Tough Week All Around

With the recent downward move in the AUDJPY my robot has been sidelined.

No big deal really but it does point to a possible correlation as I'd noted earlier. After a very good robot week, perhaps with behavior characteristic of a local top and massive robot profit, the market takes a downturn. There are only two data points so far but I'm definitely staying on the lookout for this. Above average robot profits... be skeptical.

On another note, I contacted someone concerning proprietary trading last week. While I had suspected as much, the fact that my robot is willing to be a carry trader during downturns relegates it to the world of personal trading. So, sadly, my dreams of leaving the standard workforce have been delayed.

The biggest negative event is H1N1 making the rounds through my household. It's bad enough when I feel like crap but it's a lot tougher watching my son cough, wheeze and shiver.

Hopefully we'll be back to normal by Monday. I need to get around to making a better robot -- or at least one with different characteristics.

Signals Blog Online

Just a short note to let you know that my new signals blog is online. Obviously this is a use at your own risk situation.

Robot Price Alerts

Anyway, when my robots notice various conditions they will post a message concerning the event in question.

The only notice type currently active may identify a situation that will either have a short term AUDJPY price rise offering a scalping opportunity or a longer term bottom situation if the pair is continuing an upward trend.

Minor BREAD Adjustments

The BREAD trading robot has had a minor tweak during this last weekend.

To make a long story short, another risk modification metric has been defined. If things work as planned this will give the robot the ability to trade over a wider currency pair price move.

Obviously, the plan is to simultaneously maintain the same level of profitability.

My initial readings on quantitative analysis, via forums, seem to indicate another insular pool of thinking. Unfortunately, it seems that ego often persuades people that their own area of expertise is the right area while other areas have nothing to offer.

Advice to any that will take it...

Find the important or valuable information without consideration of the source. Often, combining a few great insights from various fields (validly) will provide greater value than being very proficient at all the skills of a particular field. The real world often is not as simple as the assumptions made in order to perform calculations at the edge of the envelope.

Quantitative Analysis?

It has been more than a few years since I've had to apply any serious math skills towards my work. However, I have noticed some discussion of quantitative analysis in a few forex forums as well as job listings posted for quants.

For a very general introduction to this concept here are some links from Wikipedia:

• Stochastic calculus
• Itō calculus
• Monte Carlo option model
• Stochastic volatility
• Quantitative analyst
• Fairmat: software intro

To be honest, I don't know which of these might be most applicable at this point. These are just some general pointers for investigative purposes.

Some other places to look:

• Quantitative analysis primer (pdf)
• Algorithmic trading blog
• Quantlib: open source software
• Wilmott quantitative community (reg req'd)
• Quantitative analysis (amazon search)

So far, I've been satisfied to determine a long term fundamental direction, presumably with relatively low risk, and then develop a trading strategy that tries to take advantage of variations against that trend. However, I'm not against brushing off the old math skills to see if there is any way to integrate them into future trading strategies.

The biggest issue is time. Until I can get to the point that I'm a full time trader, I can't sit around all day rediscovering my math skills in order to develop complex software systems. However, I might be able to spend some time looking into these ideas -- perhaps getting a book or two on the subject -- to see how they may fit into future trading efforts.

Robot Trading: Six Weeks In

Things are going well. As you can see BREAD (Basic Robot Earning All Day) is starting to look like a winner.

   Return   Day
   0.1900%  Sun 13          September
   3.2339%  Mon 14
   3.1616%  Tue 15
   3.2615%  Wed 16
   2.1510%  Thu 17
   0.4442%  Fri 18
   ---------------  13.05%
 
   0.1850%  Sun 20
   2.0259%  Mon 21
   0.9016%  Tue 22
   1.1536%  Wed 23
   0.2460%  Thu 24
   0.1338%  Fri 25
   ---------------   4.72%
  
   0.0000%  Sun 27
   0.1900%  Mon 28
   0.6862%  Tue 29
   2.3444%  Wed 30
   0.3317%  Thu 01          October
   0.7376%  Fri 02
   ---------------   4.44%
 
   0.7311%  Sun 04
   1.0346%  Mon 05
   1.0587%  Tue 06
   1.9310%  Wed 07
   1.6854%  Thu 08
   0.9897%  Fri 09
   ---------------   7.75%

   0.0915%  Sun 11
   1.2179%  Mon 12
   1.4263%  Tue 13
   1.9298%  Wed 14
   1.3023%  Thu 15
   1.2064%  Fri 16
   ---------------   7.38%
  
   0.2985%  Sun 18
   1.6787%  Mon 19
   2.1774%  Tue 20
   2.3200%  Wed 21
   2.3552%  Thu 22
   1.2715%  Fri 23
   ---------------  10.52%

Looking back, this system was too aggressive during the first week. Later tweaks reduced this aggressiveness to some degree but also lead to lower earnings. At the moment aggression is scaled based on market factors so that in some situations it will take a larger slice.

