Trading Street Magazine - January 17, 2015

Trading Street The World’s Premier Online Magazine Volume 1 Issue 2

January 17, 2015

Are the Saudis Hoisted on Their ‘Oil Petard’?

Page 42

The Case 12,500 Dow

for A Jones Index Page 19

The Collapse of a Financial Giant Page 58

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Table of Contents

Trading Street Magazine Is published FREE each month

Is It Time to Buy Black Gold?......................................6

By Tony Lopez - Development Director at TradeFoxX

How to Trade the RSI Using Machine Learning.........9

By Tad Slaff Co-founder/CEO, Inovance

Three Simple but Effective FX Tools to Help You Follow the Trend in 2015...................................................13

By Sam Barry - CEO LittleFishFX

The Case for a 12,500 Dow Jones Index....................19

By Shayne Heffernan Ph.D - CEO at Heffx

Is the Euro Bear Near Hibernation?..........................22

By Rick Ratchford - President, Amazing Accuracy

Artificial Intelligence, Machine Learning, and Big Data - How Do They Apply to Trading?....................39

By Justin Cahoon Co-founder/COO, Inovance

Publisher Trading Street, LLC Editor Timothy LuCarelli Business Development Bil Hoerter Marketing Ric Chappetto Contributing Writers Benjamin Lee Tony Wiedenheft Sam Barry Shayne Heffernan Tony Lopez Thierry Laduguie Rick Ratchford Tad Slaff Justin Cahoon

Are the Saudis Hoisted on Their ‘Oil Petard’? .......42

By Bill Hoerter of Trading Street

Technology: An Atomic Explosion Beyond Anyone’s Control..........................................................................47

By Tim LuCarelli

The 7 Killer Trading Mistakes That Doom Traders From Ever Becoming Consistently Profitable...........49

By Benjamin Lee - CEO Think Trade Think

Sentiment and Elliott Wave Analysis.........................52

By Thierry Laduguie - Chief trading Strategist, BetterTrader

Is the Forex Market Worth Trading?.........................55

By Tony Wiedenheft - President The Lions Den 4X

The Collapse of a Financial Giant..............................58

By Tim LuCarelli

For Subscription Information Please visit the website www.tradingstreet.co Contact Information 646-396-8108 info@tradingstreet.co Advertisements in Trading Street Magazine are the sole responsibility of the advertiser.

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ALL RIGHTS RESERVED ON ENTIRE CONTENT Trading Street Magazine is published monthly by Trading Street, LLC and is free of charge by viewing online. Reproduction of content, articles or advertisements, is strictly prohibited without the express written consent of the Publisher. All information is provided as is and has been checked for validity to the best the writers’ abilities. Any third party information has been reprinted with permission of the content owner and may not be reproduced from this publication without the owner’s consent.

Letter From the Editor

Here we are at the start of another new year. 2015 began with a flurry of technology announcements at the Consumer Electronics Show in Las Vegas with new innovations from extra sharp 3-D TVs to self-driving cars to futuristic 3-D food printers.

The first two weeks of the New Year proved to be very exciting in the financial world as markets were rocked by a currency devaluation and a continued drop in crude oil to six year lows. Stocks around the globe gyrated and interest rates continued to fall as global economic woes circulated.

Finding understanding amid the mayhem is what this magazine is all about. Our experts at Trading Street have once again been called upon to offer up their insights into the markets and how we can all profit from the movements. Read on as this week we explore energies, stocks and the currency markets. Our expert analysts look under the cover of the markets to shed light on the what’s, why’s and how’s giving their opinion for future market movements.

Please feel free to contact any of our experts with questions or us here at Trading Street Magazine to provide guidance. The intention of the magazine is for everyone to become better educated and consequently more profitable in their daily investments.

Thank you

Timothy LuCarelli

Page 4

Trading Street Magazine

January 17, 2015

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Trading Street Magazine

January 17, 2015

Page 5

Is It Time to Buy Black Gold?

By Tony Lopez - Development Director at TradeFoxX

2015 Prediction: The last time Oil fell to $35 a barrel was in 2009. The drop started in July 2009 from $147 a barrel and stopped dropping the end of January 2010 at $35 barrel.

On the chart are some pivot points from the bottom up $35 at the bottom Red line base in 2009 $50 Blue line base in 2008 $65to $70 Orange line base in 2010 $80to $85 Yellow line base in 2013 $90 to $112 Green line base in 2014 The selloff event happening now, January 2015, has the same timing patterns as in 2009, this time starting in July 2014. We are looking at hitting rock bottom at around $40 a barrel, even possibly dipping for a record low of $35.

Last month we predicted a bounce from the $55 barrel mark that never materialized, although there is tough resistance to reach the predicted $40 mark cur-

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rently. Crude oil is at $48 barrel as of mid January 2015.

Light Sweet Crude Oil (WTI) futures and options are the world’s most actively traded energy product. WTI plays an important role in managing risk in the energy sector worldwide because the contract has the: Most liquidity, most customers, and most transparency.

The financial crisis of 2008, along with the ensuing global recession, brought about the sharpest recorded decline in demand for crude oil.

Likewise, massive political unrest across the Middle East in 2011 has led to greater volatility and unpredictability.

In times of uncertainty, the market flocks to Sweet Oil, and steady increases in contract volume.

As crude oil markets continue to experience these changes, the value of hedging with Sweet Oil futures has never been greater.

On the right you can see future contracts into the

Trading Street Magazine

January 17, 2015

next few months are being hedged at current prices. Look at how many are hedging for June 2015 at $51 a barrel.

Locking cheap oil prices now just makes sense; current prices are all favorable as a long term investment.

Summary: Oil is going through a game changer. Price this year will cycle on the low side, but the low side is just around the corner. Any purchases now could be profitable long-term, but the risk could be a 7 point divergence. Do not expect $100 a barrel any time this year, but do expect $60 to $80.

NEW YORK (MarketWatch) — A well-known Saudi prince is making a big call on oil, saying that the $100-a-barrel threshold will never be topped again.

If you want to hold off for the $40 a barrel mark or possibly the $35 barrel mark you can but you want to buy before the price goes past the $48 barrel mark to get that extra edge.

As stated before no better time to buy Oil, all current prices are great for long term investment cashing in June to October.

Trading Street Magazine

January 17, 2015

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Trading Street Magazine

January 17, 2015

How to Trade the RSI Using Machine Learning

By Tad Slaff Co-founder/CEO, Inovance

T

he Relative Strength Index, or RSI, is one of the most common technical indicators. It is used to identify oversold and overbought conditions. Traditionally, traders look for RSI values over 70 to represent overbought market conditions and under 30 to represent oversold market conditions. However, is there any validity to these claims?

Why 70 and why 30? Further, how do different market conditions affect the RSI signals you should be looking for?

In this article, we will use a Support Vector Machine (SVM), a powerful machine learning algorithm, to explore what values of an RSI you should actually be looking for while taking into account the overall trend in the market.

First, we’ll give a brief overview of the SVM, then outline the problem, and finally build a strategy based off of the patterns discovered by the algorithm and test it on the most recent data.

“bearish” bars). The power of an SVM is being able to rearrange, or map, your data with a set of mathematical functions, known as “kernels”, into a multidimensional feature space where your data is linearly separable.

Support Vector Machines

The SVM then draws a line in the higher dimensional space that maximizes the distance between the two classes. When a new data point is presented to the SVM, it then calculates which side of the line the point falls and makes its prediction.

Support Vector Machines are one of the more popular and powerful “off-the-shelf ” machine-learning algorithms based on their ability to find non-linear patterns. SVMs work by finding a line, known as a “decision boundary”, or “hyperplane”, that best separates your data based on a class (in our case, “bullish” or

Another advantage of the SVM is there are relatively few parameters that must be selected before you are able to use it. You must decide on the kernel, or mapping function, as well decide on a parameter value to control the complexity of the decision boundary to reduce over fitting. Luckily these are well-researched areas with general guidelines to follow.

Now that we have a basic idea of how a Support Vector

Trading Street Magazine

January 17, 2015

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Machine works and how to select its parameters, let’s see if we can use it to figure out how to trade an RSI.

Trading the RSI

The relative strength index, or RSI, compares the average size of the “up” moves to the average size of the “down” moves and normalizes it between 0 and 100. The conventional logic goes that once the asset has had more, larger upticks, it has become overbought, or overvalued, and is likely to decrease in price. Overbought is usually determined by an RSI value over 70, with opposite conditions representing oversold, or undervalued, at an RSI value below 30.

H

owever, these conditions don’t happen in a vacuum. There are also broader market trends at work.

An RSI value over 70 in the middle of a strong uptrend might represent a continuation of the trend while a value of 70 during a downtrend could signify a great entry point. The problem is finding out exactly what conditions we should be looking for considering both factors.

We could gather thousands of data points and try to find those relationships ourselves or we could use a Support Vector Machine, an algorithm designed to find non-linear patterns, to do the legwork for us.

Building your Model

Let’s use the difference between the open price and a 50–period simple moving average (SMA) to define the direction and magnitude of a trend. When the

price is above this 50-period SMA it is seen as a bullish trend and when it is below we see this as a bearish trend. The benefit of using a machinelearning algorithm is that it will objectively analyze our data to see whether this conventional wisdom will hold up.

MachineLearning Algorithms Black-Box Trading

So now we will use our support vector machine to find the relationship between a 3-period RSI and the distance between the open price and 50-period SMA to predict the direction of the next bar.

We will use AUD/USD currency pair on 4-hour charts from January 1st, 2011 to June30th, 2014 to build our model and from July 1st, 2014 to January 9th, 2015 to test how well the patterns we found hold up over new data.

Instead of just using these machine-learning algorithms to trade on their own (known as a “black-box”), we can look at the patterns the support vector machine found to derive our own rules.

I

nteresting! We can see two distinct spots where

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Trading Street Magazine

January 17, 2015

the algorithm found short opportunities and two major areas to go long. We selected the areas with the highest concentration of long and short opportunities.

Creating a Strategy

Let’s use those patterns to now build our strategy.

Now let’s test to see how well those patterns held up new data. Using a simple expert advisor (EA) in MetaTrader 4 using a basic 1:1 risk-to-reward ratio and without any further optimization, we were able to achieve over 62% accuracy, return almost 10% with only 3% max drawdown and achieve a fairly smooth equity curve.

Conclusion

Using a Support Vector Machine, a powerful machine-learning algorithm, we were not only able to learn under what conditions the conventional wisdom

Trading Street Magazine

January 17, 2015

of an RSI would holdup but we were also able to create a robust trading strategy.

This process, known as Association Rule Learning, or deriving rules from machine learning algorithms, allows you to leverage the capabilities of a machine-learning algorithm with your own experiences as a trader.

We believe that the best results are found when combining both man and machine, and this has formed the basis of TRAIDE. TRAIDE allows you to easily use these powerful algorithms to find patterns in any indicators you believe are important, without needing any programming or mathematical experience.

Build your next strategy by harnessing the power of machine intelligence with TRAIDE.

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Trading Street Magazine

January 17, 2015

Three Simple but Effective FX Tools to Help You Follow the Trend in 2015

By Sam Barry - CEO LittleFishFX

2014

was an interesting year in the markets, one which seemed to split into two distinct sections: a choppy first half of the year followed by quite sustained trends.

This meant that Hedgefunds and CTA advisors, who were struggling at the start of the year, typically ended on quite a high, with everything seeming right with the world.

Given that the focus at the turn of the year will be on potential rate hikes in the US and the UK, plus the possibility of further easing in Japan and the EU, there stands a high probability that we will continue to see some strong trends - whether it is in Gold, Oil, Stock, or Currencies.

difficult trading strategy to follow psychologically.

The challenge is that, typically, retail traders book profits too early and hold onto losers. If you do this you are going to struggle as you will hold losers when the trend reverses and won’t keep the big winners - meaning you’d be among those who missed the major trends in the second half of 2014.

The good news is that there are some fantastic tools out there to help retail traders follow that flow and bag a great trend. The better news is that they’re easily accessible and simple to use.

So here are some of the great tools you can utilise to follow your friend, that trend.

I am a big fan of trend/momentum trading, and the majority of systems developed here at Littlefish FX are built on concepts of trend-following using order flow techniques. In-depth analysis we have done shows that this continues to be the most profitable and consistent long-run trading strategy.

COMMITMENT OF TRADERS

From a retail traders perspective it makes a lot of sense. The general idea of trend trading typically results in holding trades longer, with smaller losses in chop being outweighed by far greater returns in trending markets. Think of EURUSD in 2014: for the amount of chop in the first half of the year (which did actually have some good trends too), this was easily made back by trend-following the currency from 1.37/1.38 to 1.18 by early January 2015.

1.

The added advantage is that, due to the reduced number of trades taken in trend following as compared to scalping or mean reversion, your costs are significantly reduced.

