Second Half of 2004

Individual buy and sell decisions will not be considered here. Instead we will take a more general look at the rest of 2004 and see what information can be gleamed from observing the CMF indicator.

4. CMF is mostly positive from July through November.
   1. The period in mid-August is interesting because as price advances, it is not met by accumulation of the pair. The implication is that the upward price move is carried out on weak volume and therefore liable to reverse.
   2. While the CMF indicator hovers near the zero line, price again begins to rise.
   3. By the start of October, price is back to 137 and CMF is at +.25. There is some retraction followed by ranging activity before price edges up even higher in mid-November.


5. At the end of November price falls from 138 to 134.5. CMF reaches negative territory and even breaks -.10. The dynamics of this fall will be explained in notes 6-8 further below. Right now a concept that affects the pair afterwards should be introduced.

Concept - If a trader looks back to see where the indicator was in the recent past he can tell that it was in positive territory for May, July, parts of August and September, October and November. It was ambiguous during June and parts of September. And finally, CMF was negative for just one week in June and now this 1-2 week period in November.

The amount of time that CMF spends in positive or negative territory can show the long term tendency and bias of traders to the pair. Seeing that the pair was in positive territory for 5 out of 8 months, and negative for 1 out of those 8 shows that the Euro is the currency whose fundamentals traders prefer during this period.

6. Distribution/Retracement: Let’s focus on what happens in November using another technical anlysis tool, Fibonacci retracement levels, along with the volume indicator.
   1. Once the pair climbs past 138 there is an initial three session fall in the pair's price. Following that, there is a surge in volume corresponding to further distribution (EUR/JPY selling). Tick volume reaching a very high level of 30,000.
   2. As August’s, September’s, and October’s volume readings show such heavy volume is not common in foreign exchange.
   3. CMF decreases for two weeks. One of those weeks it falls through positive territory; the second week it crosses the zero line into negative territory.


7. At around -.20 CMF and price make market bottoms.
   1. The price’s bottom corresponds to Fibonacci retracement ratios. Yen bulls purchase the Yen until the pair retracts to the 61.8% Fibonacci level. At that point Euro bulls make a concerted effort to wrest control of the price movement. The day the bottom is made, the pair experiences a whopping 40,000 tick volume.
   2. The massive selling runs up against support - more traders willing to buy at this lower rate (134.15) than those willing to sell - and therefore selling pressure dries up. Yen bulls are offset and countered by Euro bulls. A new downward price trend is not started.


8. As the Euro rises from the 61.8% retracement, there is just as much volume as during the selling phase in mid-November, a good sign for the subsequent uptrend. 

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