Although the last week of earnings was great it's really too early to know how this robot will perform in the long term. As mentioned in a recent post I know that BREAD will earn the most during a consolidation period with prices confined in a range that ends in an upward break. I do expect the AUDJPY to exhibit this behavior a lot but it certainly won't do this all the time.

Now what?

This thing has been trading live for a while now. The only thing I plan to do is keep on letting it run until I'm able to create something better. ARTFAB (A Rising Tide Floats All Boats) is the latest attempt...

UPDATE: Something I'm curious about is if I'll notice a longer term cycle in robot behavior. For example, the last time BREAD earned more than 10% in a week there were a couple of weeks that then underperformed. It is possible that the market will exhibit behavior that is clearly visible through trading profits.

UPDATE: I have discovered this very good blog... Hack the market. From there I've noted the following graph:


This suggest to me that I can gauge my daily returns against that of the bigger players to see whether not I'm doing well. Notice that the smallest group seems to have much better returns -- and thus is where I should be comparing my results. Perhaps my stretch goal of 2.5% is a little two low? Regardless, I'll be happy to up my goal when I reach it.

Forex Robot Wars: BREAD vs ARTFAB

Two titans of the forex robot trading industry are squaring off in the search for higher profits.

In the green corner we have BREAD (Basic Robot Earning All Day) with consistent earnings of approximately 1.2% per day. In the other green corner we have the relatively new ARTFAB (A Rising Tide Floats All Boats) with very promising early results. Already today ARTFAB has locked in over 3.0% returns.

Wait, before you change the channel, neither of these robots is for sale and I do not want to manage your money. Relax, it's safe here.

In a macro sense BREAD and ARTFAB work using very different concepts. BREAD attempts to time the market and move money in and out during cyclical movements. This allows a small amount of risk to be taken, hopefully profited from, and then put back to work during another apparent down cycle.

ARTFAB, on the other hand, doesn't care about cycles when opening positions. It accumulates small positions and releases them when larger price moves have made them significantly profitable. However, cycles are examined with respect to determining when it may be a good time to close a position.

Both of these strategies appear to be working reasonably well. I'm hoping that ARTFAB will prove to consistently earn more than BREAD, such that I am enticed to move capital from one robot sub-account to the other. However, I have to keep in mind that BREAD functions best during a consolidation while ARTFAB's best earnings occur during a market move.

Of course, as I trade the AUDJPY currency pair almost exclusively both of these robots are trading it. As I have mentioned from time to time my trading account is with Oanda (which let's me scale trade sizes down to the unit level) and I'm using the FxSpyder platform to create and run robots. I prefer Oanda's platform for discretionary trading.

AUDJPY: Market Call

The AUDJPY has done a whole lot of nothing for the last few days.

Can you blame it? It must be tired after the recent climb.

More seriously, with the RBA considering whether to raise rates another 25 or perhaps even 50 basis points, I don't expect any type of calamitous drop.

I think we might see a drop down to 83.00 again but if it does stop in that region I'd consider the range between there and 84.30 to be a consolidation zone. Again, given the interest rate decision in the near term future I'd eventually expect more upward movement as long as there is not an RBA based negative surprise.

Your mileage may vary.

UPDATE: Wednesday after 10:00am, we have an apparent AUDJPY breakout... currently at 84.50 and testing the underside of our previous support channel. I'm hoping that we reject 84.50 a few times before crossing -- as that will help my trading robot better take advantage of the movement.


See what I'm talking about? You can go back through a few previous posts to get a wider view of recent events.

Possible AUDJPY Reversal Point

I obviously have no guarantees but, according to my own proprietary reversal indicator, this is a potential reversal point.

Again, do your own homework, but this is the "signal" I'll be posting to my alerts blog...

UPDATE: It's about 9:49pm and the AUDJPY 1hr chart is showing a potential twin tail.

UPDATE: It's 10:03pm and here's the 1hr chart right now...


