Pre-Market Global Review - Is Window Dressing Alive and Well?

Good Morning Traders,
 
As of this writing 6:15 AM EST, here’s what we see:
 
US Dollar – Down at 83.350 the US Dollar is down 61 ticks and is trading at 83.350.  
Energies – May Oil is up at 96.64.
Financials – The June 30 year bond is up 8 ticks and is trading at 144.26. 
Indices – The June S&P 500 emini ES contract is down at 1553.25 and is down 14 ticks.
Gold – The April gold contract is trading down at 1603.90 and is down 23 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   


Initial Conclusion: This is not a correlated market.  The dollar is down- and oil is up+ which is normal but the 30 year bond is trading higher.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are down and the US dollar is trading lower which is not correlated.  Gold is trading lower which is correlated with the US dollar trading up.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

Asia with the exception of the Indian Sensex closed lower.  As of this writing Europe is trading mixed with e Paris CAC trading lower. 
 
 
Possible challenges to traders today is the following

1.  Unemployment Claims are out at 8:30 AM EST.  This is major.
2.  Final GDP is out at 8:30 AM EST.  This is major.
3.  Final GDP Price Index is out at 8:30 AM EST.  This is major.
4.  Chicago PMI is out at 9:45 AM EST.  This is major.
5.  Natural Gas Inventory is out at 10:30 AM EST.  This will move the Nat Gas market. 

 
Yesterday we said our bias was to the short side because the markets were correlated to the downside.  The net result being that the Dow closed 34 points lower after spending all day in negative territory.  Today we have a different situation.  The markets aren't correlated and therefore our bias is neutral.  In other words could be driven in any direction today.  We do have economic news that can set the direction but that is yet to be seen.  Could this change? Of Course.  Remember anything can happen in a volatile market.

Today is in effect the last trading day of the 1st quarter of 2013 and it struck as odd that we used to have a phenomena called window dressing in the United States.  This was the situation whereby institutional investor would speculate on the shares in their mutual funds to prop up the prices of those shares and hence have a positive quarter.  I've not seen this phenomena in quite some time.  I do think this past December we saw some of it until the fiscal cliff issue took center stage but prior to that, we haven't.  I suspect the reason for this is because in today's world everyday could be construed as window dressing.  With the advent of HFT and Algo trading, the machines (robots) are deciding where a stock should go (up/down,etc.).  This is why monitoring order flow is essential.  True, we could have a geopolitical situation that is driving the market is any one direction (look at what happened in Cyprus) but that notwithstanding; on an ordinary day it's the HFT's and Algo that rule.  As a trader you need to be watching what they're doing and follow the bots, so to speak.

As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today our bias is neutral because the markets aren't correlated.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:


http://youtu.be/tUZEZNKnGrY

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is declining.  This is normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 95.58 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 93.00 with resistance at 98.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:
- Sequester spending cuts to commence March 1st.
- Debt Ceiling in the May time frame. 
-  European Contraction


Crude oil is trading higher and the US Dollar is declining.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Recently Published Articles:
http://www.barchart.com/headlines/story/9204041/the-debt-ceiling-and-its-impact-on-the-global-economy 
http://www.barchart.com/headlines/story/9182510/will-the-fomc-harpoon-the-dow
http://www.investing.com/analysis/usd:-why-is-it-so-high%20-159009
http://www.investing.com/analysis/the-sequester-and-its-impact-on-the-us-economy-158526

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.

Pre-Market Global Review - Cyprus Safe? ...for now

Good Morning Traders,
 
As of this writing 6:05 AM EST, here’s what we see:
 
US Dollar – Up at 83.275 the US Dollar is up 227 ticks and is trading at 83.275.  
Energies – May Oil is down at 95.89.
Financials – The June 30 year bond is up 14 ticks and is trading at 144.04. 
Indices – The June S&P 500 emini ES contract is down at 1553.75 and is down 15 ticks.
Gold – The April gold contract is trading down at 1593.60 and is down 21 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   

Initial Conclusion: This is a correlated market, unfortunately it's correlated to the short side.  The dollar is up+ and oil is down- which is normal and the 30 year bond is trading higher.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are down and the US dollar is trading higher which is correlated.  Gold is trading lower which is correlated with the US dollar trading up.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

All of Asia closed higher.  As of this writing all of Europe is trading lower. 
 
