Wednesday, May 8, 2013

Pre-Market Global Review - 5/8/13 - Interview with Markus Heitkoetter

Good Morning Traders,
As of this writing 5:05 AM EST, here’s what we see:
US Dollar –Down at 82.155 the US Dollar is down 180 ticks and is trading at 82.375.             
Energies – June Oil is up at 95.71.        
Financials – The June 30 year bond is up 2 ticks and is trading at 146.10.      
Indices – The June S&P 500 emini ES contract is down at 1620.00 and is down 2 ticks.  
Gold – The June gold contract is trading up at 1454.40 and is up 56 ticks from its close.
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 higher which is 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. 
All of Asia closed higher.  As of this writing Europe is trading higher.
Possible challenges to traders today is the following            
1.  FOMC Member Stein speaks at 8:30 AM EST.  This is not major.        
2.  Crude Oil Inventories are out at 10:30 AM EST.  This will move the crude markets.      
3.  10 Year Bond Auction to start at 1 PM EST.

Yesterday we said our bias was to the upside because the USD was down and Asia/Europe closed to the upside.  Yesterday we also discussed the Dow regaining the 15,000 mark and it did so by closing 87 points higher to 15,056.  If the rule of 3 has any bearing we should know by the end of today or tomorrow if the rally is real.  Today the markets aren't correlated however our bias is to the upside.  Why?  The USD is trading lower which is bullish for the markets.   Asia closed higher and currently Europe is trading higher.  Could this change? Of Course.  Remember anything can happen in a volatile market.

Today's edition is titled Interview with Markus Heitkoetter.  Now many of you may be asking who is Markus Heitkoetter?  Markus is the CEO of Rockwell Trading and been an advocate of trader education, coaching and mentoring.  Markus is not a native born American but was raised in Germany (believe me you'll tell when he speaks) and liken to myself came from the Technology Arena.  Markus does not use any exotic indicators but rather likes to keep it simple.  He advocates indicators that can be used on any trading platform.  We spoke for some time on Wednesday May 1st and I've included that video as part of Market Tea Leaves.  Markus is living proof that anyone with the right mindset, desire and tenacity can be a successful trader.  He offers a 296 page eBook that can be viewed on the Rockwell Trading website.  It's entitled "The Complete Guide to Day Trading"  I recall when Markus started Rockwell years ago and was always impressed with the focus on coaching and paying attention to detail.  Once again our friends at TradersLog have agreed to publish the article and it can be viewed at:

The video 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 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 upside.  Could this change?  Of course.  In a volatile market anything can happen.  We'll have to monitor and see.  

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 June crude dropped to a low of 94.94 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 92.00 a barrel and resistance at 98.  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:
- Budget Battle - ongoing.
- Debt Ceiling in the August time frame.      
- European Contraction - happening now 

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 10:30 AM when the inventory numbers are released and 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.

For previous issues feel free to visit our archives

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