Following the Non-Commercials (Banks and Financial Institutions) is a great strategy to help jump on long trends.

However retail traders find this an immensely

The fundamental theory behind this is that the Commercials, who know the markets the best, use the

Trading Street Magazine

January 17, 2015

COT Report

This report has been around for years and has been used to trade by many of the great names in trading. Released on Fridays, the report is based off of the CFTC futures positions and is a delayed snapshot of every Tuesday’s order book, outlining where Banks, Commercials and Speculators are positioned in the market.Despite the delay, it remains extremely powerful.

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futures and options markets to hedge their risk and therefore position themselves on the opposite side of where they think trends will form.

Banks, on the other hand, provide these with liquidity and thus facilitate the trend by pumping volume

cials)/Blue line (Commercials) cross.

The performance in USDJPY is better, GBPUSD and AUDUSD a little worse but because it is based on the underlying order flow it has been consistent for decades.

N

ote it will struggle in choppy conditions, and the beginning of 2014 would have been relatively flat performance, but the second half more than makes up for it.

2.

On Balance Volume

While this isn’t as good as the volume or order book information we would use, it does give you a damn good proxy and is very underrated.

On Balance Volume is actually made from tick volume, which doesn’t give you an underlying view of the order book, but you can start to see where trends are forming by plotting the trend in the OBV.

A NinjaTrader chart using the Littlefish FX COT indicator, bespoke designed to fit my specifications.

Most platforms come with a slope or gradient tool, and plotting the gra-

This time I have presented the chart from Metastock Xenith Pro platform. An extremely powerful platform that gives Retail Traders Reuters-style access for a fraction of the cost.

into it.

Recent performance on EURUSD, GBPUSD, USDJPY and AUDUSD (the four most traded currencies by any retail trader)has been incredible, highlighting why it is so powerful.

In the chart below, I have presented three of the basic COT indicators derived from the COT report on the EURUSD: The key in all of them is to follow the Green line, with the most basic strategy being a Green Line (Non CommerPage 14

Trading Street Magazine

January 17, 2015

dient or linear regression slope of OBV can give you insight into the most recent trend and flow.

you a simple method for trading the trend and spotting which direction it is flowing in.

On Balance Volume was designed in the 1960s by Joseph Granville and works on the same principles as the COT.

3.

The idea being that smart money typically follows the recent flow of money in an investment, and the retail investor attempts to do the opposite.

The calculation of OBV is simple. If the current bars close is higher than the previous ones, then you add the volume. If the current bars close is lower than the previous one, then you subtract the volume.The chart below shows the OBV in Blue.

It’s easy to see trends in OBV and how the price plays out. While it is reflecting the changes in price, it can actually point to a decent trend.

That said, I am personally not a fan of trend lines, as hindsight is a wonderful thing and often by the time you draw the trend line the move could be over.So as the screen shot shows, I have a trick for this.

Below OBV is the Linear Regression of OBV (or on some platforms Linear Regression Slope of OBV); all this does is plot the gradient of the On Balance Volume.

It’s not perfect (no indicators are) but it then allows

Order Flow Tools

I’ve saved the shameless plug until the end, and this one is the closet proxy we could get to one of the component sets we run in our professional quant trading systems, and it’s a little beauty.

In fact there are two beauties.

One is the Psych Indicator, which you can see in situe with the OBV and Lin Reg on my Xenith Pro platform below.

It’s not hard to see how our prop team can combine these four indicators into a powerful trend-following trading strategy, and as it is all based on the principles of order flow, it works on any timeframe. All you need to do is apply sound risk management over the top of this.

The key to this is using the bottom and top indicators (both versions of Psych) to give shorter-term and longer-term trends (currently we use the trading week – top; and the trading month – bottom), then use the OBV for the flow of orders.

F

ollowing confluent signals you pull the trigger. A lovely strategy and if you use sound logic for the trading periods based on the timeframe you trade, you can barely go wrong with it.

The other tool we love, which is a little more bespoke (because we decide to take all of these concepts ourselves and build our own version), is pure Order Flow.

The chart below shows a couple of tools that we built for our own quant systems. They are slightly toned down for more basic use than the ones we Trading Street Magazine

January 17, 2015

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actually use, but give you an added dimension to trend trading.

risk management over the top to get yourself the performance you want.

The indicator plotted on the chart gives you the prevailing trend and entry points by way of arrows.

All these three indicators show the power of trend following. There is a reason terms like ‘the trend is your friend’ have been around for so long, and why some of the longest surviving hedge funds all focus on trendfollowing techniques.

The bottom indicator, which can be used with or separately as they are both designed to stand alone, gives you a colour representing long or short.

The idea of both of these is that they will work on any time frame and allow you to set your own risk and money management rules, but simply following them like a robot will result in decent long run results.

It doesn’t take a two-year veteran to knock some good

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As markets move to ever increasing focus on rate rises and economic growth, trends will become more prevalent than before. So it’s about time you ensured you had a good trend-following trading tool in your arsenal.

Trading Street Magazine

January 17, 2015

About the Author:

Sam Barry is the CEO of Littlefish FX, who are seeking to democratise the foreign exchange market by providing educational materials, analytical tools, trading systems and alternative investments based on order flow concepts and strategies (traditionally the preserve of large financial institutions). Get all of the indicators mentioned above, and learn more about order flow trading techniques, at LittlefishFX.com.

Trading Street Magazine

January 17, 2015

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Global Investment Perspective

The Case for a 12,500 Dow Jones Index

By Shayne Heffernan Ph.D - CEO at Heffx

My position in relation to US Debt is set out below, but first let’s take a look at what to be invested in should you accept the premise that the US Debt level is now terminal.

The danger to your total net worth from US Debt levels is severe wherever you reside. A dramatic shift in the US dollar or a severe US depression are events that you cannot hide from anywhere.

How to protect yourself?

Buy true scarcity, Gold, Metals, Prime Real Estate, Rare Art, Agricultural land.

The theme is essential items that have true rarity in the market place; food of course leads that sector, so agriculture is an important part of your portfolio.

That investment should be well spread and cover North America and Asia. There are many listed companies trading at low valuations that you should be considering, you should also be attempting to gain exposure to short the RMB, EUR, GBP, buy the Singapore Dollar, Thai Baht and Philippine Peso.

Gold is a little trickier, should we have a true economic catastrophe many 3rd world nations will increase the nationalization of mining, so holding equities in Gold producers in Safe Zones is important.

If you are buying Gold do not store it in the USA, definitely hold that gold in Asia where it is still considered currency. On April 5, 1933, U.S. President Franklin D. Roosevelt past an emergency law “forbidding the Hoarding of Gold Coin, Gold Bullion, and Gold Certificates within the continental United States”. The order criminalized the possession of monetary gold by any individual, partnership, association or corporation; do not keep your gold in the USA. We have built a fund around wealth protection.

Information for those interested is available from Livetradingnews.com

Trading Street Magazine

January 17, 2015

My thoughts on US Debt:

Terminal debt is the point at which the payments on the interest of a debt surpass the revenues of the debtor (i.e. the debt becomes fiscally unstable.)

Hyperinflation is the terminal stage of any fiat currency. In hyper-inflation, money loses most of its value practically overnight. Hyper-inflation is often the result of increasing regular inflation to the point where all confidence in money is lost. In a fiat monetary system, the value of money is based on confidence, and once that confidence is gone, money irreversibly becomes worthless, regardless of its scarcity. Gold has replaced every fiat currency for the past 3000 years.

The United States has so far avoided hyperinflation by shifting between a fiat and gold standard over the past 200 years.

Technical Outlook Short Term:

Overbought Intermediate Term: Bearish Long Term:

Bullish Moving Averages:

10-period Close: 17,725.30 Volatility: 35 Volume: 404,932,288

50-period 16,852.39 29 430,221,920

200-period 14,327.54 36 615,390,848

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riod. Generally, changes in momentum tend to lead to changes in prices. This excerpt shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 69.4699. This is not an overbought or oversold reading.

The last signal was a sell 1 period(s) ago.

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

DJ INDUSTRIAL AVERAGE is currently 22.0% above its 200-period moving average and is in a slowing upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (turning bearish). Our trend forecasting oscillators are currently turning bearish on .DJI and have had this outlook for the last 3 periods.

HEFFX Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time pe-

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 53.00. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 16. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 9 period(s) ago.

About Shayne Heffernan

Shayne Heffernan holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reached a peak market cap of $15b. He has managed and overseen start ups in Mining, Shipping, Technology and Financials. Shayne Heffernan founded the Heffernan Group of Companies and you can interact with him in his own Live Trading Lab here on Trading Street.

Click the picture to the right to find out more.

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January 17, 2015

Trading Street Magazine

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Is the Euro Bear Near Hibernation?

By Rick Ratchford - President, Amazing Accuracy

The EURO’s steep decline started at its last major swing top in May 2014.

Since making that top, there has only been one month, June 2014, that closed higher than its open during this bear trend. That one month was a failed attempt to retrace at least 50% of the initial May 2014 decline.

In total, there has been 9 months of new monthly lows including this month, January 2015. Has the EURO run its course?

MONTHLY

The monthly chart below is taken from the front month EURO futures, which is currently trading the front month, March 2015 contract.

As of this writing (1/15/2015), the monthly low of Chart by Previsions Charting, data by Pinnacle Data Corp.

January is 1.1574.

On this chart I have plotted Fibonacci fan lines, and my Overbought/Oversold zones (the red and green rectangles).

What we can immediately see is that the January low is around the Fibonacci 50% support level.

Monthly prices are now knocking at the door of the major oversold zone.

These indications suggest that the Euro may be near a monthly bottom with a rally to follow.

The seasonal tendency for the Euro over the last 25 years has shown that a negative January often resulted in a bullish February to April.

WEEKLY

The chart below is the weekly time-frame of the EURO from May 2014 to January 14, 2015 (currently in session at the time of this copy made.)

What we can surmise immediately from this chart is the converging of two inPage 22

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January 17, 2015

What is important to note here is that the DMI is well overbought as the MACD is oversold. When the DMI starts to turn down and the MACD oscillator line (blue) crosses above the signal line (red), this often indicates that the trend has run its course (for the time being at the very least). When this happens, we will see these two indicators start to move away from each other (diverge).

This has yet to happen, but the converging of these two indicators alerts us that the weekly bear trend is very near to a reversal, or at the very least, pausing for several weeks. Due to what we have noted with the monthly chart, I would be more inclined to expect a reversal.

dicators, the MACD on top of the DMI (aka ADXR), as the price nears a weekly oversold territory (the red rectangles) and is within one weekly price bar of a weekly cycle turn date (weekly FDate indicated by red diamond).

It is the grouping of these indications that should alert us that change of trend is near.

The DMI indicator (seen at the bottom of chart as a black line) rises when a trend has been established. In this case, it has been rising as the red (DI-) line is above the blue (DI+) line indicating that this is a bear trend.

The MACD that is seen above the DMI indicator clearly supports the bearish momentum of this trend.

The FDates shown on this chart suggests that a weekly cycle swing bottom is highly likely within a week of the January 9th ending period (for which this week is included) and then again the week ending January 30. As both of these cycle turn periods fall within January 2015, this adds to the potential for a January bottom in the Euro.

DAILY

There are naturally going to be a few expected cycle swings within the daily time frame.

For these we resort to the daily FDates to help fine tune our analysis for trading purposes. Dates to watch for swings include January 12 (already confirmed as a swing top) as well as the 27th and 30th of January.

There is support around 1.1469 based on 90-degrees from the 12/16/2014 high. It would be worth watching if price works its way down there.

About the Author: Rick Ratchford of Amazing Accuracy.com

Rick is joining Trading Street as a specialist in market timing and is a serious technical analyst with a background in computer programming. Discovering the futures markets in the 1980s, Rick looked to combine his knowledge of mathematical pattern recognition with the study of underlying fundamentals of market behavior.

His Turn Dates (FDates) have become a widely respected core methodology used to pinpoint market swings with a high degree of accuracy. Proprietary algorithms he developed are key to his Geometric Mathematical and Cycle Extraction protocols that predict both daily and weekly cycles. We are delighted to be partnering with Rick.

