Any trader who has been watching the markets actively in the last year or so could be excused for thinking that the US has a real corruption problem, and this has been highlighted on several occasions.

Let’s look at the two most recent examples of dubious behaviour.

In March 2008, somebody unknown to market regulators and officials bought 1.7 million dollars of puts on Bear Stearns stock. If you haven’t traded options, this is a short trade with a time limit and a price that the market must drop below to have a winning trade.

Nothing unrealistic or suspicious about the trade, but bear in mind the options had strike prices between 50% and 60% lower than the trading price. Again, perhaps a wild bet on market movements, but considering the size of the trade one would be forgiven for raising your eyebrows. But it gets better….

The options were due to expire in 9 days…..

I don’t trade options but I recognise a stupid trade when I see it. This was a ridiculous strategy unless you had some reason to suspect that Bear Stearns was not going to be saved like the other banks were.

As it turns out, Bear Stearns was not afforded a rescue package like the others, and in 6 days this trade was worth $270 million dollars to the trader. Not bad for a week’s work.

So who is this super trader with millions to risk on very doubtful trades? What was his strategy and how did he presume to know that one bank would not be saved when others were rescued? Well, we will never know because the SEC, the Securities and Exchange Commission charged with maintaining an orderly and fair trading market can’t find the trader or the money.

This must beggar belief to anyone that $270 million dollars can go missing or is untraceable. From my bank
employee days I know this is untrue, so there is a definite stink brewing here.

Now let’s look at the latest fiasco.

The US stock market had its largest single day down in history, falling over 1000 points in one day. Many stops would have been knocked out as the market fell temporarily; in fact it only took a couple of hours for the market to rally back up 700 points.

And now, yes, you guessed it, the NYSE exchange doesn’t know what caused it or how it happened. It was rumoured that a trader made a mistake entering an order, but this would have left a paper trail that could be confirmed. This now seems to have been ruled out.

Now you know why I am imploring smaller, individual traders to trade currency markets on an intraday basis. From my previous articles you will know that I am a big believer in using both Gann and Fibonacci techniques in my trading. Gann in particular is probably most famous for his trading on commodities, and to a lesser extent equities, and as such many traders think that his techniques are only applicable to those markets. What I have found over years of study is that you can apply all the works of Gann to currencies just as you would to commodities or equities, sometimes it even works better. In fact believe that where there is any "free market" that has enough liquidity, you can apply these techniques.

I think the best way to explain this is to show you a video which demonstrates how I use both Fibonacci and Gann techniques in the analysis of the Euro to $US. This is one of the four weekly videos based on Market Analyst that I produce for people who buy my course. The first of the four is actually a free weekly video that anyone can sign up for on my website www.tradingwithgods.com

Best wishes to all,

Alan Oliver.

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