 
Possible challenges to traders today is the following

1.  Pending Home Sales are out at 10 AM EST.  This is major.
2.  Crude Oil Inventories are out at 10:30 AM EST.  This will move the crude market.
3.  FOMC Member Evans speaks at 11 AM EST.  This could move the markets.
4.  FOMC Member Rosengren speaks at 11:30 AM EST.  This could move the markets.

  
Yesterday we said our bias was neutral because we felt that the market could be driven in any direction.  In other words the fundamentals weren't clear.  Well we had good news from the housing market in terms of home prices and this served as a catalyst to drive the Dow 112 points higher.  The S&P came within a point or two of an all time high.  Today we have a different situation, The markets are correlated but they are correlated to the short side hence our bias is to the short side today.  Could this change? Of Course.  Remember anything can happen in a volatile market.

Yesterday apparently the markets worldwide was ready to shake off any bad news from Cyprus.  On Monday the Cypriot government reached an accord with the troika to levy a tax on any bank account that has over 100,000 Euros but to date they haven't committed to what that rate is.  I've heard as high as 30% but can't commit to that either.  One thing is known, the banks in Cyprus are closed until Thursday at the earliest.  I would suspect that they will have a major bank run on them.  If this is the case the Cypriot government may be forced to go back to the troika and ask for more money, but we'll have to see how events unfold.



As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today our bias is to the short side because the markets are correlated to the downside.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

http://youtu.be/tUZEZNKnGrY



Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading lower and the US Dollar is advancing.  This is normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 94.79 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 92.00 with resistance at 97.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

-  European Contraction


Crude oil is trading higher and the US Dollar is advancing.  This is not normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.

Pre-Market Global Review - Cyprus Conundrum Resolved? -not quite....

Good Morning Traders,
 
As of this writing 5:55 AM EST, here’s what we see:
 
US Dollar – Up at 83.015 the US Dollar is up 20 ticks and is trading at 83.015.  
Energies – May Oil is up at 95.23.
Financials – The June 30 year bond is down 10 ticks and is trading at 143.06. 
Indices – The June S&P 500 emini ES contract is up at 1550.00 and is up 12 ticks.
Gold – The April gold contract is trading down at 1596.90 and is down 77 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   

Initial Conclusion: This is not a correlated market.  The dollar is up+ and oil is up+ which is not normal and the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up  and the US dollar is trading higher which is not correlated.  Gold is trading lower which is correlated with the US dollar trading up.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

Asia closed mixed with the Aussie, Nikkei and Shanghai exchanges closing lower; the rest of Asia closed higher.  As of this writing all of Europe is trading higher. 
 
 
Possible challenges to traders today is the following

1.  Core Durable Goods are out at 8:30 AM EST.  This is major.
2.  Durable Goods are out at 8:30 AM EST.  This is major.
3.  S&P/CS Composite-20 HPI y/y is out at 9 AM EST.  This is not major.
4.  CB Consumer Confidence is out at 10 AM EST.  This is major. 
5.  New Home Sales are out at 10 AM EST.  This is major.
6.  Richmond Manufacturing Index is out at 10 AM EST.  This is major.
 
  
Yesterday we said our bias was to the long side because an accord was reached between the Cypriot government and the Troika (ECB, EU and IMF).  Initially the markets did go higher but some comments mad by officials changed all that and the Dow fell by 64 points.  Today our bias in neutral because the markets aren't correlated and we have a tsunami of economic news that can drive the markets in any direction.  Could this change? Of Course.  Remember anything can happen in a volatile market.

Yesterday we said that the markets were poised to go higher because an agreement was reached between the Cypriot government and the Troika (ECB, EU and IMF).  Initially all markets went higher but after 10 AM the Dutch Finance Minister basically stated that what happened in Cyprus will serve as a template for all other EU nations.  Well the Euro dropped, the USD rose and all markets dropped.  I was wondering why no mention was made of the levy that will be imposed on those individuals who have more than 100,000 Euros in a Cypriot bank.  I've heard that the rate will be about 30%.  We don't know if this is true or not but one thing is certain: these officials need to think about what they say before they say it.  Their comments could cause a panic liken to what we saw yesterday.  If you ask me they need to go to Fred Astaire charm school.