Trading Street Magazine

January 17, 2015

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Calendar of Economic Events for Remaining Period in January 2015

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January 17, 2015

Saturday January 17 2015 17:30 Sunday January 18 2015 3:00

House Price Index YoY

Country

Reporting Period

Previous

CN

DEC

-3.70%

Country

Reporting Period

Survey

Forecast

Previous

Survey

Forecast

GDP Growth Rate QoQ Final

IL

Q3

0.54%

-0.02%

-0.02%

3:00

GDP Growth Rate YoY Final

IL

Q3

2.79%

1.64%

1.64%

3:00

GDP Growth Annualized Final

IL

Q3

2.20%

-0.36%

-0.36%

13:00

PPI MoM

KR

DEC

-0.30%

13:00 16:00 16:30

PPI YoY Martin L. King's Birthday New Motor Vehicle Sales MoM

KR US AU

DEC

-0.90%

DEC

-0.60%

16:30

New Motor Vehicle Sales YoY

AU

DEC

-3.80%

20:30

Capacity Utilization MoM

JP

NOV

0.70%

20:30

Industrial Production YoY Final

JP

NOV

-0.80%

-3.80%

-3.80%

20:30

Industrial Production MoM Final

JP

NOV

0.40%

-0.60%

-0.60%

21:00

Consumer Confidence

JP

DEC

37.70

Country

Reporting Period

Previous

Monday January 19 2015

-0.09%

38.00 Survey

Forecast

0:15

PPI MoM

CH

DEC

-0.70%

0:15 0:30 1:00 2:00 3:00

PPI YoY Unemployment Rate Current Account Construction Output YoY PPI YoY

CH HK EA EA PT

DEC DEC NOV NOV DEC

-1.60% 3.30% € 30.6B 1.40% -1.10%

-1.49% 3.30% € 16.3B 0.98% -1.03%

5:30

Business Confidence

BR

JAN

45.20

45.91

5:30

Foreign Securities Purchases

CA

NOV

5:30 18:00 18:00 18:00 18:00 18:00 18:00 23:00 23:00 23:00 Tuesday January 20 2015 1:00 1:30 1:30 2:00 2:00

Foreign Securities Purchases by Canadians Fixed Asset Investment YoY GDP Growth Rate QoQ GDP Growth Rate YoY Urban Investment (YTD) YoY Industrial Production YoY Retail Sales YoY Unemployment Rate PPI MoM PPI YoY

CA CN CN CN CN CN CN FI DE DE

NOV DEC Q4 Q4 DEC DEC DEC DEC DEC DEC

Country

Reporting Period

Previous

IT ZA ZA EA DE

NOV NOV NOV JAN JAN

€ 5.397B 0.50% -1.10% 31.80 10.00

Balance of Trade Mining Production MoM Mining Production YoY Zew Economic Sentiment Index Zew Current Conditions

Trading Street Magazine

January 17, 2015

CAD 9.53B (R) CAD 0.29B 15.80% 1.90% 7.30% 15.80% 7.20% 11.70% 8.20% 0.00% -0.90%

CAD 9.44B

1.70% 7.20% 15.80% 7.40% 11.70%

1.73% 7.20% 7.69% 12.77% 7.90%

-0.40% -1.40%

-0.94%

Survey

Forecast € 3.6B

-0.50% 32.00 14.90 Page 25

2:00 2:00 2:00 3:00 3:00 4:00 5:00 5:00 5:30 5:55 5:55 6:00 7:00 8:30 8:30 15:30 15:30 20:00 20:00 20:30 21:00 21:00 Wednesday January 21 2015 0:00 0:00 1:30 1:30 1:30 1:30 1:30 2:00 4:00 4:00 5:00 5:00 5:30 5:30 5:30 5:30 5:30 7:00 8:30 14:00 14:30 15:50 15:50 Page 26

Zew Economic Sentiment Index Current Account 30-Year Bond Auction Industrial Production YoY Industrial Production MoM TCMB Interest Rate Decision Interest Rate Decision GDP YoY Manufacturing Sales MoM Redbook YoY Redbook MoM Consumer Confidence NAHB Housing Market Index 3-Month Bill Auction 6-Month Bill Auction Westpac Consumer Confidence Index Westpac Consumer Confidence Change BoJ Interest Rate Decision Inflation Rate YoY All Industry Activity Index MoM Coincident Index Final Leading Composite Index Final

DE GR GB IL IL TR NG RU CA US US BE US US US AU AU JP MY JP JP JP Country

Inflation Rate YoY Inflation Rate MoM Claimant Count Change Average Earnings Excl. Bonus Average Earnings Incl. Bonus MPC Meeting Minutes Unemployment Rate ZEW Investor Sentiment MBA Mortgage Applications MBA 30-Year Mortgage Rate Industrial Production YoY PPI YoY Wholesale Sales MoM Building Permits Housing Starts Building permits MoM Housing starts MoM BoC Interest Rate Decision 4-Week Bill Auction Interest Rate Decision HIA New Home Sales MoM Foreign Bond Investment Stock Investment by Foreigners

ZA ZA GB GB GB GB GB CH US US PL PL CA US US US US CA US BR AU JP JP

JAN NOV JAN NOV NOV

DEC NOV 1/17/2015 1/17/2015 JAN JAN

JAN JAN DEC NOV NOV NOV

34.90 € -0.198B 2.70% -10.35% -1.85% 8.25% 13.00% -0.50% 0.60% 3.80% -3.20% (12.00) 57.00 0.03% 0.09% 91.10 -5.70% 0.00% 3.00% -0.10% 109.90 104.50

40.00

8.00%

58.00

36.70 € -0.4B 6.80% 0.34% 8.25% 13.00%

(11.60) 56.67

96.50

3.10%

0.00% 2.97%

108.90 103.80

108.90 103.80

Reporting Period

Previous

Survey

Forecast

DEC DEC DEC NOV NOV

5.80% 0.00% (29.60) 1.60% 1.40%

5.50% -0.06% (25.00) 1.90% 1.70%

5.53% 0.00% (24.62)

NOV JAN 1/10/2015 1/17/2015 DEC DEC NOV DEC DEC DEC DEC

6.00% (4.90) 49.10% 3.89% 0.30% -1.60% 0.10% 1052K (R) 1028K -3.7% (R) -1.60% 1.00% 0.02% 11.75% 3.00% ¥ 455.1B ¥ -684.4B

5.90%

5.80%

NOV 1/17/2015 1/17/2015

20.37% 5.25% -2.10%

2.18% -1.44%

1054K 1040K

1055K 1044.4K

1.00%

1.00%

12.25%

12.25%

Trading Street Magazine

¥ 876.4B ¥ -1514.7B January 17, 2015

16:00 16:30 21:00 Thursday January 22 2015 0:00 0:00 0:00 0:00 0:00 0:30 0:30 0:30 1:00 1:00 1:00 1:00 1:00 1:00 1:00 1:30 3:00 3:00 3:30 4:45 5:30 5:30 5:30 6:00 6:00 7:00 7:30 8:00 8:00 11:00 15:00 15:00 17:00 17:35 17:45 21:00 21:00 Friday January 23 2015 0:00 0:00 0:00

Consumer Inflation Expectations Unemployment Rate BOJ Monthly Report

AU TW JP Country

Consumer Confidence Retail Sales MoM Retail Sales YoY Unemployment Rate Consumer Confidence Inflation Rate YoY Consumer Confidence Unemployment Rate Industrial Orders MoM Industrial Orders YoY Industrail Sales MoM Retail Sales MoM Retail Sales YoY Retail Sales YoY Unemployment Rate Public Sector Net Borrowing CBI Business Optimism Index CBI Industrial Trends Orders MoM Current Account ECB Interest Rate Decision ECB Press Conference Continuing Jobless Claims Initial Jobless Claims Mexico mid-month CPI MoM House Price Index MoM Consumer Confidence Flash EIA Natural Gas Stocks Change EIA Crude Oil Stocks Change EIA Gasoline Stocks Change Balance of Trade GDP Growth Rate QoQ Adv GDP Growth Rate YoY Adv Balance of Trade Markit/JMMA Manufacturing PMI Flash HSBC Manufacturing PMI Flash Inflation Rate YoY Inflation Rate MoM

Industrial Production YoY Markit Comp PMI Flash Markit Manufacturing PMI Flash

Trading Street Magazine

January 17, 2015

DK DK DK ES TR HK NL SE IT IT IT IT IT PL PL GB GB GB PT EA EA US US MX US EA US US US AR KR KR PH JP CN SG SG

JAN DEC

3.40% 3.87%

Reporting Period

Previous

JAN DEC DEC Q4 JAN DEC JAN DEC NOV NOV NOV NOV NOV DEC DEC DEC Q1 JAN NOV

6.00 0.80% 0.80% 23.67% 67.70 5.10% (7.00) 7.40% 0.10% -0.20% 0.40% 0.00% -0.80% -0.20% 11.40% £ -13.41B 8.00 5.00 € 505.7M 0.05%

1/10/2015 1/17/2015 JAN NOV JAN 1/17/2015 1/17/2015 1/17/2015 DEC Q4 Q4 NOV JAN JAN DEC DEC

2424K 316K 0.41% 0.60% (10.90) -236Bcf 5.4M 3171K $ 461M 0.90% 3.20% $ -55.6M 52.00 49.60 -0.30% 0.30%

Country

Reporting Period

Previous

AT FR FR

NOV 1/1/2015 JAN

-2.30% 49.70 47.50

3.80%

Survey

23.48%

7.40%

£ -9.05

Forecast 5.95 0.18% 2.01% 23.50% 67.22 5.09% (6.81) 7.40% -1.48%

0.06% -0.17% 2.50% 11.50% £ -12B 12.98

5.00 € 351.5M 0.05%

300K

2335K 335K

(10.50)

(10.95) -361.2Bcf 11.4M -1784K $ 681.8M 0.41% 3.28% $ 348.2M 52.01

-0.10%

-0.22% -0.21%

Survey

Forecast

48.10

-2.77% 49.29 47.68 Page 27

0:00 0:00 0:30 0:30 0:30 0:30 1:00 1:00 1:00 1:30 1:30 1:30 1:30 1:30 2:00 2:00 3:00 3:00 3:30 3:30 3:30 4:30 4:30 5:30 5:30 5:30 5:30 5:30 5:30 5:30 5:30 6:00 6:45 7:00 7:00 7:00 11:00 Sunday January 25 2015 5:00 15:50 15:50 15:50 15:50 21:00 21:00 21:00 Page 28

Markit Services PMI Flash Industrial Production YoY Markit Comp PMI Flash Markit/BME Manufacturing PMI Flash Markit Services PMI Flash Unemployment Rate Markit Comp PMI Flash Markit Manufacturing PMI Flash Markit Services PMI Flash Retail Sales ex Fuel MoM Retail Sales ex Fuel YoY BBA Mortgage Approvals Retail Sales MoM Retail Sales YoY Industrial Production YoY Industrial Production MoM IPCA mid-month CPI YoY IPCA mid-month CPI MoM Deposit Growth YoY Foreign Reserves Bank Loan Growth Current Account Foreign Direct Investment Core Inflation Rate MoM Core Inflation Rate YoY Inflation Rate YoY Inflation Rate MoM Retail Sales MoM Retail Sales YoY Retail Sales Ex Autos MoM Chicago Fed National Activity Index Business Confidence Markit Manufacturing PMI Flash Existing Home Sales MoM Existing Home Sales CB Leading Index MoM Industrial Production YoY

FR TW DE DE DE NL EA EA EA GB GB GB GB GB BE BE BR BR IN IN IN BR BR CA CA CA CA CA CA CA US BE US US US US AR Country

Australia Day (Observed) Balance of Trade Exports YoY Imports YoY BoJ Monetary Policy Meeting Minutes Unemployment Rate Industrial Production YoY Industrial Production MoM

AU JP JP JP JP MY SG SG

JAN DEC JAN JAN JAN DEC 1/1/2015 JAN JAN DEC DEC DEC DEC DEC NOV NOV JAN JAN 1/3/2015 1/17/2015 1/3/2015 DEC DEC DEC DEC DEC NOV NOV NOV DEC JAN JAN DEC DEC DEC DEC

50.60 6.86% 52.00 51.20 52.10 8.00% 51.40 50.60 51.60 1.70% 6.90% 36.7K 1.60% 6.40% -0.62% 0.10% 6.46% 0.79% 11.50% $ 319.48B 10.50% $ -9.33B $4.64B -0.20% 2.10% 2.00% -0.40% 0.00% 4.90% 0.20% 73.00% (6.90) 53.90 -6.10% 4.93M 0.60% -2.10%

50.80

51.70 52.50 51.80 51.00 52.00 -0.70% 3.30% -0.60% 3.00%

48.41 7.34% 50.47 51.67 54.33 7.77% 51.35 51.19 52.14

0.43% 4.75% -0.65% -0.28%

0.88%

$ -8.3B $ 5.3B 2.10% 1.50% -0.60%

54.00 2.40% 5.05M 0.40%

2.26% 1.99% 0.08% 0.47% 5.26% 0.35% 43.00% (6.66) 53.99 5.2M -1.39%

Reporting Period

Previous

DEC DEC DEC

¥-892B 4.90% -1.70%

¥ -541.9B

NOV DEC DEC

2.70% -2.80% -1.40%

2.50% -0.37% -0.61%

Survey

Trading Street Magazine

Forecast

January 17, 2015

23:00 23:00 23:00 Monday January 26 2015 0:00 0:30 1:00 1:00 1:00 4:30 4:30 5:00 5:00 6:00 6:00 6:00 8:30 8:30 13:00 16:30 23:00 23:00 23:00 23:00 23:45 Tuesday January 27 2015

