSSIE level FAILS and the AUSSIE goes DOWN vs the USD then the Chinese market should follow lower …

Aussie and the FXI plotted together ...

Aussie and the FXI plotted together …

advanced pattern recognition in the intermarket circle of life ….

rock on, always

B

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