As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today our bias is neutral because we feel that this market could go in any direction.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

http://youtu.be/tUZEZNKnGrY



Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is advancing.  This is not normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 94.01 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 92.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

-  European Contraction


Crude oil is trading higher and the US Dollar is advancing.  This is not normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.

Pre-Market Global Review - Cyprus Conundrum Resolved

 

Good Morning Traders,
As of this writing 6:45 AM EST, here’s what we see:
 
US Dollar – Down at 82.500 the US Dollar is down 29 ticks and is trading at 82.500.  
Energies – May Oil is up at 94.15.
Financials – The June 30 year bond is down 22 ticks and is trading at 142.30. 
Indices – The June S&P 500 emini ES contract is up at 1559.00 and is up 28 ticks.
Gold – The April gold contract is trading down at 1602.10 and is down 41 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   

Initial Conclusion: This is a nearly correlated market.  The dollar is down- and oil is up+ which is normal and the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up  and the US dollar is trading lower which is correlated.  Gold is trading lower which is not correlated with the US dollar trading down.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

With the exception of the Shanghai and the Sensex, all of Asia closed higher.  As of this writing all of Europe is trading higher. 
 
 
Possible challenges to traders today is the following

1.  Ben Bernanke speaks at 1:15 PM EST.
2.  Lack of economic news.

On Friday we said our bias was to the  short side because the Bonds and Gold weren't correlated however the markets (tired of the Cyprus Conundrum) decided to go higher and close 91 points to the upside.  Today the markets are nearly correlated with the missing ingredients being Gold.  If Gold were trading higher I would say we had a completely correlated market.  This being said our bias  today is to the long side.  Here's why.  With the exception of Shanghai and the Indian Sensex all of Asia closed higher,  currently Europe is trading higher.  Could this change? Of Course.  Remember anything can happen in a volatile market.

It would appear that over the weekend, the Cyprus Conundrum has finally been resolved.  Cyprus has come to terms with the ECB, EU and IMF whereby only depositors with more than 100,000 Euros in their bank accounts will be subject to a levy tax.  Thus far, it isn't known what that percentage is or will be but this news has done much to propel both the Asian and European markets forward.  In the United States on Friday the Smart Money decided then that they weren't going to allow the conundrum to stop the markets from moving forward and the Dow closed 91 points higher.  Just goes to show you that anything can happen in a volatile market.




As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today market correlation is calling for a higher open and our bias is towards the long side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

http://youtu.be/tUZEZNKnGrY



Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is declining.  This is normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. On Friday crude dropped to a low of 92.52 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 91.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

-  European Contraction


Crude oil is trading higher and the US Dollar is declining.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.

Pre-Market Global Review - Cyprus Conundrum Continues

Good Morning Traders,
As of this writing 5:50 AM EST, here’s what we see:
 
US Dollar – Down at 82.815 the US Dollar is down 90 ticks and is trading at 82.815.  
Energies – May Oil is up at 92.67.
Financials – The June 30 year bond is up 17 ticks and is trading at 143.27. 
Indices – The June S&P 500 emini ES contract is up at 1539.50 and is up 2 ticks.
Gold – The April gold contract is trading down at 1612.20 and is down 16 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   

Initial Conclusion: This is not a correlated market.  The dollar is down- and oil is up+ which is normal but the 30 year bond is trading higher.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are up fractionally and the US dollar is trading lower which is correlated.  Gold is trading lower which is not correlated with the US dollar trading down.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

With the exception of the Shanghai , all of Asia closed lower.  As of this writing all of Europe is trading lower. 
 
 
Possible challenges to traders today is the following

1.  No major economic news.
2.  Lack of economic news.

Yesterday we said our bias was to the  short side because the markets weren't correlated.  The  net result being that the Dow closed 91 points lower.  Today the markets are not correlated with the missing ingredients being Bonds and Gold.  It would appear that the Cyprus Conundrum has taken center stage again.  As such our bias  today is to the short side.  Here's why.  Asia closed lower (with the exception of Shanghai) and Europe is currently trading lower.  The USD is lower but the Bonds are trading higher.  Events in Cyprus are taking center stage and there are no major economic news to propel the markets forward.  Could this change? Of Course.  Remember anything can happen in a volatile market.