PPI YoY Nationwide Housing Prices YoY Nationwide Housing Prices MoM

0:30 0:30 0:30 0:30 0:30 1:00 1:30 1:30 2:00 5:00 5:00 5:00 5:15 5:15 5:30 5:30 6:00 6:00

PPI YoY Business Confidence IFO Business Climate IFO Current Conditions IFO Expectations Business Confidence Capacity Utilization Consumer Confidence Industrial Production YoY Interest Rate Decision Retail Sales MoM Retail Sales YoY 3-Month Bill Auction 6-Month Bill Auction Consumer Confidence NAB Business Confidence Consumer Confidence Import Prices MoM Retail Sales MoM Retail Sales YoY Business Confidence

FI GB GB

DEC JAN JAN

-0.50% 7.20% 0.20%

7.50% 0.20%

Country

Reporting Period

Previous

Survey

NOV NOV

-1.50% 340.00% 105.50 110.00 101.10 101.20 74.60% 109.20 -0.40% 0.25% -0.10% 5.60%

JAN DEC JAN DEC DEC DEC JAN

102.00 1.00 4.40 -0.80% 1.00% -0.80% 99.00

Country

Reporting Period

Previous

Balance of Trade

HK

DEC

Balance of Trade PPI MoM PPI YoY Balance of Trade Tourist Arrivals YoY GDP Growth Rate QoQ Prel GDP Growth Rate YoY Prel Business Confidence PPI MoM PPI YoY Retail Sales YoY Redbook YoY Redbook MoM Durable Goods Orders MoM Durable Goods Orders Ex Transportation Balance of Trade Economic Activity YoY

SE SE SE TH TR GB GB FI RU RU RU US US US US MX MX

DEC DEC DEC DEC DEC Q4 Q4 JAN DEC DEC DEC 1/21/2015 1/21/2015 DEC DEC DEC NOV

Trading Street Magazine

January 17, 2015

ES NL DE DE DE TR TR BR RU IL MX MX US US KR AU FI DE DE DE FR

DEC JAN JAN JAN JAN JAN JAN JAN DEC

HKD -52.16B SEK -0.7B -0.40% 1.30% $ -0.08B 1.19% 0.70% 2.60% (8.20) -0.50% 6.10% 1.80%

-0.70% -0.40% $ -1076M 2.54%

-0.45%

Forecast -1.02% 356.00% 104.38

0.20%

100.68 74.05% 109.28 1.53% 0.25% 0.33% 5.40%

101.48 4.12 5.49 -0.44% 0.71% 99.61 Survey

Forecast HKD -52.6B SEK 1.3B 2.71% $ -0.6B 0.79% 2.91% (8.37) 7.35% -1.04%

-1.02% 0.62% $ -323.7M

Page 29

6:00 6:00 6:45 6:45 7:00 7:00 7:00 7:00 7:30 8:30 10:00 13:00 13:00 15:00 16:30 16:30 23:00 23:00 23:30 23:45 Wednesday January 28 2015 0:00 1:00 2:00 4:00 4:00 5:00 7:30 7:30 10:00 11:00 15:50 15:50 15:50 16:30 16:30 18:00 18:00 Thursday January 29 2015 0:00 0:00 0:00 0:00 0:00 0:00 Page 30

S&P/Case-Shiller Home Price YoY S&P/Case-Shiller Home Price MoM Markit Composite PMI Flash Markit Services PMI Flash New Home Sales MoM CB Consumer Confidence New Home Sales Richmond Fed Manufacturing Index Dallas Fed Manufacturing Index 4-Week Bill Auction 2-Year Note Auction Inflation Rate YoY Inflation Rate MoM Manufacturing Production YoY Inflation Rate YoY Inflation Rate QoQ GFK Consumer Confidence UBS consumption indicator Interest Rate Decision Consumer Confidence

US US US US US US US US US US US KR KR KR AU AU DE CH TH FR Country

PPI YoY Business Confidence Interest Rate Decision MBA Mortgage Applications MBA 30-Year Mortgage Rate Unemployment Rate EIA Crude Oil Stocks Change EIA Gasoline Stocks Change 5-Year Note Auction Fed Interest Rate Decision Foreign Bond Investment Stock Investment by Foreigners Retail Sales YoY Export Prices QoQ Import Prices QoQ GDP Growth Rate QoQ GDP Growth Rate YoY

Business Confidence Unemployment Rate Retail Sales MoM Retail Sales YoY Business Confidence Consumer Confidence

AT NO MY US US RU US US US US JP JP JP AU AU PH PH

NOV NOV JAN JAN DEC JAN DEC JAN JAN

JAN JAN DEC Q4 Q4 FEB DEC JAN Reporting Period DEC Q4 1/17/2015 1/24/2015 DEC 1/24/2015 1/24/2015

4.50% -0.10% 53.50 53.30 -1.60% 92.60 438K 7.00 4.10

53.06 53.38

460.8K 13.21 9.41

0.70% 0.80% 0.00% -3.50% 2.30% 0.50% 9.00 1.29 2.00% 90.00 Previous

0.88% 0.26% -1.46% 2.39% 0.43% 8.41 2.00% 90.82 Survey

-1.10% 2.00 3.25%

5.20%

5.40%

Forecast -0.86% 3.25 3.25% 56.09% 3.61% 5.30% 12.8M -7058.6K

1.74% 0.25% 1/24/2015 1/24/2015 DEC Q4 Q4 Q4 Q4

¥ 1265B ¥ -2848.2B -0.16%

0.40% -3.90% -0.80% 0.40% 5.30%

Country

Reporting Period

Previous

DK DK ES ES SE SE

JAN DEC DEC DEC JAN JAN

(19.00) 3.90% 1.80% 1.90% 107.60 99.00

1.10% 7.16% Survey

Trading Street Magazine

Forecast (17.33) 3.90% 0.49% 1.25% 107.56 98.43 January 17, 2015

0:30 0:30 0:30 0:55 0:55 0:55 1:00 1:00 1:00 1:00 1:00 1:30 1:30 1:30 1:30 2:00 2:00 2:00 2:00 2:00 2:00 2:00 2:00 2:30 2:30 3:00 3:00 5:00 5:00 5:00 5:30 5:30 7:00 7:00 7:00 7:30 10:00 13:00 15:00 15:00 15:30 15:30 15:30 15:30 15:30 15:30 15:30 15:30

Lending to Households YoY Retail Sales MoM Retail Sales YoY Unemployment Change Unemployment Rate Harmonised Unemployment Rate Bank Austria Manufacturing PMI Private Loans YoY Money Supply M3 YoY Business confidence Consumer Confidence Business confidence Consumer Confidence PPI MoM PPI YoY Business Confidence Business Climate Indicator Economic Sentiment Consumer Confidence Final Industrial Sentiment Business Confidence Consumer Confidence PPI YoY Inflation Rate YoY Inflation Rate MoM Unemployment rate Unemployment Rate Inflation Rate YoY Prel Inflation Rate MoM Prel Interest Rate Decision Continuing Jobless Claims Initial Jobless Claims Interest Rate Decision Pending Home Sales MoM Pending Home Sales YoY EIA Natural Gas Stocks Change 7-Year Note Auction Business Confidence Industrial Production YoY Industrial Production MoM Core Inflation Rate YoY Household Spending YoY Tokyo Core CPI YoY Tokyo CPI YoY Inflation Rate Ex-Food and Energy YoY Inflation Rate YoY Inflation Rate MoM Unemployment Rate

Trading Street Magazine

January 17, 2015

SE SE SE DE DE DE AT EA EA IT IT PT PT ZA ZA AT EA EA EA EA GR GR GR BE BE BR IL DE DE ZA US US MX US US US US KR KR KR JP JP JP JP JP JP JP JP

DEC DEC DEC JAN DEC DEC JAN DEC DEC JAN JAN JAN JAN DEC DEC JAN JAN JAN JAN JAN JAN JAN DEC JAN JAN DEC DEC JAN JAN

5.90% 0.50% 4.50% -27K 5.00% 6.50% 49.20 -0.90% 3.10% 97.50 99.70 30.00% (22.30) 0.00% 6.50% (7.60) 4.00% 100.70 (10.90) (5.20) 98.90 (53.90) -2.30% -0.38% -0.11% 4.80% 5.60% 0.20% 0.00% 5.75%

1/17/2015 1/24/2015 DEC DEC 1/24/2015 JAN DEC DEC DEC DEC JAN JAN DEC DEC DEC DEC

3.00% 0.80% 4.10% 2.13% 73.00 -3.40% 1.30% 2.70% 0.40% 2.30% 2.10% 2.10% 2.40% -0.40% 3.50%

5.98% -0.03% 2.95% 6.6K 5.40% 5.40% 50.33

97.83 99.92 78.00% (22.62) 6.29% (6.97) 8.00%

102.78 (53.83) -0.66% -0.19% 0.20% 3.70% 5.60% 0.38% 0.18% 5.75% 2203K 355K 3.00% -0.89% -530.5Bcf 73.79 -1.50% 0.39% 2.64% -6.57%

3.59% 0.02% 3.50% Page 31

15:50 15:50 16:05 16:30 16:30

Industrial Production YoY - Prel Industrial Production MoM - Prel Gfk Consumer Confidence PPI QoQ PPI YoY

JP JP GB AU AU

DEC DEC JAN Q4 Q4

18:00

Bank Lending

SG

DEC

18:30 19:30 21:00 21:00 21:00 22:00 23:30 23:30 23:45 Friday January 30 2015 0:00 0:00 0:00 0:00 0:00 0:00 0:00 0:30 1:00 1:00 1:00 1:00 1:00 1:00 1:00 1:30 1:30 1:30 1:30 2:00 2:00 2:00 2:00 2:00 2:00 2:00 2:30 3:00 3:00

Unemployment Rate Prel Industrial Production YoY Construction Orders YoY Housing Starts YoY Business Confidence Private Sector Credit YoY Current Account Private Consumption MoM PPI MoM

SG TH JP JP SG ZA TH TH FR

Q4 DEC DEC DEC Q1 DEC DEC

Page 32

Country GDP Growth Rate YoY Flash GDP Growth Rate QoQ Flash GDP Growth Rate YoY Flash Inflation Rate YoY Prel Inflation Rate MoM Prel KOF Leading Indicators Balance of Trade GDP Growth Rate YoY Adv Consumer Confidence Unemployment Rate Retail Sales MoM Retail Sales YoY Unemployment Rate Business Confidence Current Account BoE Consumer Credit Mortgage Lending Net Lending Individuals MoM Mortgage Approvals Unemployment Rate Core Inflation Rate YoY Flash Inflation Rate YoY Flash Unemployment Rate Retail Sales YoY PPI MoM PPI YoY Interest Rate Decision Industrial Production YoY Industrial Production MoM

AT ES ES ES ES CH TR TW AT IT NO NO NO ES ES GB GB GB GB BE EA EA EA GR IT IT RU PT PT

DEC Reporting Period Q4 Q4 Q4 JAN JAN JAN DEC Q4 JAN DEC DEC DEC NOV JAN NOV DEC DEC DEC DEC DEC JAN JAN DEC NOV DEC DEC DEC DEC

-2.99% 0.28% (3.94)

(4.00) 0.20% 1.20% SGD 608.2B 2.00% -3.50% 16.90% -14.30% 1.00 9.13% $ 1660 M 0.00% -0.10% Previous -0.10% 0.50% 1.60% -1.00% -0.60% (1.30) $ -8.3B 3.63% (31.00) 13.40% 0.20% -0.61% 3.80% (6.90) € 0.311B £1252M £2.10B £3.3B 59.03K 8.50% 0.70% -0.20% 11.50% 3.70% -0.20% -1.20% 17.00% -2.00% -0.10%

1.82% 60893741.00% 2.10% -4.64% 1.36% -21.14%

$ 798.9M 0.26%

Survey

Forecast 0.05% 0.65% 1.60% -0.67% -0.06% (1.84) $ -7.8B 4.41% (24.50) 13.48% 0.05% 0.72% 3.50% (5.13) € 0.5B £ 1003.1M

59.8K 8.50% 0.76% 0.14% 11.48% 2.88%

17.00%

Trading Street Magazine

-1.35% 17.00% -1.60% -2.37% January 17, 2015

3:00 3:30 4:00 4:00 4:00 4:00 4:00 4:00

Retail Sales YoY Foreign Reserves Industrial Production YoY Retail Sales MoM Retail Sales YoY Unemployment Rate Foreign Exchange Reserves Balance of Trade

