Monday, February 08, 2010 - New York Update - 11:07 AM EST Based on the corrective bounce in the risk markets I referred to on CNBC Fast Money - NASDAQ on Friday, I am going long EURUSD with hesitation for a corrective bounce only at current levels. I am long 2 units 1.3696 with bids for 2 more units at 1.3650, stops for all 4 units at 1.3615. I am leaving the upside targets in, but they are subject to change at any time as this 3-wave correction could be shorter than expected. On CNBC Fast Money at 12:45 PM EST today.

I was not expecting this move down, especially after such blowout earnings from Cisco last night, to begin so soon. We had no positions working today, which is a bit frustrating, but in the interest of discipline and risk management the appropriate position was to not have one. I spent a long time today going through the longer term charts mapping our likely course over the next few months. The path of least resistance is for a stronger dollar and yen, and weaker commodity and equity prices.

I am going to focus on then golden boy of FX in 2009 which is AUDUSD. The RBA shocked the markets by leaving the overnight cash rate unchanged at 3.75% after 3 consecutive hikes. And that was before today's 3-5% dump in global equities. I'm thinking the RBA will be hard-pressed to raise rates any time in the future with a global economic slowdown. Keep in mind FX markets trade based on perceived interest rate direction, and not current interest rate differentials. So with monetary policy on hold, and Asian interest in Australian commodities likely to drop off, the Australian dollar could be in for a long summer. Don't forget their seasons are opposite of ours in North America.

I spent some time on this daily count today and I have a fairly high degree of confidence in it. 0.8740 was the key break today, which should setup continued selling pressure in coming sessions.

So in the spirit of maintaining discipline I believe purple wave .4 is coming and should offer a re-test of the key 0.8730 level. I am going to leave offers out to get short 1 unit of AUDUSD at 0.8710 and get short another unit at 0.8810 with extremely large stops at 0.8920 just for now. I will be looking to get more aggressive with this position by adding more size and clamping down on the stop, but only after we see how NFP plays out tomorrow. Back with you tomorrow morning before NFP for a brief update. TG.

**ANNOUNCEMENTS**

COMING MEDIA APPERANCES

DVD RELEASE We recorded a presentation I gave in Chicago back in January 2009 about the tools I use here in Strategy of the Day- FOREX Trading Using Fibonacci and Elliott Wave.

STRATEGY OF THE DAY - What's New in 2009 Strategy of the Day, or S.O.T.D., features in-depth analysis of the FOREX markets based on Elliott Wave and Fibonacci principles, Intermarket analysis, as well as more elementary technical analysis methodologies. SOTD is not just a traditional research piece, however. SOTD is actually a written game plan and trade journal of how a professional fund trader approaches the FOREX markets. Todd executes the trade ideas shared in SOTD in his G.C.A.M.(GAIN Capital Asset Management) account. All aspects of the trade are shared including the analysis, position sizing, entry, stop loss, and take profit levels. SOTD readers can follow Todd's trades as he puts his ideas to work in the market in real time, and with real dollars. SOTD is updated at least once daily on the FOREX.com platform.

POSITION SIZING To begin the new year, I am going to introduce some new features of SOTD. In the past I have shared with you all aspects of a trade idea including analysis, entry and exit levels. Going forward, I am going to include my position sizing for each trade idea as well. Essentially, the smallest position I trade will be referred to as a ?unit?. The maximum size I will put on in a single position is 50 units of a notional USD position. For an average sized position, I will have anywhere from 5 to 10 units at work. The more units in a position you can work with, the more flexibility you will have in entry and exit tactics. If you are only able to trade 1 or 2 units, I would adjust your account size to ensure you have the proper flexibility.

WAVE ANNOTATIONS Much like the original wave annotations introduced by Ralph Nelson Elliott in the early 20th century, I am going to introduce a standardized labeling procedure custom to SOTD. This will allow you the reader to quickly identify the location and degree of my Elliott wave counts on the charts. As you can see on the chart below, I have listed 9 possible degrees of wave counts and the corresponding chart time frame that is likely to use a particular annotation. Now obviously you will not see just one degree of wave annotations on any chart. My purpose within this framework is to align a certain degree wave annotation with the primary price trend on a given chart. For example, if you see a blue underlined roman numeral labeling, the price move I am studying is probably best viewed on either a 30 or 45 min timeframe. Once you see black Arabic numeral labels, the move is probably best seen on either a 60 or 90 min chart.

Questions or comments?