As of this writing 5:20 AM EST, here’s what we see:
US Dollar –Down at 82.700 the US Dollar is down 91 ticks and is trading at 82.700.
Energies – June Oil is up at 87.68.
Financials – The June 30 year bond is down 2 ticks and is trading at 147.29.
Indices – The June S&P 500 emini ES contract is up at 1540.00 and is up 12 ticks.
Gold – The June gold contract is trading up at 1386.90 and is up 42 ticks from its close.
Quick Note: Unless otherwise shown the above contract months are now June.
Initial Conclusion: Finally a correlated market to the upside. 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 higher 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.
Asia closed mixed with the Aussie, Hang Seng and Nikkei trading lower and 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. Unemployment Claims are out at 8:30 AM EST. This is major.
2. Philly Fed Manufacturing Index is out at 10 AM EST. This is major.
3. CB Leading Index is out at 10 AM EST. This is major
4. Natural Gas Storage is out at 10:30 AM EST. This will move the Nat Gas market.
5. FOMC Member Raskin speaks at 12 Noon.
Yesterday we said our bias was to the downside as the market were correlated as such. The net result? The Dow dropped 138 points. Today the markets are correlated to the upside. Hence our bias is to the upside. Could this change? Of Course. Remember anything can happen in a volatile market.
Last night this President decided to slam Congress over not passing extended background checks for gun control. Republican Senator Ayotte decided to vote against it as she felt it was an undue and un-necessary government intrusion on private citizens. Obama slammed it hard accusing the gun lobby of lying about the bill. Well, Mr. President if you feel that strongly about it, why don't you just issue an Executive Order and do something about it? After all 92% of Americans think its a good idea and you no longer need to be concerned about re-election. When are you going to realize that the GOP aren't your friends and you can wine them and dine them to your hearts content and guess what? They're still not your friends! To add insult to injury the Republican Senators in Congress are now demanding a "reboot" for digital medical records claiming that they'll never be ready in time for January. Coming from the software industry, I can only imagine what happened. Someone probably said "well you know we need to analyze what has to be done in order to determine the way to implement the proposed solution, we need to do an "as is" study in order to determine the "to be" solution" " And you know that's going to require capital to do so." In the meantime they've had over 3 years to do so and may miss the targeted implementation date. I cannot begin to tell you how many times I've heard this same nonsense from the Fortune 1000. They'll all looking for capital to do a "study" because they have to get it "right". Because you know that if they don't get it right someone's head will wind up on a chopping block and the CIO is determined that it won't be their head. It would appear to me that this President thinks all he has to do is sign bills and auto magically it will just appear. As anyone knows who's responsible for making things happen, you can approve something, you can fund something, but there's no guarantee that it will happen unless you stay on top of it. I'm not suggesting micro-managing but I am saying you can hold meetings to insure that the targeted deadlines are met. You can hold people accountable. Anyone whose ever managed anything knows what I'm talking about.
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.
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 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 June crude dropped to a low of 86.06 a barrel in the overnight session and as of this writing is starting to rebound. We'll have to monitor and see if crude either goes lower or holds at the present level. We'll have to see where crude falls to before we can establish a support and resistance level. At this time crude can fall further. 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 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.forexcrunch.com/effects-of-sequestrationthus-far/
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.