And here's the chart from my last post showing the 3hr trend channel.


I don't know if we are going to stay in trend, but I wouldn't expect a straight drop through a support line that has been in effect for so long.

AUDJPY: October Trend

The AUDJPY has been on an upward trajectory for a while now.

There is no telling, at least not in advance, whether we'll see more massive upward movement due to hawkish statements from the RBA or not.

However, here is a 3hr chart showing recent movements:


Obviously, clear support and resistance helps identify some lower risk entry points.

New Robot Rules Fermenting

It's late Friday night, the markets are closed, and all through the house not a creature is stirring. Well, nobody but the scheming trader hatching up another robotic system.

As someone who designs software systems for a living I can assure you that, in terms of making improvements, nothing is more helpful than watching a system in action. The key point here is the concept of "seeing" the results. While this arena is a bit of a different animal I've always been proud to claim that if I could see the problem I could fix it. You see, no matter how complex the problem there is usually something along the lines of a paradigm shift which greatly changes the nature of available solutions.

So, at the end of the week, when I'm not at work, I can review charts, apply various indicators, and see how various changes might affect trading and earnings. During the week I can see or hear positions open and close and watch the daily results tally up. Simple but powerful stuff.

Anyway, the thing that is keeping me awake at night, in a good way, is a relatively easy way to increase the profit per trade. I believe so anyway. Hopefully we'll find out next week... as I'll be developing this new ARTFAB robot pronto.

I do already have a robot trading at an average return of 1.2% per day over the last five weeks (BREAD - basic robot earning all day) but I've set an aggressive stretch goal of averaging 2.5% per day. BREAD just isn't going to get there. Assuming that other people have done much better than my paltry goal really gets the creativity flowing -- as you simply know it's possible if others have done it. There must be a way to get there while strictly controlling risk levels.

I'm sure there are many ways. I intend to find one of them.

Meteoric AUDJPY Rise

I'm starting to get more than a little cautious about the stellar increase in the AUDJPY over the last several days.

While it's true that markets can continue to move higher or lower for long periods of time it's important not to get too caught up in recent events. In fact, though we all react to these things at different rates, you can consider it a warning whenever there is something to get caught up in.

Insidiously, it is often those things that happen over a very long period of time that we forget to take notice of. For example, the smart phone has been growing in leaps and bounds and will probably do so for years, but at some point it is likely to turn into the next PC. If you haven't noticed PC's are now relatively cheap commodity products which leaves PC makers turning to the service sector in an attempt to fuel continued growth.

In any case, this is a point at which I have to resist ramping up the aggression factor in my trading robot... and the notion that it might be a good idea to take a bigger bite out of upward movement needs to serve as a warning to me.

Recent Forex Results

I've had some success analyzing the AUDJPY over the last few days. In particular, whether by luck or otherwise I managed to spot some channels, one of them an apparent bull flag, a wedge leading to 82.00 and then predicting a breakthrough beyond that level.

It's very rewarding to make an observation and then have results conform to your expectations.

Anyway, I'm still letting my robot do my trading for me. It's earning north of 1% per day and I continue to make minor tweaks in an attempt to push the appreciation rate closer to 2% if I can.

Recent tweaks involve looking at various stochastic values in order to adjust position entry scale to some degree. Obviously, as the robot only opens long positions, the idea is to open less positions during periods of strength and more positions during periods of weakness.

It's never as simple as it sounds.

For more radical tweaks or outright departures from the main trading robot I'll strike out with a small amount of capital in a new account. I have one of these experimental robots running right now. It's very heavily tweaked.

I've got another radical, but simple, idea in the wings. It will have to wait until next weekend so that I'll have time to implement it.

AUDJPY: Possible Bull Flag

My last post focused on a short term channel.

This time I'm looking at a longer term trend -- though still on the 1hr AUDJPY chart. This one looks like it might be a bull flag.

It's always hard to tell. However, with future interest rate hikes expected, it's likely we'll continue our upward movement if signs of an Australian recovery remain strong.

Here's the chart:


Play safe.

UPDATE: It's 7:00am the next morning... and our chart now looks like this:


Any other AUDJPY traders out there? If we pull back near the top of the possible bull flag channel that would potentially be a good entry point. I'd expect a bounce off of 82.00 as it's a recent and long term high as well as a psychological point.

UPDATE: Pennant? Flag? It's still bull... ;)

AUDJPY: Channel on the 1hr

There's a channel on the AUDJPY 1hr chart.