After a one day reprieve due to the FOMC meeting on Wednesday it appears as though the markets are squarely focused on Cyprus again.  The latest news is that their Finance Minister went to Russia to see if a deal could be negotiated.  He could not do this.  On Tuesday afternoon shortly before the close of trading in the United States an announcement was made that the ECB would provide Cyprus with full liquidity.  It turns out that it will be full liquidity within limits.  Now the ECB has given Cyprus what is tantamount to an ultimatum: either strike a deal with the EU and IMF or else.  This is not going to make the Cypriot government look good in the eyes of its people and I suspect that this government will resign and a new election will be held.  The question who would want that job?  A new government would have to do a major sales job on its people to sell this.  On Tuesday you reject the bank levy and now you advocate it?  The only other recourse would be for Cyprus to withdraw from the EU but then what would they use for currency?  The Greek drachma?  I don't think so.  The existing government is clearly incompetent.  They make statements and assumptions without even checking first.  I personally think the Marx Brothers could do a better job. One thing is certain, the longer this conundrum exists the worse it will be for the markets in general.  We need closure.




As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today market correlation is calling for a lower open and our bias is towards the short side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

http://youtu.be/tUZEZNKnGrY

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading higher and the US Dollar is declining.  This is normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 91.84 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 91.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

-  European Contraction


Crude oil is trading higher and the US Dollar is declining.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.

Pre-Market Global Review - FOMC Moves Markets..momentarily

Good Morning Traders,
As of this writing 5:30 AM EST, here’s what we see:
 
US Dollar – Up at 83.025 the US Dollar is up 77 ticks and is trading at 83.025.  
Energies – May Oil is down at 92.97.
Financials – The June 30 year bond is down 7 ticks and is trading at 142.29. 
Indices – The June S&P 500 emini ES contract is down at 1547.75 and is down 5 ticks.
Gold – The April gold contract is trading up at 1607.80 and is up 3 ticks from its close.

Quick Note: Unless otherwise shown the above contract months are now June.   

Initial Conclusion: This is not a correlated market.  The dollar is up+ and oil is down- which is normal but the 30 year bond is trading lower.  The Financials should always correlate with the US dollar such that if the dollar is lower then bonds should follow and vice versa.  The indices are down and the US dollar is trading higher which is correlated.  Gold is trading higher which is not correlated with the US dollar trading up.   I tend to believe that Gold has an inverse relationship with the US Dollar as when the US Dollar is down, Gold tends to rise in value and vice-versa. Think of it as a seesaw, when one is up the other should be down.   I point this out to you to make you aware that when we don't have a correlated market, it means something is wrong.  As traders you need to be aware of this and proceed with your eyes wide open. 

Asia closed mixed with the Hang Seng and Sensex exchanges closing lower and the rest of Asia closing higher.  As of this writing all of Europe is trading lower. 
 
 
Possible challenges to traders today is the following

1.  Unemployment Claims are out at 8:30 AM EST.  This is major.
2.  Flash Manufacturing PMI is out at 8:30 AM EST.  This is not major.
3.  HPI is out at 8:30 AM EST.  This is not major.
4.  Existing Home Sales are out at 10 AM EST.  This is major.
5.  Philly Fed Manufacturing Index is out at 10 AM EST.  This is major. 
6.  CB Leading Index is out at 10 AM EST.  This is not major.
7.  Natural Gas storage is out at 10:30 AM EST.  This will move the Nat Gas market. 

Yesterday we said our bias was to the upside because the USD and bonds were trading lower.  The  net result being that the Dow closed 56 points higher.  Today the markets are not correlated with the missing ingredients being Bonds and Gold.  It would appear that after a 1 day reprieve (due to FOMC) the markets are focused on Cyprus (again).  As such our bias  today is to the short side.  Here's why.  Asia closed mixed but Europe is currently trading lower.  The USD is higher and Bonds are trading lower.  Events in Cyprus are taking center stage.  Could this change? Of Course.  Remember anything can happen in a volatile market.


