Tuesday, April 23, 2013

Pre-Market Global Review - 4/23/13 - Apple Reports Tonite

Good Morning Traders,
As of this writing 5:40 AM EST, here’s what we see:
US Dollar –Up at 83.125 the US Dollar is up 301 ticks and is trading at 83.125.         
Energies – June Oil is down at 88.26.    
Financials – The June 30 year bond is up 25 ticks and is trading at 148.30    
Indices – The June S&P 500 emini ES contract is down at 1554.50 and is down 6 ticks.  
Gold – The June gold contract is trading down at 1415.80 and is down 56 ticks from its close.
Initial Conclusion: This is a correlated market, unfortunately it is correlated to the downside.  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 lower with the exception of the Indian Sensex.  As of this writing all of Europe is trading higher. 

Possible challenges to traders today is the following    
1.  Flash Manufacturing PMI is out at 9 AM EST.  This is major.   
2.  HPI m/m is out at 9 AM EST.  This is major. 
3.  New Home Sales are out at 10 AM EST.  This is major.
4.  Richmond Manufacturing Index is out at 10 AM EST.  This is major.        

Yesterday we said our bias was to the upside as with both Asia closing higher and Europe trading higher, we felt it was a good recipe for the upside.  Whereas the Dow did close higher by 19 points, it was a bumpy ride.  Today the markets (as of this writing) are correlated however it is correlated to the downside.  As such our bias is to the downside today.  Could this change? Of Course.  Remember anything can happen in a volatile market.

Yesterday we said our bias was to the upside and the markets closed higher but it did not start out that way.  Caterpillar Tractor reduced their 2013  outlook and reported earnings that were less than stellar pre-market.  This set the tone for the trading day and most of the session traded to the downside.  However rules of market correlation prevailed and the Dow closed 19 points higher.  Today we have Apple reporting after hours which will set the tone for the overnight trading session and tomorrow for the US markets.  We'll have to see what they say and what they report.  Apple has been taking a beating lately as some have claimed they problems with some of their suppliers.  Recently Apple is trading around the $400.00 a share mark, which the lowest since December, 2011.  I tend to take a different view.  My view is that Apple has been trading higher for sometime now.  What goes up will eventually come down.  Nothing stays up forever.  Want a lesson on how this works?  I remember when the Nasdaq was trading at the 5000 level and every idiot pundit thought it was going to go higher.  It didn't.  Don't buy the hot air you'll get from the analysts and pundits that are paid by teh Smart Money.  They want you to keep your money in the market so they can easily use that capital to manipulate the market. Our goal is simple: to help you keep your hard earned trading capital.

 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:
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 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 June crude dropped to a low of 87.69 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 85.00 a barrel and resistance at 92.  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 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.

Recently Published Articles:      

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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