PT IN CL CL CL CL NG ZA

DEC 1/24/2015 DEC DEC DEC DEC JAN DEC

4:30

Nominal Budget Balance

BR

DEC

5:30 5:30 5:30 5:30 5:30 6:00 6:00 7:00

CA US US US US BE BE US

7:00 9:00 10:00

GDP MoM GDP Price Index Adv GDP Growth Rate QoQ Adv Core PCE Prices QoQ PCE Prices QoQ GDP Growth Rate QoQ Adv GDP Growth Rate YoY Adv Reuters Michigan Consumer Sentiment Final Reuters Michigan Consumer Expectations Final Reuters Michigan Current Conditions Final Unemployment Rate Interest Rate Decision

14:00 15:00 15:00 16:30 16:30 Saturday January 31 2015 16:00 17:00 Sunday February 01 2015 16:00 17:35 17:45 18:00 19:00 20:00 20:00 20:00 20:15 20:15 20:15 20:30

7:00

0.20%

0.99%

-0.10% 0.40% 6.10%

-0.13% 26.83% 1.08% 5.80%

NOV Q4 Q4 Q4 Q4 Q4 Q4 JAN

ZAR -5.7B BRL -41.61B 0.30% 1.40% 5.00% 1.40% 1.20% 0.30% 0.80% 93.60

98.20

US

JAN

86.40

108.30

US CO CO

JAN DEC

104.80 7.70% 4.50%

108.30

Balance of Trade

CO

NOV

$ - 1.63B

Retail Sales MoM Retail Sales YoY Private Sector Credit MoM Private Sector Credit YoY

KR KR AU AU

DEC DEC DEC DEC

1.90% 1.00% 0.50% 5.90%

Country

Reporting Period

Previous

KR CN

JAN JAN

Country

Reporting Period

KR JP CN TW ID ID ID ID ID ID ID TH

JAN JAN JAN JAN JAN JAN JAN JAN DEC DEC DEC JAN

Balance of Trade NBS Manufacturing PMI

HSBC Manufacturing PMI Markit/JMMA Manufacturing PMI Final HSBC Manufacturing PMI Final HSBC Manufacturing PMI HSBC Manufacturing PMI Core Inflation Rate YoY Inflation Rate YoY Inflation Rate MoM Balance of Trade Exports YoY Imports YoY Core Inflation Rate YoY

Trading Street Magazine

January 17, 2015

ZAR -7.5B BRL -53B

2.59%

7.80% 4.50% $0.846B

$ -0.7B -0.34% 1.70% 0.55%

Survey

$ 5.78B

Previous

0.08% 1.20% 98.20

Forecast 472256.00% 5022.00%

Survey

Forecast

49.90 52.00

49.93

50.00 4.93% 8.36% 2.46% $-0.43B

50.90 49.84 4.34% 9.09% 1.69% $ -0.3B

1.69%

1.78% Page 33

20:30 21:00 22:00 Monday February 02 2015 0:00 0:00 0:00 0:15 0:30 0:45 0:50 0:55 1:00 1:00 1:00 1:00 1:30 1:30 4:00 5:30 5:30 5:30 5:30 5:30 5:30 6:30 6:45 7:00 8:30 8:30 9:00 14:30 15:00 16:30 16:30 16:30 16:30 16:30 17:00 19:30 20:00 21:30 23:30 Tuesday February 03 2015 0:00 Page 34

Inflation Rate YoY HSBC Manufacturing PMI HSBC Manufacturing PMI

NEVI Manufacturing PMI HSBC Manufacturing PMI HSBC Manufacturing PMI Markit Manufacturing PMI Retail Sales YoY Markit/ADACI Manufacturing PMI Markit Manufacturing PMI Final Markit/BME Manufacturing PMI Final Markit Manufacturing PMI Final Markit Manufacturing PMI Loan Growth YoY KAGISO Manufacturing PMI Inflation Rate YoY Markit/CIPS Manufacturing PMI HSBC Manufacturing PMI Core PCE Price Index MoM Core PCE Price Index YoY PCE Price Index MoM PCE Price Index YoY Personal Income MoM Personal Spending MoM RBC Manufacturing PMI Markit Manufacturing PMI Final Construction Spending MoM 3-Month Bill Auction 6-Month Bill Auction Balance of Trade AIG Manufacturing Index Current Account Balance of Trade Building Permits MoM Exports MoM Imports MoM ANZ Job Advertisement MoM Non Manufacturing PMI RBA Interest Rate Decision Consumer Confidence RBI Interest Rate Decision Swedbank Manufacturing Pmi

NIMA Manufacturing Pmi

TH IN RU

JAN JAN JAN

Country

Reporting Period

NL PL TR ES HK IT FR DE EA GR NO ZA PK GB BR US US US US US US CA US US US US BR AU KR AU AU AU AU AU CN AU TH IN SE

JAN JAN JAN JAN DEC JAN JAN JAN JAN JAN DEC JAN JAN JAN JAN DEC DEC DEC DEC DEC DEC JAN JAN DEC

0.60%

1.19% 54.18 49.96

48.90 Previous

Survey

52.94 53.14 52.50 53.64 3.28% 48.46

53.80 7.50% 48.40

49.40 5.20% 50.20

48.77 5.21% 48.91 0.04 53.21 51.25

52.50 50.20 0.00% 1.40%

0.40% 0.60% 53.90 53.90 -0.30%

JAN JAN DEC DEC DEC DEC DEC JAN JAN

$ 0.29B

JAN

81.10 7.75%

0.27% 0.52% 52.27 -0.06%

4830.00% $ 9.2B A$ -0.9B 3.08%

$ 11.41B A$-0.925B 7.50% 1.00% 1.00% 1.80% 54.10

53.85 3% 81.40 8.00% 54.83

JAN

Country

Reporting Period

Previous

NO

JAN

49.80

Forecast

Survey

Trading Street Magazine

Forecast 50.59 January 17, 2015

0:00 0:00 0:00 0:00 0:30 1:30 2:00 2:00 2:00 2:00 3:00 3:00 5:15 5:15 5:30 5:30 5:30 7:00 7:00 7:30 8:30 8:30 13:00 17:35 17:45 21:00 22:00 Wednesday February 04 2015 0:15 0:45 0:50 0:50 0:55 0:55 1:00 1:00 1:00 1:00 1:30 2:00 2:00 2:00 2:00 2:00 2:00 2:00

Inflation Rate YoY Inflation Rate MoM PPI MoM PPI YoY SVME Manufacturing PMI Construction PMI PPI MoM PPI YoY Inflation Rate YoY Prel Inflation Rate MoM Prel Industrial Production YoY Industrial Production MoM Redbook Index yoy Redbook Index mom PPI MoM PPI YoY SIPMM Manufacturing PMI ISM Manufacturing PMI Factory Orders MoM HSBC Manufacturing PMI 4-Week Bill Auction 52-Week Bill Auction Total Vehicle Sales Markit Services PMI HSBC China Services PMI HSBC India Services PMI HSBC Services PMI

Markit Services PMI Markit/ADACI Services PMI Markit Comp PMI Final Markit Services PMI Final Markit Comp PMI Final Markit Services PMI Final Markit Comp PMI Final Markit Services PMI Final Consumer Confidence Total New Vehicle Sales Markit/CIPS UK Services PMI Retail Sales MoM Retail Sales YoY Retail Sales MoM Retail Sales YoY Retail Sales MoM Retail Sales YoY Retail Sales MoM

Trading Street Magazine

January 17, 2015

TR TR TR TR CH GB EA EA IT IT BR BR US US CA CA SG US US MX US US US JP CN IN RU

JAN JAN JAN JAN JAN JAN DEC DEC JAN JAN DEC DEC 1/28/2015 1/28/2015 DEC DEC JAN JAN DEC JAN

JAN 1/1/2015 1/1/2015 JAN 1/1/2015

Country

Reporting Period

ES IT FR FR DE DE EA EA ID ZA GB AT AT BE BE EA EA FI

JAN JAN 1/1/2015 JAN 1/1/2015 JAN 1/1/2015 JAN JAN 1/1/2015 1/1/2015 DEC DEC DEC DEC DEC DEC DEC

8.17% -0.44% -0.76% 6.36% 54.00 57.60 -0.30% -1.60% 0.00% 0.00% -5.80% -0.70%

8.01% 0.40% 5.84% 54.17

-1.39% 0.07% 0.16% -1.16% 0.06%

-0.40% 1.90% 49.60 -0.70% 55.30

2.67% 50.68 55.16 -0.34% 55.51

0.25% 16.92M 51.70 53.40 51.10 45.80

17.1M 51.31 53.21 49.83 46.95

Previous 54.30 49.40 49.70 50.60 52.00 52.10 51.40 51.60 116.50 51,461.00 55.80 -0.50% -2.30% -0.20% 0.70% 0.60% 1.50%

Survey

Forecast 59.28 50.01

115.80 56,543.77 57.28 1.24% 0.79% -0.01% 0.62% -0.40% 1.03% 0.39% Page 35

2:00 2:00 2:00 3:00 4:00 4:00 4:00 4:00 5:15 6:45 6:45 7:00 7:00 7:00 7:00 7:00 7:00 7:30 7:30 15:50 15:50 16:00 16:30 16:30 16:30 17:00 17:00 17:00 17:00 17:00 19:00 19:00 Thursday February 05 2015 0:30 0:30 0:30 1:00 2:00 3:30 4:00 4:00 4:30 5:00 5:00

Retail Sales MoM Retail Sales YoY Retail Sales MoM Unemployment Rate HSBC Composite PMI HSBC Services PMI MBA Mortgage Applications MBA 30-Year Mortgage Rate Adp Employment Change Markit Composite PMI Final Markit Services PMI Final Ivey PMI s.a IBD/TIPP Economic Optimism ISM Non-Manufacturing PMI ISM Non-Manufacturing Business Activity ISM Non-Manufacturing Employment ISM Non-Manufacturing Prices Crude Oil Stocks Change EIA Gasoline Stocks Change Foreign Bond Investment Stock Investment by Foreigners HIA New Home Sales MoM Retail Sales MoM Inflation Rate YoY Inflation Rate MoM Inflation Rate YoY Inflation Rate MoM Core Inflation Rate YoY Inflation Rate YoY Inflation Rate MoM GDP Growth Rate QoQ GDP Growth Rate YoY

Unemployment Rate Industrial Production YoY Industrial Production MoM Business Confidence Retail Sales MoM IMACEC Economic Activity YoY Interest Rate Decision BoE Interest Rate Decision Challenger Job Cuts Inflation Rate YoY Inflation Rate MoM

AT SE SE ID PL CL PL GB US RU RU

JAN DEC DEC Q4 DEC DEC

5:30

Balance of Trade

CA

DEC

Page 36

FR FR PT PT BR BR US US US US US CA US US US US US US US JP JP AU AU TW TW CO CO PH PH PH ID ID

DEC DEC DEC Q4 JAN JAN 1/24/2015 1/31/2015 JAN 1/1/2015 JAN JAN FEB JAN JAN JAN JAN 1/31/2015 1/31/2015 1/31/2015 1/31/2015 DEC DEC JAN JAN JAN JAN JAN JAN JAN Q4 Q4

Country

Reporting Period

JAN JAN JAN

0.80% 0.70% 3.00% 13.10% 49.20 49.10

0.04% 1.10% -1.41% 12.70% 49.85 50.13 52.35% 3.61% 233K

241K 53.50 53.30 55.40 51.50 56.20 57.20 56.00 49.50

54.96 49.55 59.01

12.9M -7010.6K ¥ 1279.3B ¥ -2839.6B 0.10% 0.61% -0.08% 3.66% 0.27% 2.30% 2.70% -0.20% 2.96% 5.01% Previous

0.61% 0.40% 0.21% 3.72% 1.28% 2.27% 2.31% 0.88% 1.15% 4.78% Survey

10.20% -5.00% -0.20% 2.30% 1.30% 2.00% 0.50% 32.64K 11.40% 2.60% CAD -0.64B Trading Street Magazine

Forecast 10.70% -2.58% -1.55% 10701.00% -0.16% 1.75% 0.50% 61K 13.02% 1.18% 36882.00% January 17, 2015

5:30 5:30 5:30 5:30 6:00 6:00 7:30 18:30

Balance of Trade Continuing Jobless Claims Initial Jobless Claims Unit Labour Costs QoQ - Prel New Car Registrations MoM Business Confidence EIA Natural Gas Stocks Change HSBC Manufacturing PMI

US US US US BR MX US HK

DEC 1/24/2015 1/31/2015 Q4 JAN JAN 1/31/2015 JAN

20:00

Balance of Trade

MY

DEC

21:00 22:45 23:00 23:00 23:00 23:00 23:45 Friday February 06 2015 0:00 0:00 0:00 0:00 0:00 0:00 0:00 0:15 0:15 0:30 0:30 1:00 1:00 1:00 1:30 2:00 3:00 3:00 4:00 5:15 5:30 5:30 5:30 5:30 5:30 5:30 5:30 5:30

