It’s all about building your case
In an economic week in the US where the existing home sales, the weekly unemployment claims and the flash manufacturing PMI are the only events on the docket, it is hard to get too excited about the prospects for trading. At least from the economic release angle.
However, the US impeachment trial of President will begin this week with enough uncertainty and drama for viewers to be mesmerized – and potentially ruin any hope of movements in the forex markets as a result of the made for TV drama.
At the end of the day, however,it will take a “2/3 supermajority of those present in the Senate” to impeach the President. With 53 Republicans, 45 Democrats and 2 Independents, the odds are in the President’s favor that he will NOT be impeached.
Nevertheless, the show must go on and there are other battles to be won through the process. It is after all, an election year. If impeachment is not possible, voting out the President or shifting the power in the House and Senate is at stake. It IS a high stakes game.
To defend himself, President Trump announced his team of lawyers who will defend him yesterday. Included in the list is Alan Dershowitz.
Dershowitz is a retired Harvard Law Professor and famed criminal defense attorney. He became the youngest full professor of law at Harvard in its history at the age of 28.
Dershowitz is a Democrat who endorsed Hillary Clinton, calling her a “progressive on social issues, a realist on foreign policy, a pragmatist on the economy”. He also supported Barack Obama for re-election on the basis of his “excellent judicial appointments, his consensus-building foreign policy, and the improvements he has brought about in the disastrous economy he inherited”.
He campaigned against Trump during the 2016 election, and has been a critic of some of his actions including his travel ban, and the rescission of protections for “dreamers”.
Sounds like a Trump type of guy right? I would have expected that Trump would steer clear of that resume and might have taken a shot or two at him on Twitter at some point as well.
However, Dershowitz has also be supportive at times of the President calling the Trump’s alleged disclosure of classified information to Russia as the “most serious charge ever made against a sitting president”, and called the Democrats attacking Trump’s mental fitness as a “very dangerous” line of attack.
Last night after seeing a movie and winding down afterwards before calling it a day, I flipped on CNN. Dershowitz was on with CNN legal analyst Jeffrey Toobin and host Anderson Cooper. It was an interesting discussion and explained why Trump choose Dershowitz to be part of his defense team.
Dershowitz is a staunch supporter of the Constitution and in particular section 4 of Article 2 of the Constitution which says,
“The President, Vice President and all civil Officers of the United States, shall be removed from Office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and Misdemeanors.”
Dershowitz’s argument in favor of the President is that what the President did with regard to the Ukraine (the “other high Crimes and Misdemeanors”) was not on par with the stated crimes of Bribery and Treason as so stated in the Constitution.
He argues that the framers could have explicitly used the term “abuse of power” but they chose not too. He describes himself as an “advocate against impeachment”. He said, “I am not part of the strategic legal team. I am a constitutional analyst. I want the impeachment to fail. I hope it will fail.”
He added “I am working for the Constitution. At this time the beneficiary happens to be the president. Last time it was President Clinton , the time before it was Pres. Nixon.”. He says “I am making a constitutional argument on behalf of Pres. Trump’s team against impeachment. I am against impeachment. I think would be a very bad thing to happen”
Clearly, Dershowitz has a role in the defense team. He provides a specific point of view on the Constitution. He will not defend the nuances of what took place between the Pres and Ukraine. That defense will be made and defended by the other six members of the Trump legal team. Dershowitz is only one of the seven. Each of the others will have their own specific role.
So what does this have to do about trading?
While watching the drama of the interview play out (it was good TV -you can see it here
), I was thinking of a question from a Forexlive follower yesterday, who asked the following:
“….please talking about the weekly range and the mid point of the range in the GBPUSD …. this is so important…. is it possible to explain technically how can I benefit from it …. because once I saw a trader talking about that but to be honest, I did not understand what he was talking about”
My response started with:
“The midpoint is just a piece of the technical story. I would not say it is “so important” but it is a piece. I like to think of the 50% midpoint as a tilt area. Also, it is important to think about how the buyers were in control above the midpoint, but how the bias shifts below 50% level. What does that do to the tone of the market? “
The Trump defense team of seven different people are each likely to have a role in the impeachment trial. Dershowitz will only speak to the Constitution. The others will add their expertise to the defense of the President. The hope is that they not only AVOID impeachment (which already is likely), but also convince the American people, that the grounds for impeachment were unwarranted.
On the other side, the House managers team will argue the opposite side of the argument. That is, there is likely to be someone who will argue the Constitution DOES allow for the impeachment for the abuse of power. There will be others on the team who will be more suited for the other pieces of the trial (much like the Trump team).
There will be a battle.
Paralleling to trading, for me the 50% retracement is part of my “team” when analyzing the market. It can be an influence to the “tone of the market”. It helps to tilt (in my view), the bias to the “other side”. If the price moves below the 50%, it tilts the bias to the downside. If the price moves above the 50% it tilts the bias to the upside. That is by itself. However, their are other members of the technical team.
Dershowitz is the 50% retracement. His stated goal is to tilt “3 to 4” Democrats to the “this is unconstitutional” side. In the debate on CNN,, he stated just that. Remember, we live in a political world where getting 3-4-5 members on one side to tilt to other is nearly impossible. Putting it another way, a 57 to 43 vote is a lot more convincing to the American people vs a 53 to 47 one. However, Dershowitz is just one piece of that team. The other members will be fighting as well with their expertise, to add even more to the Presidents side.
Going back to trading, if the 50% is Dershowitz, the 100 and 200 hour MAs can be thought of other members of the team.
Looking at it in the GBPUSD chart above from yesterday, the 50% was at 1.30361. The price on the way down yesterday, cracked below the 200 hour MA (green line currently at 1.30512), the 50% and stalled at the 100 hour MA (the blue line) The move back higher stalled near the 200 hour MA again before moving back below the 50% and ultimately the 100 hour MA. The pair closed at the session low.
The sellers on my team had the 200 hour MA, the 50% and the 100 hour MA as technical hurdles. Each of them is a “piece of the technical story” (or defense). If the sellers can win their arguments, the price goes lower.
On the other side are the buyers (think of them as the House managers). They may argue the bullish side and help swing the price off the 100 hour MA (blue line) by “stating their case” to buy against that level. However, when the 200 hour MA (green line) held on the correction, and the price moved back below the 50% and then the 100 hour MA, the bias shifted in the favor of the sellers. The vote for NOT impeaching went to 57-43 (or better and outside the yellow area).
The point is, the impeachment process will be a battle that will pit Trumps team vs the House managers team. In trading the price action process is a battle that pits sellers vs buyers.
As the trial goes on, there will be ebbs and flows, but there should be a winner that emerges.
In trading there are ebbs and flows as well, but the technicals will often show the way. Often times it takes clues from more than one technical tool to influence the trading bias.
The best places to trade (win the battles) are at the places where you are stating your case. The sellers in the GBPUSD stated their case when the 200 hour MA was retested and held near that resistance level. The rest of the team then did their job and the price moved lower and to new lows for the day.
Although the week may be more focused on the trial vs the economic data, think about the ebbs and flows in the trial and how the same process happens in trading. It can make for a clearer vision of the outcome.
Good fortune with your trading.
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