Good Morning Traders,
As of this writing 6:15 AM EST, here’s what we see:
US Dollar –Down at 82.760 the US Dollar is Down 80 ticks and is trading at 82.760.
Energies – June Oil is down at 93.05.
Financials – The June 30 year bond is up 10 ticks and is trading at 148.08.
Indices – The June S&P 500 emini ES contract is down at 1577.00 and is down 15 ticks.
Gold – The June gold contract is trading down at 1461.90 and is down 1 tick from its close.
Initial Conclusion: This is not a correlated market. The dollar is down- and oil is down- which is not 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 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.
Asia closed mixed with about half of the exchanges closing higher and the other half lower. As of this writing all of Europe is trading lower.
Possible challenges to traders today is the following
1. Advance GDP q/q is out at 8:30 AM EST. This is major.
2. Advance GDP Price Index q/q is out at 8:30 AM EST. This is major.
3. Revised UOM Consumer Sentiment is out at 9:55 AM EST. This is major.
4. Revised UOM Inflation Expectations is out at 9:55 AM EST. This is not considered major.
Yesterday we said our bias was to the upside as the markets were correlated as such. The net result? The Dow closed 25 points higher. As we said yesterday the Unemployment Claims number will drive the market. It came in better than expected. Today are bias is to the downside but we have Advanced GDP which will be the market mover. Could this change? Of Course. Remember anything can happen in a volatile market.
Yesterday the Unemployment Claims came in less than expected at 339,000 vs 352,000 expected. If you read some of the headlines after this report, you would swear the US no longer has an employment problem. One headline I read said "Lowest Claims in 6 Years". What the report doesn't say is how many people are still unemployed nor does it state how many people exhausted their benefits. You see in the US when someone is collecting unemployment insurance and no longer qualifies (exhausted benefits) the Labor Dept assumes they are working. One official that I spoke with once told me "well they must be doing something, right? So they're working." Really? Tell that to the millions who are still looking. Today we have Advanced GDP for the 1st calendar quarter of 2013 so it'll be interesting to see what that number is. I don't think it will be too much of a falloff as the sequester didn't start until March and it's effects haven't been fully felt yet. Remember that it is a lagging number. I suspect that if the number isn't too bad the pundits will say "see, we have no problem." Of course not taking into account that it is a lagging number. One thing is certain, this report is the market mover today.
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 downside. Could this change? Of course. In a volatile market anything can happen. We'll have to monitor and see.
On Friday, April 5th I had the opportunity to interview Carl Weiss from Algo Futures. We talked at length about his thoughts on the future of the markets and new and upcoming endeavors. Ultimately this is the story of an American entrepreneur and what he had to go thru to create a solution that can be used by any trader. If any reader wants to know and is curious about what it takes to be self-made in America, then you need to listen to this. Additionally our friends at TradersLog.com have graciously published my article on this subject. It can be viewed at:
http://www.traderslog.com/interview-with-carl-weiss/ My interview with Carl can be viewed at:
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 declining. 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 June crude dropped to a low of 91.08 a barrel and held. We'll have to monitor and see if crude either goes lower or holds at the present level. It would appear at the present time that crude has support at 89.00 a barrel and resistance at 95. 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.
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.
- European Contraction - happening now
Crude oil is trading lower and the US Dollar is declining. 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.
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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.
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