Leading Composite Index - Prel Consumer Confidence Factory Orders MoM Industrial Production YoY Industrial Production MoM Balance of Trade Balance of Trade

JP CH DE DE DE CH FR

DEC Q1 DEC DEC DEC DEC DEC

-2.40% -0.50% -0.10%

Country

Reporting Period

Previous

Balance of Trade Industrial Production YoY Industrial Production MoM Industrial Production YoY Retail Sales MoM Retail Sales YoY Halifax House Price MoM Retail Sales MoM Retail Sales YoY Manufacturing Prod YoY New Orders Industrial Production YoY Industrial Production MoM Manufacturing Prod YoY Balance of Trade Balance of Trade Inflation Rate YoY Inflation Rate MoM BOE Quantitative Easing Housing Starts Building Permits MoM Employment Change Full Time Employment Chg Part Time Employment Chg Participation Rate Unemployment Rate Average Hourly Earnings MoM Average Weekly Hours

Trading Street Magazine

January 17, 2015

AT DK DK ES TR TR GB CH CH NL SE NO NO NO GB GR BR BR GB CA CA CA CA CA CA CA US US

NOV DEC DEC DEC DEC DEC JAN DEC DEC DEC DEC DEC DEC DEC DEC DEC JAN JAN JAN DEC JAN JAN JAN JAN JAN JAN JAN

$ -39B

$ -41.9B 2021K 356K

25.60% 52.31

52.26 -529.1Bcf 50.95

50.30 MYR 11.13B

574560.00% 10348.00% -356.00% 0.50% -0.91% 0.14% 110654.00% € -4.2B

€ -3.2B Survey

Forecast

€ -104.6M -1.36% 0.10% 0.00% 0.60% 3.80% 0.90% 0.20% -1.20%

-12319.00% -0.88% 0.21% 2.21% 0.66% 4.39%

4.20% 1.90% 4.00% £-1.4B € -1.46B 6.41% 0.78% £ 375B 180.6K -13.80% -4.3K 53.5K -57.7K 65.90% 6.60% -0.20% 34.60

4.62% 0.84% 3.41% £ -2B € -1.8B 6.26% 0.60%

-0.36% -0.20% 1.22%

185.2K 20.3K 35.8K 65.87% 6.60% 0.02% 34.58 Page 37

5:30 5:30 5:30 5:30 5:30 5:30 5:30 6:00 12:00 14:30 21:00 22:00 Saturday February 07 2015 23:00

Page 38

Government Payrolls Labor Costs QoQ Participation Rate Manufacturing Payrolls Non Farm Payrolls Nonfarm Payrolls - Private Unemployment Rate Consumer Confidence Consumer Credit Change AIG Construction Index Coincident Index - Prel Foreign Exchange Reserves

Balance of Trade

US US US US US US US MX US AU JP ZA

JAN Q4 JAN JAN JAN JAN JAN JAN DEC JAN DEC JAN

12.0K

14.5K

62.70% 17.0K 252K 240K 5.60% 93.60 $ 14.08B

62.75% 16.4K 280.4K 286.7K 5.61% 92.84 $ 16.3B

Country

Reporting Period

Previous

FI

DEC

€ -115M

10857.00% $ 49.1B Survey

Trading Street Magazine

Forecast € -24.7M

January 17, 2015

Artificial Intelligence, Machine Learning, and Big Data - How Do They Apply to Trading?

By Justin Cahoon Co-founder/COO, Inovance

A

rtificial intelligence, machine learning and Big Data seem to get thrown around in everything from business intelligence to financial services, but what do they really mean and how are they applied to trading?

Artificial intelligence is used where machine learning should be and machine learning is often confused with data mining. The goal of this article is to clarify these buzzwords, explore how they apply to trading and then define a subcategory for data mining.

Clarifying the Buzzwords

Artificial intelligence, a subfield of computer science, has three main categories; machine learning, curated knowledge and reverse engineering the brain.

Machine learning is a method of developing algorithms Trading Street Magazine

January 17, 2015

Page 39

for recognizing patterns within data. Data mining, also a subfield of computer science, is the whole information discovery process; from preparing and cleaning data to analyzing, post processing and visualizing your results.

Data mining uses techniques developed in machine learning, i.e. machine-learning algorithms, and statistics. Here is a diagram of the big picture:

A machine-learning algorithm is better than you or me at analyzing data and discovering valuable information The reason why big data gets thrown into the mix is because data mining and machine learning often involves large and/or complex data sets where traditional data management and processing tools will not work.

For example, if you wanted to capture, curate, store, and analyze blog posts over the past 10 years for a sentimental indicator, traditional data management and processing tools probably would not cut it.

Applying the Buzz Words to Trading

When making an investment decision, we go through 3 steps: 1. Idea: Our intuition tells us there is some relationship, or predictive power, between a few indicators and the price of an asset.

2. Analysis: We analyze the relevant data, we can do our research in a chart, Excel, or statistical analytics tools like R or Matlab.

If we could improve any one of these three steps, we could improve our investment decision. Step 1 is really up to you; there is no substitute for your intuition.

Improving your order execution, in step 3, unless you are in the high frequency space where every millisecond makes a difference or you need to break your orders down to minimize the impact in the market, is not going to improve the performance of your trade. Step 2, the analysis step, is where we can make the biggest impact. How can we make our analysis as good as possible? This is where the buzzwords come in.

I

n short, a machine-learning algorithm is better than you or me in analyzing data and discovering valuable information. Instead of scrolling through charts and creating pivot tables in Excel, we can use a machine-learning algorithm to do the work for us. Let’s say we have an intuition that Google’s Price/Earningto-Growth (PEG) ratio, the MACD and StockTwit sentiment have a relationship to Google’s stock price. I could spend a lot of time analyzing that data myself or I can use an algorithm developed in machine learning to mine for patterns for me. These algorithms (decision trees, support vector machines, Naive Bayes classifiers, etc.) uncover the relationship between the indicators I want to analyze and their affect on Google’s stock price.

The results from the algorithm’s analysis are objective and mathematically supported. Here is a step-by-step tutorial in R using a Naive Bayes algorithm and a few

3. Decision: We trade. We make an investment decision, an educated bet, based on our analysis.

Page 40

Trading Street Magazine

January 17, 2015

technical indicators to predict the price of AAPL. You can download R for free and copy and paste the code to do it yourself! It will give you a good understanding of the overarching concepts and general process.

O

ne of the main reasons why these technologies are taking time to trickle down to the individual investor is because the results are difficult to interpret.

For example, it is difficult to translate beta coefficients, decision matrices, and probability density functions to actionable trading logic, something that a trader without a background in machine learning or data mining is going to understand and be able to use. This is why I would like to introduce a specific subset of data mining that is perfect for the individual trader.

Data Mining in Expressive and Human Readable Form Data mining is composed of 6 subcategories:

Data mining has a wide application in the financial industry. For example, anomaly detection is used to detect insider trading and fraud, and clustering can be used for portfolio optimization. As it turns out, association rule learning is a perfect fit for traders.

Association rule learning translates the complex output of a machine-learning algorithm into an expressive and human-readable form. You get an objective, mathematically supported analysis that is easy to understand, and most importantly, easy to apply to your own trading. You have also created a one-of-a-kind strategy, presented in a series of “if-then� statements, that is based on your intuition and fine-tuning. For example, Artificial intelligence, machine learning, data mining, and big data have attracted so much attention recently due to the advantages they can provide to a variety of industries. Within the financial industry, these buzzwords have wide applications. For traders, there is a particular subset of data mining that can be utilized to improve upon our trading. We are used to clear and concise trading rules. We are also used to analyzing charts and row-after-row in Excel. To get the analytical capabilities within data mining and machine learning with a clear set of rules as the output, we can utilize association rule learning.

Combining your intuition with machine intelligence gives you the edge you need to create robust, objective, trading strategies.

With TRAIDE, you can use Artificial Intelligence, machine learning and Big Data to build your next strategy.

Trading Street Magazine

January 17, 2015

Page 41

Are the Saudis Hoisted on Their ‘Oil Petard’?

By Bill Hoerter of Trading Street

Saudi Arabia is sitting on arguably the largest proven oil reserve in the world their lone exportable commodity.

Page 42

Trading Street Magazine

January 17, 2015

Ok, Saudi Arabia has all the Oil.

Some people consider them a marginally bad actor on the political stage. They are sitting on arguably the largest proven oil reserve in the world – their lone exportable commodity. Let’s look today at what is likely the current strategy and where this is possibly going to take the global balance of power as it relates to energy.

As the most significant source of funding of Sunni terrorist groups worldwide according to many sources, including Hillary Clinton in 2009, and a Guardian article from December 5, 2010, yet they remain one of the major global commercial players. OPEC, created in 1960, for the sole purpose of unifying and controlling the price and distribution of crude oil, acted against the pricing of the seven largest multinational oil producers in the world at that time. Saudi Arabia instantly became a player on the global capital scene.

Their state oil company, Saudi Aramco is now valued at over $10trillion by the Financial Times, making it the world’s most valuable company; thus the Kingdom and its benefactors are major players on all financial stages.

These two particulars about Saudi Arabia demonstrate how powerful, yet iconic, this closely held kingdom is on the world stage.

wide so far this year. Experts are beginning to put this pressure at the feet of collapsing oil prices. No less an authority as Jeff Grundlach of DoubleLine Capital (a $65B Hedge Fund), who Reuters says correctly predicted government treasury yields would collapse in 2014; this week warned that there is a possibility of a “true collapse” in US capital expenditures and hiring if the price of oil remains at current levels of $45 and lower.

The thought is that the large majority of growth in the US has been in the energy sector – with much of the remaining economic vectors being flat.

On the other hand, Dan Steffens of Oilprice.com makes a case for the age of “cheap oil” being over, yet we all have the exact same data on our desks. His arLet us assume Saudi Arabia is extremely intergument is that there is only so far oil can fall before a ested in maintaining global relevancy and wave of market forces kick in to drive prices wealth retention. So are they missing someback up again. Among his points of marketthing in this collapse of oil prices these past Saudi Arabia logic are that Saudi Arabia requires $90-95 months? They announced maintaining oil requires oil to balance their budget. Yet he does adproduction quotas across the OPEC board mit that, yes, they can afford to reconfigure at their Nov 2014 conference in Vienna, in $90-95 oil to their budgetary demands – since as we said the face of prices falling under $75bbl, a balance their earlier, they have all the money anyway. We 26% 3-month fall at the time. We would arbelieve it is foolhardy to act as if Saudi Arabudget gue that this is the flip side of the coin upon bia follows normal economic practices so which Saudi Arabia has always operated – we dismiss this argument. He also notes absolute control over the world price of oil. The sigcorrectly that most of the newer, more leveraged US nal to maintain production is arguably the key to the oil extractors require somewhere between $50-65 oil to current price of crude near $45bbl. Before we think of remain in business beyond 2015. Apparently this fact them as a world benefactor, the drop in prices is putting is also a contributor to the need to rally prices at some a significant amount of cash back in the pockets of the point. consuming public, let’s look closer at the ramifications of this lowering of prices. owever, our opinion is that the potentially unfortunate loss of some of these companies is absoMarket Forces at Work lutely natural to normal market forces and as long as There is a heavy weight on all markets world-

H

Trading Street Magazine

January 17, 2015

Page 43

lapse of Russia’s Ruble due to its pegging to the price of energy – their sole export and the basis for the majority of their GDP – is a factor that might give rise to further acts of sovereign aggression which is the kind of unknowable fact that could beget wild price spikes in oil. To this we will add the latest factor, the rise of active militant Islamic terror activity to potential price destabilization, and how it ties back to the core of this article.

governments remain out of the equation from either a taxation or regulatory standpoint capitalism will maintain equilibrium over the marketplace. Larger companies will absorb the viable smaller firms, and balance sheets will be rewritten. The addition of cheaper oil as a stimulus to the average working family and smaller energy-dependent companies is a factor that many of these experts are overlooking.

Cheap oil is a boon to society in ways that can lead to a boom in other sectors of the economy in the US and around the world. It is essential that we maintain expansion and production, even at these relatively cheap prices, to increase consumer spending, industrial production, and ultimately capital expenditures in sectors other than energy. This is the new paradigm for free societies and we see no reason to think otherwise – unless other wild cards come into play. Let us have a look at these possible factors.

Geopolitics – a Large Part of the Equation In the December 13, 2014 issue of Trading Street’s magazine, this author noted the unpredictability of Putin’s Russia in the theater of global cheap oil. The colPage 44

The facts are that the majority of Salafist Jihadists such as al-Qaida, ISIS and the Afghan and Pakistani Taliban – are essentially acts of state-sponsored terrorism, funded in large part by Saudi Arabia, according to Wikipedia and a December 8, 2008 article in USA Today. If allowed to flourish in a vacuum, the destabilization of world peace by these Jihadist bad actors would potentially collapse markets of all types worldwide.