For as long as the channel decides to last we have an opportunity at either the top or bottom levels.

Notice it going back and forth?

This is perfect for my custom trading robot...


Unfortunately, predictability never lasts.

Well, that was nice. It's about an hour and half later... see the bounce? Click the image to get a larger version...


Are we going to make it back to the top?

UPDATE: It's approaching 9:15pm. Here's a 15min chart showing the latest action and a channel support challenge:


I'm guessing we break downward. I'm not betting on it though.

UPDATE: Around 9:40pm... and we are out!

AUDJPY: 3hr A/D Trend

Here's a snip showing the accumulation distribution on the AUDJPY since the 2nd of October.

The recent test of the support line happened today near 2:30pm. Obviously, the fact that the RBA appears to be ready to continue a series of interest rate hikes appears to be driving this.


I'm looking for this line to break.

UPDATE: It's just after 6:30pm and I figured it might be nice to get a larger look at the situation (so it's easier to tell whats happening).



Notice the last minute downward motion on the A/D? I'd like it to hold and continue upward... but I continue to watch for the break.

UPDATE: It's almost 7:00pm. It looks like a break may be in progress. We'll have to see what happens prior to the end of the bar.


This may presage a correction in the AUDJPY. I'm putting my AUDJPY trading robot on a short leash.

UPDATE: It's approaching 7:30 and we get a different look right now.


The robot is staying on that short leash for now...

UPDATE: It's now 3:00am on the 13th of October. We're still treading just above the A/D support line.


I've noticed people tweeting about opening short positions. It might be best to wait until the A/D support line provides a signal.

Robot Upgrades: Preliminary Results

On weekends I like to either tweak existing robots or create new ones. While it's very early in the process I think the most recent tweaks are going to have a noticeable positive effect.

I woke up around 4:00am this morning and thought I'd check on the computer. What did I see? A nice AUDJPY move from 81.10 to 81.50 for now. Anyhow, this weekend's tweaks were operating on the dip and return.

Returns are clearly higher over this move than they would have been without recent changes. This is great news. Something as apparently minor as pushing average daily returns from 1.2% to 1.4% would have a huge effect on compounding.

Anyhow... let's wait and see how things look by light of day.

BREAD's Trading Results

Yes, for lack of a better name I am calling my robot BREAD. This is short for Basic Robot Earning All Day. It has been given minor tweaks from time to time but it still continues to follow the same system and strategy... taking advantage of constant price oscillations in the AUDJPY.

While the results don't look all that spectacular I invite you to investigate how this ends up in a compound interest calculator. And, finally, the results for the last four weeks are:

Return	Day
0.1900%	Sun 13 September
3.2339%	Mon 14
3.1616%	Tue 15
3.2615%	Wed 16
2.1510%	Thu 17
0.4442%	Fri 18
0.1850%	Sun 20
2.0259%	Mon 21
0.9016%	Tue 22
1.1536%	Wed 23
0.2460%	Thu 24
0.1338%	Fri 25
0.0000%	Sun 27
0.1900%	Mon 28
0.6862%	Tue 29
2.3444%	Wed 30
0.3317%	Thu 01 October
0.7376%	Fri 02
0.7311%	Sun 04
1.0346%	Mon 05
1.0587%	Tue 06
1.9310%	Wed 07
1.6854%	Thu 08
0.9897%	Fri 09

So far the average rate of return over the life of the robot is ~7.20% per week. I'd like to make improvements but it is difficult to make changes that don't have unintended consequences.

Skeptical About The AUDJPY?

I'm sorry you feel that way. Perhaps after looking at the following chart snip you'll think that you may have missed the boat.

See how the daily chart shows solid support since March? March! Hello, it's a little too late to be skeptical. The question you have to ask yourself is why has the AUDJPY been performing so well and how long will it continue to do so.


On another note, I'm going to start posting "signals" to a companion blog soon... perhaps as early as next week. I've already created the blog. These won't quite be signals but they will be alerts suggesting points of opportunity.

Beating The AUD Drum

Did anyone notice this AUD tidbit?

Unemployment fell to 5.7% from 6.0% against expectations of no change. The extremely strong job number will cement expectations that the RBA will continue to hike rates and perhaps be more aggressive in doing so.

If you been following my blog this isn't going to be a surprise.

As my last post said... buy on dips.

Buy AUDJPY On Dips?

It's very plausible that the RBA (Reserve Bank of Australia) has started the slow process of moving interest rates from emergency levels to normal.

