Good Morning Traders,
As
of this writing 5:10 AM EST, here’s what we see:
US Dollar –Up at 82.410, the Sept US Dollar is up 10 ticks and is trading at 82.410.
Energies – September Oil is down at 104.88.
Financials – The September 30 year bond is up 2 ticks and is trading at 134.05.
Indices – The September S&P
500 emini ES contract is down at 1675.75 and is down 32 ticks.
Gold – The August
gold contract is trading down at 1318.40 and is down 11 ticks from its close.
Initial Conclusion: Finally 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 some exchanges trading lower to the tune of triple digits . As
of this
writing Europe is trading lower.
Possible challenges to
traders today is the following
1. Unemployment Claims are out at 8:30 AM EST. This is not major.
2. Core Durable Goods are out at 8:30 AM. This is major.
3. Durable Goods are out at 8:30 AM EST. This is major.
4. Natural Gas Supply is out at 10:30 AM EST. This will move the Nat Gas market.
Yesterday we said our bias was to
the upside as the Bonds were trading lower and Gold was trading higher. Apparently the Smart Money thought otherwise and decided to take capital off the table after 2 days of gains. The Dow dropped by 26 points and the S&P fell as well. Today we are dealing with a correlated market, however it is correlated to the downside therefore our bias is to the downside. Could
this change? Of Course. Remember anything can happen in a volatile market.
Yesterday our bias was to the upside and despite the fact that we had good economic reports the markets dropped. New Home Sales came in better than expected as well as Manufacturing PMI yet the markets dropped. I can only suspect that the Smart Money decided it was time to take capital off the table. In other news President Obama decided to have a talk regarding a "Better Bargain". Don't worry folks he's been saying the same thing for the last 5 years and guess what? Nothing's changed. In fact they're getting progressively worse. Let me give you a case-in-point; my wife was let go on her job after 15 years of meritorious service and has attempted to apply for work in other companies in the same industry. They told her they would no longer accept in-person applications and was told to apply on the Internet. No problem there, right? Except that for her type of work they do not post job openings on the Internet. Employers are making it more difficult for job seekers to apply for work and they say that people aren't looking for work or have giving up looking. If you buy that I have a good bridge to sell you. This President talks the talk, but does not walk the walk. His policies will virtually guarantee that the top 1 percent will grow even further. He claims that he wants to put more people in the middle class as opposed to protecting the already shrinking middle class. His biggest mistake was to concern himself with medical benefits as opposed to growing the economy. Now they're popping the champagne cork in DC thinking "unemployment problem?" "there's no unemployment problem, look at all the jobs we created in the last 20 months". But what they fail to say is that the jobs created are menial at best, don't carry a living wage and don't have benefits associated with them. So much for A Better Bargain....
On Friday, June 7th I had the
opportunity to interview Mr. Sal Spedele regarding ObamaCare. Sal is a
20 year veteran of the Insurance Industry and we spoke at length
regarding the ramifications of the Patient Protection and Affordable
Care Act aka ObamaCare. If you are at all concerned about the future of
Health Insurance in the United States, then you need to listen to this
interview and act on it. Sal and his team is offering complimentary
advisory services to inform you of your rights and ramifications of this
Act.
As an update on this issue, last week
the White House extended the employer's mandate to 2015 versus 2014 and
currently the house will vote on a similar measure for individuals. The
question is can you trust the folks in DC to implement anything?
To download the article on ObamaCare, go to:
https://markettealeaves.sharefile.com/d/s978a806ae2e41569
To view my discussion with Sal:
http://youtu.be/sR_ine0b5Ro
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.
In
May, I spoke with John Karnas, CEO of Trend Following Trades. John has
an interesting background as he was a trader for a number of years
prior to buying Trend Following Trades. John is a believer in Trading
Plans and has a very precise method of developing aspiring traders. To
download the article I've written, go to:
https://markettealeaves.sharefile.com/d/sdf8f77f6e2c4347a
My discussion with John can be viewed at:
http://youtu.be/uVwHpMq1604
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 September crude dropped to a low of 104.79 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 $104 a barrel and resistance
at 108. 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.
- Asian Contagion - 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:
http://www.barchart.com/headlines/story/10598425/when-perception-becomes-reality
http://www.forexcrunch.com/the-taper-caper/
http://www.traderslog.com/john-karnas/
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 editions.