This would play right into the hands of the old OPEC paradigm, in which they could spike oil prices by simply announcing production cuts – therefore punishing those free economies that they deemed unworthy. (Remember that OPEC weaponized the price of oil both to counter lower prices but also to hurt those “free-world” economies that supported their supreme moral enemy, Israel in the 1960s and 70s).

We believe that a miscalculation has occurred,

however, and that the Jihadist factor will not ultimately be a major player in the spiking of oil prices. World opinion has now shifted hugely against radical Islamist acts of terror. In spite of the fact that our current US administration is slow to acknowledge this fact, that is decidedly not true of other major sovereign powers, if the “Peace Rally” in Paris this past weekend is any indication. Government agencies worldwide are steeling themselves against the bad actors, and this is taking away the element of surprise as the Paris events noted.

The increasing unavailability of the “unrest factor” for the OPEC gang and the Saudis in particular, further lend stabilizing factors to oil prices going forward. Let us note also that non-OPEC production such as US shale fields, Canadian sand fields, and Central American wells – not to mention the world’s use of Trading Street Magazine

January 17, 2015

increasingly more fuel-efficient transportation – will be the ultimate end of the era of Oil as a weapon.

Ironically, therefore, the fact that we have been for decades under the sword of expensive oil has led us to begin processing ourselves out of that era on its own merit. This, friends, is how free-markets, and free thinking societies cope with those who would do us harm simply because we exist. It is now up to the Saudis and their like-minded compatriots to adapt to the

free world that they have helped foster. Radical Jihadist will now be addressed, and their acts of terror will be countered, and ultimately defeated. Oil as a commodity will begin to fade as the preferred weapon of economic warfare. Prices will rise and fall due to market forces familiar to traders and investors worldwide.

For that, we owe the Saudis as much thanks as scorn.

About Bill Hoerter

Beginning on the Mid-American trading floor back in the late 70’s when prices were still recorded on chalkboards, Mr. Hoerter found himself on the trading floor of the CME in the 1980’s in roles varying from B-arbitrage currency pit clerk/trader, to Broker-Member of the exchange.

Click HERE to learn more about Mr. Hoerter

Trading Street Magazine

January 17, 2015

Page 45

CES 2015 Review

Page 46

Trading Street Magazine

January 17, 2015

Technology: An Atomic Explosion Beyond Anyone’s Control

By Tim LuCarelli

The exponential advances in technology are like the ever expanding atomic splitting rings in a nuclear explosion begging the question at what point will humans run out of advancing ideas? Last week wrapped up the CES show in Las Vegas, the largest technology show in the world where companies come to show off their latest inventions. Some of those innovations leave you wondering why anyone would spend the money and time on such stupidness while others are truly amazing.

What would be outstanding is if we could predict which innovations were going to be the next iPhone and invest in those companies. Here is a look at some potentials from CES and the reason why they could be good investments.

8K 3-D TV’s

If you have been to an electronics store in the last year then you most certainly have seen the 4K TVs; very impressive clarity. While noticeably better than 4Ks the difference between an 8K screen and 4Ks are not the wow factor like the difference between the 1080p and 4Ks; there is a point at which the human eye cannot distinguish much of a difference. At least that was the thought until Samsung showed off their 8K 3-D glasses free TV. Another rage at CES was the Virtual Reality headsets like Oculus, however they are big bulky and

you have to wear them to get the experience, like 3-D glasses. With the Samsung 8K 3-D TV, realty is almost touchable.

Samsung has been at the cutting edge for many electronics over the years but they truly are the leader in TVs. Like Apple computer Samsung is the innovator and everyone is the copycat. As the global economy starts to pick up people will spend more on entertainment, especially home entertainment, namely TVs. Investing into an innovative leader in the electronics industry could be a good long term play and Samsung has pulled back from its highs in 2013. They have fairly strong financials with a reasonable P/E of 8.11, debt to equity of 8.53 and plenty of cash on hand. With its innovative R&D and well managed financials finding a technical buying opportunity below the 1,200 level per share with a 2 year time horizon and an 1,800 price target would yield a 25% per year average return.

Printed Food

Star Trek food replicators have finally arrived.

While not what everyone was expecting it is none-theless a step into the future. Going on sale later this year XYZ Printing Company will have a consumer printer to produce cookies, pizza and many other tasty treats.

While you may not be able to speak to it asking for an “tea, Earl Grey, hot” you will most certainly be able to impress your friends with some really cool tech.

XYZ Printing Company is owned by New Kinpo Group, a Taiwan conglomerate, so investment into

Trading Street Magazine

January 17, 2015

Page 47

this particular company may now be feasible or direct.

However, there are a few other publically traded companies that do not currently have 3-D food printers, but are working on them. 3d Systems Corp (symbol DDD on the NY Stock Exchange) has a development agreement with Hershey, Foodini by Natural Machines is still in the development stage with private funding and 3DVentures is currently raising money through a Kick Starter campaign.

Stick N Find

While much of the technological advances we see are really cool visually there are many that meet the practical side of life with the utmost necessity. A Blue Tooth device that allows you track its whereabouts within a 100 foot (30 meter) range. These little sticky buttons can be placed on just about anything allowing you to track its whereabouts in seconds; the TV remote may be a good starting point.

The buttons sell for $50 for two buttons and can be used with any Blue Tooth device. Like any technology prices will drop as manufacturing kicks up. These are the types of things that could very easily become mainstream without anyone really talking about them; it could be the next Kleenex type product. A brand name that becomes common verbiage. While the company is getting a name for its consumer products it also has a business to business division that caters to stores want to know more about its customer’s movements allowing them to engage people on a more personal level.

Stick N Find is currently privately owned but they are a company to watch for a future IPO.

Thync Mood Enhancer What if you could feel great without drug or alcohol enhancements? What if there was a wearable device that could take you up when you were feeling down or better yet calm you down when you got upset. Thync Mood Enhancer may just be the non-drug/non-alcohol solution.

With promises to unlock the mind’s potential Thync came together with some of the leading minds in neuroscience creating a device from which potential human production as well as medical applications could be achieved without drugs. Unfortunately for investing purposes the company is funded by venture capitalists so here again a potential IPO should be a consideration.

In 1915, 100 years ago, the average person used a horse and buggy to get around, telephones were only for a select few, running water was concentrated to large cities and no one ever heard of TV; pretty much the same as it was 100 years earlier in 1815. Technological advances are truly exponential; newer, better, bigger, smaller – innovation feeds on itself. What if you could buy one share of stock of the 25 most innovative companies of today and put them away for your great grandchildren to sell in 2115, which ones would they be? Any of these companies?

About Tim LuCarelli He began his investment career trading Swiss Franc and Deutschemark futures on one of the early electronic platforms in the late 1980’s. His career progressed naturally to interest rates, energies, equities, and derivatives – which, in addition to his FX background -- all helped build the broad base on which he launched his financial modeling and quantitative analysis companies.

Click HERE to learn more about Mr. LuCarelli Page 48

Trading Street Magazine

January 17, 2015

The 7 Killer Trading Mistakes That Doom Traders From Ever Becoming Consistently Profitable

By Benjamin Lee - CEO Think Trade Think

Part two in a seven part series.

As I mentioned in the previous article, trading is one of the most difficult yet most fulfilling endeavors anyone may ever embark on. It takes a dedication, patience, flexibility, and even a little bit of stubbornness to become a successful trader. There will be times where you are going to feel like giving up but if you can weather the storms you will join a very elite fraternity of people that can make money trading. I know of several occasions where I was really close to giving up but it was something inside of me that just told me to keep pushing forward.

I knew I just needed to figure out what traits successful traders had as compared to those that were unsuccessful.One of those traits that I see in every successful trader is confidence in themselves and their ability to interpret the market. They absorb all of the information that is available to them and filter it through their own system. They do not rely on other people’s opinions wholeheartedly. The major difference that I see between professional and novice traders is that the novice traders take whatever investment advice they receive at face value. They do not consider all the different angles and possibilities and are willing to follow blindly.

There is always so much information flowing from “talking heads”, “gurus”, and other people that just want to be heard or make a name for themselves. For example, now some people are predicting that there will be a global economic collapse when the US Dollar ceases being the world’s reserve currency or that the S&P 500 will lose 50% of its value within the next 12 months. While on the other hand, you have some people predicting that the US Dollar will continue its global dominance and that the S&P 500 will break 2400 in the next 12 months.This leads us into Killer Mistake #2.

Killer Mistake #2: They listen to too many people for trading or investment advice.

When you turn on CNBC or type “investing” or Trading Street Magazine

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“trading” into Google, there is no shortage of people giving trading and investment advice. There is talking head after talking head telling you about how the market is surging up or crashing down or giving their analysis of the market. With so many different viewpoints, it’s very difficult to create a sound investment or trading strategy let alone stick to it. Once you enter the market, you may hear or read several viewpoints that are opposite of your trade. That obviously will erode your confidence in your analysis of the trade and will make you second guess yourself. You need to be able to handle and discern all of the information, whether it supports or disproves your position, and make an objective decision based on the facts.

Another problem most traders face that will hurt them in the long run is not finding a suitable mentor. If you look at the path of every successful person on the planet, at some point, they had a mentor to teach and guide them through their journey. Having a mentor is very important because they understand the path you have to take to reach your goal and can show you the best way to reach it. They can provide you with a thirdperson perspective that is unaffected by your emotions and see things that you might be blind to. I would recommend finding a mentor that has exactly what you want and learn from them. You do not have to reinvent the wheel, just model what has already been done and you can save a lot of time.

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One issue that arises for most traders is trying to do too many things at once. In trading, there are an infinite amount of different types of strategies, indica-

tors, interpretations and trading styles. It is very easy to get lost in the flood of information. It seems reasonable that the more systems you know, the better your results will be. Personally, I subscribed to that theory and invested in over ten different trading systems. I thought the more I knew, the better my trading would become. The exact opposite occurred and I didn’t improve my results until I simplified my trading system.

Finding one system and financial instrument to trade and becoming an expert with those tools is the best way to learn. You can add additional trading systems and filters after you have mastered each trading system and instrument. Just make sure you find a system that is based on the fundamentals of the market and auction principles.

About the Author, Benjamin Lee: The the next “Master Market Psychologist” Benjamin Lee of ThinkTradeThink.com understands the institutional trading mindset enlightening the “average trader” to the pathways trod by true working professional traders.

• 8-Years Professional trading Experience • Trades 2 Hedge Funds • Has Traded Positions in Excess of 1 Million Shares • Bachelor’s in Finance • MBA in Entrepreneurship Click below to learn more about Mr. Lee

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Key to Success

“Tell me and I forget, teach me and I may remember, involve me and I learn.�

Benjamin Franklin

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Sentiment and Elliott Wave Analysis

By Thierry Laduguie - Chief trading Strategist, BetterTrader

I

have been using Elliott wave analysis for years to forecast the stock market. I remember the first time I came across Elliott wave analysis was in 1997, I was reading a book called “Technical Analysis of the Futures Markets”. As I began to count the waves I quickly became a devoted Elliott wave analyst. Elliott wave theory was discovered by Ralph Nelson Elliott in the 1930’s, he was an accountant–turned-stock-marketanalyst who noticed that the stock market followed a recurring and predictable pattern; he called this pattern the wave theory. In the financial markets these patterns take various shapes, the most common being a cycle occurring in eight waves, consisting of five waves up and three waves down.

The most important aspect of Elliott wave is that it works well with investor sentiment. In general the end of a five-wave pattern coincides with an extreme in sentiment. For example, at the top of a five-wave sequence sentiment will be extremely bullish and at the bottom sentiment will be extremely bearish. This makes sense if you think about it, the more a market rallies the more it makes investors feel “safe” and the more investors join the rally. This explains why bullish sentiment increases as the rally progresses.

But as we know, rallies don’t go on forever as we have seen recently - I am referring to last year’s stock market rally that ended on the 29th December 2014.

On that date and during the previous weeks bullish sentiment reached an extreme on various measures. My own sentiment indicator reached an extreme in bullish sentiment on 21st November. Ironically it’s when there are too many bulls that the rally ends. Bullish sentiment is healthy for the stock market as it enables the rally to

... at the top of a five-wave sequence sentiment will be extremely bullish Page 52

continue but too much of it is never a good thing. In fact, excessive bullish sentiment is a sell signal.

This led me to develop my own sentiment indicator a few years ago, the Bullish Trend Indicator (BTI). I was looking for a way to measure excessive sentiment.