RBA Starts Rate Rises

We'll want to see what happens over the next couple of months in order to confirm this analysis. However, from now on whenever the markets are panicked about the latest downward surprise, it might be time to dip your toes in.

We're staring at the bottom of a long term AUDJPY carry trade cycle.

I know that Japan has made some noise about not wanting a weak dollar -- but you have to look at the size of their debt load before you start to worry about them being willing or able to withstand high interest rates.

The recently touted alternate carry trade, consisting of the AUDUSD, is much more precarious in my opinion. It's great in the short term. However, in the longer term, perhaps a year or more, I think you'll find the greenback starts to get supported by higher interest rates. How else will the USA entice foreign entities to continue to buy and hold debt once the worldwide spate of risk aversion fades?

Personally, I think this is a good time to raise capital and slowly work on getting carry trades protected by an in-profit stop loss. Presumably, over the course of months and years, we should find that 80.00 represents resistance, then perhaps 85.00, 90.00, 95.00 or more. We'll probably have Yen intervention from time to time as well and language designed to scare us out... but if you keep an eye on the fundamentals you can probably view these as opportunities to place more capital into stop loss protected profitable trades.

Also, if I was managing a countries financial reserves I think I'd be looking for currency trading opportunities involving countries that are both economically sound and likely to continue to raise interest rates over the years as inflation gathers steam. The general business cycle is probably not going to disappear this time around either... regardless of all the hyperbole in the mainstream media.

US Economy Heads Up

If you are wondering what is going on with the US economy, this puzzle piece from CNBC will fit in very nicely.

Dunkelberg: You Can't See Main Street From Wall Street

What this is saying is that there probably is not a small business collapse in the works due to credit issues. Smaller businesses will simply wait until they see consumer spending before they bother to access credit.

Personally, I am going to suggest that old habits die hard. For all those that did not suffer unemployment, which will be the majority of consumers, the lure of credit and consumption will be waiting for them once confidence returns. As well, they will have fattened their bank accounts to the point that they won't know how to resist putting some of it to use.

While we do perhaps have a lot of reasons to fear gloom and doom, we also have a consumer tinderbox waiting for a spark. I don't know which one will win out nor do I know how long it will do so. For example, I don't know if the tinderbox can be lit before housing prices start to rise. What is the ratio of renters vs owners?

I do know that the nuggets of information regarding real people, real habits, and their likely actions are few and far between. Too much of the material we read (on CNBC) is very biased by political viewpoints... and you need to find a way to see past that barrier to the good information the partisan baloney conceals.

UPDATE: Wednesday 7-Oct-2009

As a counterpoint, here is another article talking about problems caused by the ongoing lack of various debt-securitization markets.

Why It's Still Difficult for Many Americans to Borrow Money

However, I will point out that the title seems a bit broad for the issue at hand. It seems that the article is pointing to the idea of a systemic inability for large lenders to resell their lending in order to enable more lending.

Perhaps the fact that these institutions, and their rating agency cohorts, have just burned half the planet with their prior recklessness is one reason that purchasers of these products are a bit gun shy?

Robot Strategy / Development

Without getting into detailed specifics I thought I'd try to answer a recent question about the strategies I'm trying with my various robots.

First, a bit of background in case this is the first post you see on this blog:

• I design software and systems for a living
• I've been trading for years -- learning through the heart of the downturn.

With that out of the way I'd suggest looking at one of my posts about microtrading.

You may also want to consider the fact that the Australian economy seems to be doing very well with respect to the rest of the world. I've been pointing that out on my blog from time to time. Also, if you follow AUDJPY as I do, you may notice that the RBA just hiked interest rates by 25 basis points. This bears out a previous post about the long term carry trade prognosis dated September 2008.

Anyway, what this all means is that I'm happy to open long positions in AUDJPY, to some pre-defined level of risk, and then wait for this currency pair to give me some profits. To get down to brass tacks, the AUDJPY trading robot looks for what appears to be decent entry points, perhaps via stochastics and/or moving average crossovers, and then opens up micro-positions.

Sure, often the robot is wrong for some period of time. Who cares? With confidence that the AUDJPY will eventually rebound, and/or pay decent carry trade rates, it doesn't hurt to wait. Besides, when the robot is wrong, trades entered at even lower levels can often be closed for a profit, repeatedly, prior to a later price rise allowing the short-term carry trade to be closed for a profit.

