As of this writing 4:35 AM EST, here’s what we see:
US Dollar –Down at 82.660 the US Dollar is down 21 ticks and is trading at 82.660.
Energies – June Oil is up at 88.58.
Financials – The June 30 year bond is down 14 ticks and is trading at 148.00.
Indices – The June S&P 500 emini ES contract is up at 1542.75 and is up 35 ticks.
Gold – The June gold contract is trading up at 1413.20 and is up 207 ticks from its close.
Initial Conclusion: This is 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 lower which is 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 all of Europe is trading higher.
Possible challenges to traders today is the following
1. No Major Economic news for the US markets.
2. Lack of major economic news.
3. FOMC Member Stein speaks at 12 noon.
4. Day Two - G20 meeting.
5. Day One - IMF meeting.
Yesterday we said our bias was to the upside as the markets were correlated as such. Unfortunately we had not too stellar economic reports that drove the markets lower. Unemployment Claims came in greater than expected, Philly Fed Manufacturing Index came in lower than expected and the CB Leading Indicators came in lower than expected. As such the Dow dropped 82 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 I watched the news because I like to keep abreast of what's happening either from a political or financial point of view. The political point of view is because the markets in the United States are very much driven by what's going on in DC. In any case, I'm watching the news and all they kept talking about were two men: one in a dark baseball cap and the other with a white cap turned around. This is in tandem with the bombing that took place in Boston this past Monday. Now our thoughts are for the victims of that tragedy and I like all Americans want to see justice done. But I wouldn't want this to turn into a vigilante hunt and apparently the media is doing precisely that. The commentator (who is quite well known) tried to convince the listening audience that these two men were the bombers. In other words they're guilty before proven innocent. I couldn't believe it. The FBI who is covering the investigation claims to have photos of the white cap guy laying his backpack, yet we don't see it. They claim that he dined in a "foreign" restaurant prior to the bombing, yet we don't see it. The commentator even said during the broadcast "he's guilty" and one of his guests pointed out that the FBI still has to make a case out of it and still the commentator claimed "there's no case to be made, he's guilty." The FBI doesn't know the names of these two individuals and has at best highly circumstantial evidence. I think that they released these photos because they want info on these men and will chase every lead regardless of where it comes from. If that's the case every ex-brother-in-law is in danger of being questioned. Looking at the bigger picture, I think this country fell asleep after 2011. After all Bin Laden was killed, there's no more terrorists, right? This was the first successful attack after 2011, if in fact it turns out to be an act of terror. Who told us last year that we were safe? Who told us that terrorism was negated? You guessed it, our newly elected President did. Why do you think Obama went to Boston and addressed the State Congress? I have nothing against this President. I believe him to be a humane individual but I wish he stop falling asleep behind the wheel, as he often does.
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:
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 86.50 a barrel and held. 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.
- 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.
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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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