Well FOMC Day came and went and like clockwork, the Fed didn't change a thing.  They left the FFR where it is currently and reaffirmed their commitment to easing.  This lifted the markets and even Europe traded higher despite the Cyprus conundrum.  Domestically speaking the US now needs to focus on the looming budget battle.  Yesterday a bill passed teh Senate to extend funding for the Federal government until late September.  This now has to go to the House of Representatives where it will be voted on today.  The question is will the GOP dominated House approve this bill or will they stick to their ideology and shoot it down?  We'll soon see.

It also appears that after a 1 day reprieve due to the FOMC meeting, the news from Cyprus is taking center stage.  On Tuesday their government decided to shoot down the notion of a levy tax on depositors money in their banks.  On Tuesday afternoon an announcement was made that the ECB will provide Cyprus with full liquidity.  We already knew that their banks and stock market was closed until Thursday (today).  At 5 AM EST this morning the ECB made an announcement that said emergency funding for Cyprus will be cut off by Monday, March 25th unless Cyprus comes to terms with the European Union and the IMF.  Ironically enough the banks in Cyprus will be on "holiday" until Monday as well as their stock market.  I've written an article published by Investing.com that details this.  It can be viewed at http://www.investing.com/analysis/cyprus-conundrum-continues-159887

   

As readers are probably aware I don't trade equities.   While we're on this discussion, let's define what is meant by a good earnings report.  A company must exceed their prior quarter's earnings per share and must provide excellent forward guidance.  Any falloff between earning per share or forward guidance will not bode well for the company's shares.  This is one of the reasons I don't trade equities but prefer futures.  There is no earnings reports with futures and we don't have to be concerned about lawsuits, scandals, malfeasance, etc.

Anytime the market isn't correlated it's giving you a clue that something isn't right and you should proceed with caution. Today market correlation is calling for a lower open and our bias is towards the short side.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  For awhile now we've promised a video on how a trader can use Market Correlation in tandem with their daily trading.  A good friend of Market Tea Leaves: Carl Weiss of Sceeto and I produced a video on December 22nd that shows this.  Here it is:

http://youtu.be/tUZEZNKnGrY

Please note the video is about a half hour in length and we plan on producing more in the near future.  Also note that in the near future we will have other videos where we will interview various trading leaders.

As I write this the crude markets are trading lower and the US Dollar is advancing.  This is normal.  Think of it this way.  If the stock market is trading lower, it's safe to assume that the crude market will follow suit and vice versa.  Crude trades with the expectation that business activity is expanding.  The barometer of which is the equities or stock market.  If you view both the crude and index futures side by side you will notice this. Yesterday crude dropped to a low of 92.55 a barrel and held.  We'll have to monitor and see if crude either goes lower or holds at the present level.   It seems that at the present time crude's support is at 92.00 with resistance at 96.00 a barrel.  This could change.  All we need do is look at what happened last fall when crude was trading over $100.00 a barrel. We'll have to monitor and see.  Remember that crude is the only commodity that is reflected immediately at the gas pump. 



Future Challenges:

 - Sequester spending cuts to commence March 1st.
 - Debt Ceiling in the May time frame.

-  European Contraction


Crude oil is trading lower and the US Dollar is advancing.  This is normal.  Crude typically makes 3 major moves (long or short) during the course of any trading day: around 7 AM EST, 9 AM EST and 2 PM EST when the crude market closes.  If crude makes major moves around those time frames, then this would suggest normal trending, if not it would suggest that something is not quite right.  If you feel compelled to trade consider doing so after 10 AM when the markets give us better direction.  As always watch and monitor your order flow as anything can happen in this market.  This is why monitoring order flow in today's market is crucial.  We as traders are faced with numerous challenges that we didn't have a few short years ago.  High Frequency Trading is one of them.   I'm not an advocate of scalping however in a market as volatile as this scalping is an alternative to trend trading.

Remember that without knowledge of order flow we as traders are risking our hard earned capital and the Smart Money will have no issue taking it from us.  Regardless of whatever platform you use for trading purposes you need to make sure it's monitoring order flow.  Sceeto does an excellent job at this.  To fully capitalize on this newsletter it is important that the reader understand how the various market correlate.  More on this in subsequent blogs.

To view previous issues of Market Tea Leaves visit our archive.