In case you are thinking this sounds like throwing darts here are a few of the strategic points that guide this strategy:

• The fundamentals over the next period of years points to a rising AUDJPY.
• A future period of panic is unlikely to exceed the unwind that occurred during the recent financial crisis.
• A rising AUDJPY will eventually allow any position to be exited profitably during a new high.
• Using microtrades allows frequent trading within precise levels of accumulated risk.
• Adding logic to enter positions at what will often be an opportune time greatly improves the odds of taking profit from a position quickly.

Another robot, currently experimental, trades the EURCHF. The idea here is that this currency pair is relatively stable compared to some others. Here I'm basically trying to play a mathematical game. If one were to open a very small long or short position every few moments the price would eventually make at least one trade direction profitable.

The reason this is interesting is that you can define the rate of return you want. Trade N positions at size S per hour at P pips profit and you will earn $D. Of course, it isn't so simple, but that's where the challenge lies. How do you keep from accumulating all your long positions at a recent top and all your short positions at a recent bottom? How do you keep from accumulating positions during a lull in price movement? How can you goose profits during active periods to make up for price movement lulls?

This thing is a work in progress, is not significantly capitalized, and probably is a pure dart throwing exercise. However, it does keep me busy. This is important. If I don't keep busy I'll worry too much about what's happening in my AUDJPY sub-account and either make discretionary trades or tinker with something that is already working well enough.

Anyway, all strategies face the same basic issues. These include:

• Prices will eventually move up and down in varying amounts.
• Accumulation of positions incurs increasing levels of risk.
• Avoidance of risk decreases maximum theoretical gains.
• Carry trades have long term pressure supporting the carry trade.
• Carry trade pairs have periodic unwinds.
• Long term economic fundamentals are plainly visible to all but very often misunderstood.

Traditional robot development is based on the same concepts as discretionary trading. Find a high probability entry point, based on risk versus reward, set an appropriate stop-loss, and then wait to see the result.

In a nutshell -- my current robot strategy is to look for long term predictability and then try to take advantage of that predictability as often as possible using small individual units of risk.

A final word of advice. If I'm wrong about the AUDJPY, and it doesn't have a long term rising trajectory, then I'll have an unproductive robot sitting on some carry trades. Similarly, if you decide to take advantage of a longer term trend, make sure you have a solid basis for your predictions.

AUDJPY Roller Coaster

Generally, I follow and prefer to trade the AUDJPY. It goes through unwinds from time to time as the bigger players suffer fits of risk aversion.

For the last few weeks we've been bouncing back and forth between 77 and 80. On the way down, with all the gloom and doom blaring in the media, it feels like we must be about to fall off a cliff.

It's difficult not to be scared. After all, anyone who was trading during the last couple years knows very well what it feels like to fall off a cliff. Ouch.

However, it's precisely when everyone is scared that prices adjust too much. How do you know when to get in without trying to pick the bottom? You get in when you have a strong resistance point. You can enter your trade, conditions permitting, and set your stop at a safe distance below the resistance point. You get in when you know there is a large potential upside and a low potential downside.

With all my work on robots I haven't been doing much discretionary trading lately. In a strange way, this is helping me develop patience.

My personal take is that we're going to have variability in the global economic recovery. Some portions of the world will contract while others expand, and then we'll probably get oscillations between those regions. This means that the roller coaster may be the main mode of the markets until everyone starts to settle down and stop pressing the panic button. This could take a very long time.

However, this is great news!

The roller coaster is a great place to trade. As long as you are only trading appropriate amounts of capital per position you have the ability to earn every time we get another cycle of exuberance and fear.

As long as we have people in both camps, gloom and doom vs surprising growth and strength, then the markets will be a great place to be. Just keep an eye out for anything that truly is a disaster in waiting.

In particular, I think we are at a point where different segments of the trading world exhibit different behavior. For example, Australia and Japan exist in a different economic climate than the USA. It's quite possible that traders in these regions, especially those not too tied to US events, won't be feeling risk aversion.

Similarly, sections of Europe seem to be recovering nicely. I can see that many regional traders would not be overly risk averse, in general, and that carry trade strategies might be entertained. For example, China and India are becoming more important in terms of world trade and they don't seem to be necessarily synchronized with the US.

This is another reason for our roller coaster. We may get different directions on the risk trades (carry trades) based on which financial center is generating most of the trading activity. Yet another reason to expect a choppy ride.

Related reading... yahoo finance.