The BTI does the job. Today my primary tool to forecast the stock market is sentiment analysis, when combined with Elliott wave analysis it can be a powerfully accurate trading indicator. My secondary tools are technical analysis indicators like the relative strength, directional movement index and the MACD. The signals I use are triggered when my sentiment indicator and the Elliott wave confirm each other.

This is how it works: The BTI is either rising or declining Rising BTI = bullish sentiment, in this situation the short term trend is up Declining BTI = bearish sentiment, in this situation the short term trend is down To reduce the number of false signals I use a variation of the BTI (34-day BTI) as a filter.

Sentiment becomes bearish when the daily change in the BTI turns from up to down AND the 34-day BTI is declining. After a bearish signal has been triggered, both BTI and 34-day BTI will continue to decline. This combination of declining indicators indicates that senTrading Street Magazine

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timent is bearish. During this period most stocks will perform poorly, the stock market is likely to go down.

Sentiment

will turn bullish when the daily change in the BTI turns from down to up AND the 34day BTI is rising. As long as both the BTI and 34-day BTI continue to rise I assume that sentiment is bullish. During this period most shares will outperform the broader market and the stock market is likely to rise.

I did some research in the UK market and the statistics show that when sentiment is bullish, the FTSE 100 goes up by an average 1.5% in the short term and when sentiment is bearish, the FTSE 100 goes down by an average 0.6%.

My sentiment indicator gives me the direction of

the stock market, for example when it is bullish I assume that the trend is up. This helps me interpret the Elliott wave count on the chart. The trend remains in place until sentiment reaches an extreme. On 21st November 2014 sentiment reached an extreme (above 400 extreme in bullish sentiment), that was signaling an imminent trend reversal. As you can see since the signal was given the S&P 500 has turned down. During the decline sentiment turned bearish on 9th December, as I write sentiment is neutral. The S&P 500 is still in a long term bull trend but near a major top. The index has struggled to move above 2080 recently, investors are quick to take profits when the index approaches that level. They are concerned by the declining oil price, the selloff in copper and the fact that interest rates are set to rise in 2015. For these reasons there is good chance sentiment, as defined by the BTI, will turn bearish again as we move forward into 2015.

About the Author: Thierry Laduguie

Thierry joins Trading Street as an investment advisor, analyst, guest speaker and writer who is widely published in the UK and Europe for his mastery of Elliot Wave analysis and the predictive powers of his proprietary indicators in a number of markets.

A member of the UK Society of Technical Analysts and an active advisor to various private clients, Mr. Laduguie has been published by such well known publications as Fleet Street Publications and as editor of Spread Trader, as well as many industry websites on the subject of trade theory, technical analysis, and the fundamentals of trading equities.

He currently is chief trading strategist at BetterTrader.co.uk and is soon to be unleashed as a contributor to Trading Street, your premier (global) investment website.

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Educational Editorial

The whole purpose of education is to turn mirrors into windows.

Sydney J. Harris

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Is the Forex Market Worth Trading?

By Tony Wiedenheft - President The Lions Den 4X

Is Extra Income in Your Future?

Have you ever thought about trading the Forex market? Maybe you need to make some extra income or make a career change. You may have heard about Forex asking yourself if it would be worth the effort? In the world we live in today it is getting increasingly difficult to supplement ones income, let alone try to start up one’s own business from scratch. If you needed say an extra $400 a month to make ends meet you could go and get a part-time job at near minimum wage, spend extra hours away from the house, family and have added expense to go back and forth to work. You could try to go back to school to upgrade your education or learn a new vocation. There would be a cash outlay and probably take several years to achieve your goal. Also there would be some type of structure in the course that would keep you focused and allow you to follow “The Plan”.

Maybe you have dreamed about starting your own business, being your own boss and having unlimited growth potential. That all sounds good, but there again it is going to take time, money and effort. Anything worth achieving in life is going to take effort. As a child growing up we didn’t realize it but the majority of people do better with structure of some kind. Whether it was how to clean ones room, do homework or cook a meal. There is, in a majority of cases, a better outcome when there is leadership to follow, whether it came from a family member or a mentor. Learning in most cases is better if you follow the footsteps of someone that has been where you want to go; in one manner or the other. One could try to build a business with the field of knowledge they have or head in an entirely new direction. It would be nice of course if the new field of choice had a reasonable startup cost. How many thousands of dollars does it cost to start up your own business from scratch?

What Business is the Correct Business?

In looking for a new field one might come across something that seems too good to be true. The position may be touted as having a potential for unlimited Trading Street Magazine

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income. It may have a small startup cost, say under $ 5,000. If you told that to someone in your family or one of your friends they would all probably say sit down, take a breath and come back to reality.

Take a look at the Forex market? If you asked

100 people probably 99 out of 100 have never heard of it. You may come across someone that has heard of it and their uneducated response could be “yes it is like the stock market don’t go near it you will lose your shirt”. Let’s try to set the story straight.

The Forex market is a worldwide market. It is bigger than all other markets in the world combined; USA, Asia, London stock markets. It produces $ 5.5 trillion dollars a day in transactions. It is open from Sunday at 5pm EST to Friday at 5pm EST, or 24 hours a day five days per week. The market is ambivalent to how much one makes or how much one loses. With that last statement in mind, the Forex market will produce more selfmade millionaires than any other business in the world in the next 10 years. Now let us get this straight. We are looking for a startup business that doesn’t cost an arm and a leg. It needs to fit into our work timeframe and has unlimited income potential. Someone pinch us, we think we may be in heaven. Could this be it? Well let’s see. What does the Forex market have to offer someone that is willing to put forth the effort needed to reach ones goals?

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1. Unlimited income potential (it is only up to you) 2. Set one’s own hours (work anytime from Sunday 5pm - Friday 5pm) 3. Low startup cost (need a computer) 4. No added cost to get to work 5. No boss to answer to (be your own!)

6. No customers to service 7. No startup inventory cost

Now that we have found this “perfect” opportunity, so we think, what do we need? As we start our new business much like we went through life as children years ago, we know very little. Everything is a new adventure and we are looking for some guidance. It would be nice to find someone that has been where we are now and is headed in the direction we want to go.

The expert traders and mentors at Trading Street have all been where you are and know how to get to where you want to go.

Where One Goes Now! Well you are now at the end. You started out looking for some additional income to help you cope with your daily life challenges or a carrier change. You listed your options, good and bad. You found an opportunity that sounded too good to be true, met all of your needed requirements and even found a place with mentors willing to give you a helping hand to reach your goal.

Now your question is this. What are you willing to do?

Remember one thing:

When you set a goal for yourself You have to make up your mind to do What is necessary to get where?

You want to go You don’t achieve anything worthwhile By making excuses and complaining About how hard it is!

The Lions Den 4X was started by Tony Wiedenheft in 2003 when a family health crisis demanded he raise some additional funds over and above what he was taking home as a Florida construction supervisor. A friend suggested he look at Forex as a means to an end, and after going to a live FX seminar in West Palm Beach, realized a new passion for trading. After 2 years of saving cash, he was $4K lighter, but in possession of a new system, one that he mastered in 2 months, to the extent that he could quit his construction job to trade full-time.

Read more about The Lions Den 4X and Tony Weidenheft on Trading Street: Click HERE

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The Collapse of a Financial Giant

By Tim LuCarelli

Switzerland has traditionally been the envy of

the financial world with stable growth, a very secure banking system and some of the most respected companies in the world. The country, enduring the advance of the Nazis during WWII by staying neutral, was one of a very few safe havens at that time. Since WWII they have managed to proliferate as a research Mecca and provide for their people one of the highest standards of living in the world.

One of their key attributes has long been their banking secrecy laws. The law allowed Switzerland to attract wealth at the expense of, and to harbor clients from, other countries’ political instabilities and high tax rates. It became a safe haven not only for wealthy executives wanting to hide money but also criminals and tax dodges. Over the last couple of decades governments who have “suffered” the benefits to expatriated funds, namely the US, Germany and the UK, have pressured Switzerland to chisel away at the framework of those laws until today there is very little secrecy left. Now, if any government wants information on depositors they more-or-less only have to ask.

In the severe recession of 2008/2009 Switzerland managed to hold its economy together as the rest of the world sank. Surrounded physically by Europe and having a large percentage of its income derived from European sources, Switzerland eventually succumbed to the downward economic woes of its neighbors and largest trading partners.

Interest rates in 2009 were brought all the way down to zero by the Swiss National Bank (the SNB or Switzerland’s Central Bank) and stayed at zero until December 2014 when the SNB took them to negative 0.25 percent.

Smartest People

Nearly everyone within a country is expected to trust their Central Bank to make the correct decisions keeping their country’s economy stable and on an upward growth path without overheating inflation that can erode its citizen’s assets. That trust is shared by companies, people from within the country’s borders as well as those in other countries. Of particular importance is maintaining consistency, as this fosters the creation of a harmonious circle of economic exchange among trade partners whose interest lies in the stability of the currency.

...central banks normally would hire Because of this trust both inside and only the outside a country’s borders, one may assume that central banks normally would hire only smartest the smartest people, whose function is to help maintain financial confidence. Since people these people are suppose to actually be the

Back to 2011, feeling continued economic pressure from Europe, and having interest rates already at zero, the SNB pegged their currency, the Swiss Franc, to 1.2000 Euros. Needing alternative measures to spur growth within its borders the SNB resorted to a very old Page 58

yet tried and true measure of economic stabilization: the currency peg. What this meant was that anytime the exchange rate would trade near or below 1.20 Euros the SNB would buy Euros and sell Francs. In doing so the bank, over a period of 39 months, accumulated huge amounts of Euros. This is the “floor” being referred to commonly in the news of late.

smartest, everyone naturally assumes they will not make any rash decisions or foolish mistakes; certainly none that would hurt their own people.

Shock and Awe

There have been many times that a country’s cenTrading Street Magazine

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tral bank has used immediate and dramatic action to curb a flight of capital that could cause serious detriment to its people. For example, in 1987 the US Federal Reserve provided substantial liquidity to stop a stock market meltdown. The Bank of Japan routinely halted flows in and out of their currency by “shock-style” verbal and physical manipulations of currency. This had happened many times when the yen was at its most volatile over the course of two decades.

But never has a central bank used a kind of immediate shock to hurt its own citizens: wherein on Thursday, January 15th the SNB immediately and without warning removed its own Euro peg of 1.20, allowing the Franc to dramatically and unexpectedly gain value against the Euro and every other currency. The immediate effect of this maneuver resulted in depreciation of over 40% for the Euro against the Swiss Franc. The Swiss stock market over the course of the day tanked heavily, losing over 100 billion Francs of corporate value.

The bottom line is the Swiss economy has been stagnant to the same extent much of Europe has been, and yet their central bank inflicts additional financial pain on its businesses and people. This is interesting at least, and unbelievably short-sighted at the same time.

If these people are supposed to be the smartest around, why would they react so arduously?

If they had heeded the advice of both professional observers and this author, for the past 39 months the SNB should have been taking all the Euros they bought, exchanging them for short Francs, and then, according to their own recipe for protecting their economy, could have exchanged them back for US Dollars. They would then have been holding the USD which they could have eventually exchanged back into Swiss Francs; perhaps even for a profit. This type of swap would have resulted in no net effect to the Euro or the Dollar and would have served to negate any forward risk for the SNB, since the US Economy has been much stronger than the European economy, and the natural process would have been for the Dollar to appreciate against the Swiss Franc.

The Process

The unwinding of the peg to let free market forces dictate the Franc’s value is not the issue; the issue is the way the SNB did its deed. It should have been a slow maneuver taken over a period of time. Just like the Trading Street Magazine

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central banker should not be, and just like everyone expects a central banker to not be, they did the unthinkable and reacted. They reacted to a potential move by the European Central Bank to start quantitative easing thus devaluing the Euro and making it financially unbearable for the SNB to keep the peg.

The SNB could have created the Euro/Swiss/Dollar swap and over a year’s period lowered the peg in increments allowing companies, markets and people to adjust. The impending drop of the Euro would have been absorbed by a stable US Dollar and the SNB would have negated its risk without hurting anyone.

An Economic Blow to the People of Switzerland

While the reverberations have been felt in boardrooms and living rooms around the globe for their actions this past Thursday, the SNB’s results will likely fade over a few days. Unfortunately for the people of Switzerland the full effects will not be felt for weeks or even months. In one day the Franc gained anywhere between 20% and 30% broadly in value against most currencies.

This now means that companies outside of Switzerland doing business with Swiss companies will have to pay 20% to 30% more overnight. Tourists from Europe, of which Switzerland relies greatly for a large portion of its GDP, will have to pay 30% more in everything on their next visit. The shock of this increase will almost certainly cause a recession for the Swiss economy.

In conclusion, at the very least, Thomas Jordan, the Swiss Central Bank President, should be fired, and at the extreme he and the rest of the SNB core decision makers should be jailed for economic crimes against the Swiss people. This type of behavior for a central bank is unconscionable.

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